Prime Trust creditor trust sues Swan Bitcoin, alleging $1B in pre-bankruptcy asset transfers

Prime Trust's post-bankruptcy litigation trust has sued Swan Bitcoin in Delaware bankruptcy court, alleging the crypto custody firm used insider access to move roughly $1 billion in assets out of Prime Trust before the custodian collapsed in August 2023. The complaint says Electric Solidus, the corporate entity behind Swan Bitcoin, received more than $24.6 million in cash, 11,994 BTC (valued at about $923 million at the time of filing), around $5 million in USDT, and smaller amounts of other digital assets before Prime Trust filed for bankruptcy. At the center of the case is a Prime Trust senior executive who allegedly had a long-running side arrangement as a paid adviser to Swan dating back to July 2019. The filing claims that four days before Prime Trust met with Nevada regulators on May 26, 2023, the executive opened an encrypted chat with Swan CEO Cory Klippsten and enabled messages to auto-delete every 24 hours. The auto-delete feature was reportedly disabled the day after the regulatory meeting, when Swan withdrew more than 10,000 BTC from Prime Trust. The lawsuit is part of a broader effort by the Prime Trust litigation trust to claw back assets transferred in the weeks leading up to the bankruptcy. The trust alleges Swan prioritized its own position over other customers by accelerating withdrawals as Prime Trust's financial condition deteriorated. "Swan knew to transfer fiat and crypto from Prime immediately prior to Prime filing for bankruptcy to avoid catastrophic losses," the complaint states. The filing also points to an internal ledger created on May 25 titled "PT FBO Swan Customers," which it says did not previously exist. The trust argues the ledger was designed to make it appear Swan's funds were held in a separate, customer-specific trust, when in substance they were not, potentially obscuring custody arrangements from creditors and regulators. The plaintiffs seek relief under the Bankruptcy Code's preferential transfer and actual fraudulent transfer provisions and ask the court to bar Swan from asserting future claims against the estate until restitution is made. Cointelegraph said it contacted Swan for comment but did not receive an immediate response.