- Prime Trust and Fortress Trust, both crypto custodians founded by Scott Purcell, have collapsed amid financial misconduct allegations.
- On October 22, Nevada regulators issued a cease-and-desist order against Fortress Trust for insolvency and inadequate assets.
- Prime Trust filed for bankruptcy in August 2023 after misusing customer funds and losing crypto wallet keys.
- Fortress Trust claimed a $15 million customer loss due to a “hack,” but Ripple withdrew from acquiring the company shortly after.
- Both companies faced similar failures: poor asset protection, inability to meet withdrawals, and opaque financial conditions.
Prime Trust and Fortress Trust, two Nevada-based crypto custody firms started by Scott Purcell, have both collapsed following serious allegations of financial misconduct. On October 22, the Nevada Financial Institutions Division issued a cease-and-desist order against Fortress Trust, citing insolvency and insufficient assets to cover customer obligations.
As of June 26, 2023, Prime Trust owed $85.6 million in cash obligations but had only $2.9 million in cash available. The company filed for Chapter 11 bankruptcy in August 2023 after its Banq subsidiary failed and it was revealed the company improperly used customer funds to cover other withdrawals. Regulators also disclosed in 2023 that Prime Trust lost access to certain crypto wallet keys back in December 2021, information it had not publicly shared.
Following his departure from Prime Trust in 2021, Scott Purcell founded Fortress Trust, which received a trust company license from Nevada regulators by May 2022. In September 2023, Fortress Trust reported an alleged hack causing approximately $15 million in customer losses. Initially, the company denied any fund loss, but later reporting contradicted that claim. On September 8, 2023, Ripple announced an agreement to acquire Fortress Trust and cover the losses; however, Ripple CEO Brad Garlinghouse confirmed on September 28, 2023, that the acquisition would not proceed, though Ripple remained an investor.
Similar to Prime Trust, Fortress Trust went through multiple CEO changes, with Rich Hauschild and Anthony Botticella taking the helm after Purcell’s departure. Botticella stated in a filing that he learned of the company’s severe financial difficulties only after assuming his role. Nevada’s cease-and-desist order prevents Fortress Trust from accepting fiat currency, cryptocurrencies, or commodities for custody from both existing and new clients.
Both custodians failed under comparable conditions, including inadequate protection of customer assets, failure to fulfill withdrawal requests, and large financial shortfalls hidden from public view. Both were Nevada-chartered entities serving the cryptocurrency market, and regulatory actions highlighted unsound business practices. These successive collapses reinforce concerns about risks associated with centralized crypto custodians led by the same founder.
For detailed regulatory documents and further reading, see the Nevada cease-and-desist order, the Bloomberg report on Prime Trust’s obligations, the Bitcoin–USDC-usdt-ripple/”>Fortune article on Fortress Trust’s $15 million hack, and Ripple’s acquisition announcement.
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