- A litigation trust is suing Swan Bitcoin for allegedly withdrawing nearly $950 million in cash and crypto from the failing custodian Prime Trust days before its August 2023 bankruptcy.
- The lawsuit, filed in Delaware, centers on a senior Prime Trust executive who was also a paid adviser to Swan.
- The complaint alleges Swan used insider knowledge to execute a full asset evacuation, including over 11,994 Bitcoin, just before regulators were notified of Prime Trust‘s dire financial state.
The post-bankruptcy trust for collapsed custodian Prime Trust has filed a lawsuit alleging Swan Bitcoin exploited insider information to withdraw nearly $1 billion in assets just days before the firm’s failure. According to a complaint filed in Delaware bankruptcy court, Swan received over $24.6 million in cash, 11,994 Bitcoin (worth roughly $923 million), and other digital assets.
At the center of the allegations is an unidentified senior Prime Trust executive who was simultaneously a paid adviser to Swan. This executive allegedly opened an encrypted, auto-deleting chat with Swan CEO Cory Klippsten four days before a critical meeting with Nevada regulators.
The lawsuit claims Swan then abruptly expanded a partial transfer into a full evacuation of all funds. Consequently, Prime Trust staff scrambled to move the assets before the close of business on May 25, 2023.
The complaint further states an internal ledger was created to make Swan’s funds appear separately held. “In substance, however, those assets had not been and were not held in trust for the benefit of Swan’s customers,” the suit claims.
This legal action is part of a broader effort to recover assets transferred out before the bankruptcy. The trust is seeking recovery under fraudulent transfer provisions and to disallow any future claims from Swan until restitution is made.
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