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United States trust sues Swan Bitcoin for $1B

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United States trust sues Swan Bitcoin for $1B

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United States – The PCT Litigation Trust overseeing the bankruptcy of crypto custodian Prime Trust has filed a lawsuit in Delaware bankruptcy court seeking nearly $1 billion from Swan Bitcoin and its parent company, Electric Solidus. The trust alleges Swan used non-public information to execute a last-minute, coordinated withdrawal of assets just days before Prime Trust collapsed, including 11,994 bitcoin valued at about $923 million, $24.6 million in fiat currency, around 5 million USDT, and a range of altcoins such as 91,444 XRP. The complaint says these withdrawals emptied Prime Trust accounts to the detriment of remaining customers and unsecured creditors. United States – The suit further alleges that a senior Prime Trust executive secretly served as a paid adviser to Swan since 2019 and used an encrypted chat channel with Swan chief executive Cory Klippsten, enabled with a 24-hour auto-delete function, around key regulatory meetings in May 2023. According to the filing, this insider tipped off Swan after Nevada regulators confirmed Prime Trust’s dire financial condition, leading Swan to pull out more than 10,000 bitcoin within 24 hours. The trust also claims Prime Trust staff created a new sub-account ledger called “PT FBO Swan Customers” on May 25, 2023, to give the appearance that Swan-related assets were segregated, while in reality they were commingled and should be available to the bankruptcy estate. Swan denies wrongdoing, arguing the assets belong to its customers, not to Swan or Prime Trust’s creditors, and says it is confident the court will uphold customer property rights in the case.

Prepared by Christopher Adams and reviewed by editorial team.

Timeline of Events

July 2019 Senior Prime Trust executive begins advising Swan
May 22 2023 Encrypted channel opened with Swan CEO
May 2023 Auto-delete chat feature allegedly activated
Late May 2023 Swan allegedly withdraws major digital assets
2023 Prime Trust collapses and enters bankruptcy proceedings
2023 PCT Litigation Trust formed to pursue recoveries
Recent weeks Trust files Delaware lawsuit against Swan
Today Allegations focus on insider information and withdrawals

Why This Matters to You

This lawsuit could affect the stability of crypto markets. If you own Bitcoin or altcoins, keep an eye on this case. It might impact your investments. Check your portfolio and consider diversifying if needed.

The Bottom Line

Swan Bitcoin is accused of using insider info to protect its assets. They deny wrongdoing and claim customer property rights. This case could set a precedent for how crypto assets are handled in bankruptcy. Worth forwarding if you know someone invested in cryptocurrency.