Swan Bitcoin is facing a lawsuit alleging it used insider access to withdraw nearly $1 billion in Bitcoin and cash from crypto custodian Prime Trust in the days leading up to Prime Trust’s 2023 bankruptcy filing.
Allegations against Swan Bitcoin
The complaint claims Swan Bitcoin moved substantial digital asset and fiat balances out of Prime Trust shortly before the custodian entered bankruptcy, allegedly leveraging nonpublic access to do so. The transfers, as described in the filing, occurred days before Prime Trust sought court protection in 2023.
The lawsuit characterizes the withdrawals as harmful to other creditors and stakeholders in the bankruptcy, framing them as transactions that should be scrutinized and potentially reversed under U.S. bankruptcy law. Allegations have not been proven in court.
Background on Prime Trust’s collapse
Prime Trust, a Nevada-based trust company and crypto custodian, encountered severe operational and liquidity issues in 2023. The company halted services amid regulatory pressure and later filed for bankruptcy that year. Its failure disrupted services across multiple crypto businesses that relied on Prime Trust for custody and payments infrastructure.
Swan Bitcoin previously used Prime Trust for certain services before moving to other custody arrangements as the custodian’s troubles escalated.
Why it matters
The case highlights ongoing legal and counterparty risks in digital asset custody. In bankruptcy, transfers made shortly before a filing can be challenged as preferential or fraudulent under federal law, and courts may order funds returned to the estate for equitable distribution. The outcome could influence how crypto firms structure custody, access controls, and contingency plans when a service provider shows signs of distress.