Swan Bitcoin Accused of Insider Withdrawal From Prime Trust Before Collapse

Swan Bitcoin faces a Delaware bankruptcy lawsuit over allegations it withdrew approximately US$1 billion in digital assets from Prime Trust before the crypto custodian’s collapse in 2023. The PCT Litigation Trust, which is handling recovery efforts tied to Prime Core Technologies’ bankruptcy proceedings, filed the complaint in the US Bankruptcy Court for the District of Delaware. According to court filings, Swan allegedly had access to confidential information about Prime Trust’s deteriorating financial position and used that knowledge to remove funds before bankruptcy proceedings began, while most other Prime Trust customers suffered significant losses.

Allegations of Insider Knowledge and Communications

The lawsuit claims Swan benefited from access to confidential information concerning Prime Trust’s financial troubles. Court records allege that a senior Prime Trust executive who also advised Swan privately communicated with Swan CEO Cory Klippsten using encrypted messages shortly before Nevada regulators intervened. The filing states these messages were set to automatically delete after 24 hours during the period leading up to Swan’s withdrawals.

Assets Identified for Recovery

The litigation trust is seeking to claw back substantial holdings for redistribution to creditors. The assets identified in the lawsuit include approximately 11,994 BTC valued at around US$938 million (AU$1.31 billion), along with US$24.66 million (AU$34.52 million) in cash, roughly US$5 million (AU$7 million) in stablecoins, and 91,144 XRP worth about US$129,484 (AU$181,278).

Prime Trust’s Regulatory Shutdown and Bankruptcy

Prime Trust was shut down by Nevada regulators in June 2023 before filing for bankruptcy two months later amid claims it could not meet customer obligations.