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The payments subsidiary of Prime Trust bank, the custodian of the cryptocurrency, filed for bankruptcy protection in the US on June 13, court documents show.
The move comes just days after wallet infrastructure provider and digital asset custodian BitGo signed a non-binding letter of intent to acquire Prime Trust, announced on June 8.
Banq’s bankruptcy filing lists $17.72 million and $5.4 million in liabilities, and lists “unauthorized transfer” of $17.5 million of assets to Fortress NFT Group, and illegal transfer of trade secrets and proprietary information Fortress.
Fortress NFT Group was reportedly set up by the former CEO, CTO and CFO of Banq, and Banq is currently in arbitration with Fortress NFT Group over these allegations.
The timing of the filing just after the deal to acquire BitGo’s parent company Banq Prime Trust was announced raises questions about how this could affect the agreement.
Although the terms of the deal were not disclosed, if it goes through, BitGo will acquire Prime Trust payment rails and a cryptocurrency IRA fund and expand its asset management offerings.
Nevada-based trust company Prime Trust will also join the BitGo network of regulated trust companies in South Dakota, New York, Germany and Switzerland. The Prime Trust API infrastructure and exchange network will be “1:1 mapped” to the BitGo services. BitGo stated:
“This acquisition makes BitGo the first global digital asset company to provide a complete set of solutions for institutions and fintech platforms.”
The crypto custody market is booming, with recent deals including Ripples’ acquisition of Swiss digital asset custody service provider Metaco in May for $250 million.
The BitGo/Prime Trust deal, if it goes through, will come just as the US Securities and Exchange Commission has proposed changing rules that would make it harder for crypto companies to act as custodians of their clients’ funds.
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Prime Trust has been under pressure for some time now, as it reportedly laid off a third of its staff in January. Later, he took up custody of Binance client funds. US through a network of partner banks after the banking crisis in March.
He became the focus of a scandal in the US state of Oregon last year when he was identified as the source of a $500,000 contribution to the state’s Democratic Party, later revealed to be from FTX chief executive Nishad Singh.
BitGo itself came close to being acquired by Galaxy Digital last year for $1.2 billion and sued Galaxy for violating the terms of the acquisition after the deal was cancelled.