Prime Trust put $6M of client crypto into Terra's stablecoin — and never recovered

Prime Trust was a licensed custodian that held crypto and fiat on behalf of exchanges, wallets and fintech apps that outsourced custody rather than build it themselves. In 2021 a wallet-migration error locked $76 million of customer funds in an inaccessible address — a loss the company absorbed rather than disclosed at the time. The following year, in the run-up to TerraUSD's collapse, Prime Trust put $6 million of client funds and $2 million of its own treasury into the stablecoin, losing all $8 million when it depegged.

By 2023 Nevada regulators found Prime Trust's finances "critically deficient": it held roughly $2.9 million of the more than $85 million in fiat it owed customers, and could not fully cover its crypto liabilities either. A rescue acquisition by custodian BitGo, agreed in June 2023, collapsed after BitGo's due diligence turned up the shortfall.

Nevada's Department of Financial Institutions placed Prime Trust into receivership on June 26, 2023, and the company filed for Chapter 11 bankruptcy on August 14, 2023, listing liabilities as high as $500 million against $50–100 million in assets and naming between 25,000 and 50,000 creditors.