Swan Bitcoin Hit With Nearly $1 Billion Lawsuit Over Prime Trust Collapse

In brief

• PCT Litigation Trust sued financial services firm Swan Bitcoin seeking repayment of nearly $1 billion in assets.
• The lawsuit alleges that Swan used inside information to avoid significant losses from the Prime Trust collapse in 2023.
• The suit seeks repayment of nearly 12,000 Bitcoin along with stablecoins, XRP, and more.

Electric Solidus, Inc, which operates as Bitcoin services firm Swan Bitcoin, was named as a defendant in a newly filed lawsuit in Delaware Bankruptcy Court that aims to recover nearly $1 billion worth of cryptocurrency linked to the 2023 collapse of Prime Trust.

The suit, filed by PCT Litigation Trust—a trust created for the distribution of assets and litigation pursuit related to Prime Core Technologies—claims that Swan was able to avoid major losses in 2023 when the former crypto custodian was forced to shut down and file for bankruptcy, citing the firm’s “unrivaled access to inside information.” The suit was first reported by Blockspace.

“Swan—unlike most of Prime’s customers—did not suffer significant losses because Swan had insider, non-public information,” the suit says. “Swan knew to transfer fiat and crypto from Prime immediately prior to Prime filing for bankruptcy to avoid catastrophic losses.” 

Prime Trust was forced to shut down by Nevada regulators in June 2023 after it was determined the firm was heavily in debt, and unable to service customers. That August, the custodian filed for Chapter 11 bankruptcy protection on account of its financial woes, with early regulatory filings indicating it owed as much as $82 million to customers from missing fiat deposits. 

Prior to its bankruptcy filing, Swan was able to transfer nearly $1 billion worth of assets at today’s prices, led by 11,992 BTC currently valued around $917 million, that the suit alleges belongs to Prime debtors. 

While typically these funds could be clawed back based on a 90-day lookback period, also known as a preference period, the suit alleges that Swan took steps to circumvent that potential. 

“Upon learning non-public information indicating that Prime was on the cusp of bankruptcy, Swan recognized that offloading its entire business from Prime could expose it to enormous preference liability. Swan thus undertook efforts to shield itself from such exposure,” the suit reads.