PCT Trust Sues Swan Bitcoin for Nearly $1B in Crypto

PCT Litigation Trust filed a lawsuit in Delaware Bankruptcy Court seeking nearly $1 billion, alleging Swan Bitcoin used nonpublic information from Prime Trust to transfer assets before Prime’s collapse.

The complaint, brought by the trust set up to distribute assets and pursue claims tied to Prime Core Technologies, says Swan moved fiat and crypto out of Prime immediately before Prime filed for bankruptcy and took steps to avoid clawbacks under the 90-day preference window that lets estates recover certain transfers made shortly before insolvency.

The filing lists roughly 11,992 Bitcoin, valued at about $917 million at current prices, along with about $22.4 million in U.S. dollars, $5 million in dollar-backed stablecoins and 91,444 XRP, valued at about $126,000. PCT Litigation Trust contends those assets belong to Prime’s debtors and should be returned to the bankruptcy estate for distribution to creditors.

The complaint links Swan’s advantage to a “senior executive” at Prime who also served as a compensated outside advisor to Swan. The filing says that executive initiated encrypted communications with Swan’s CEO, and that on May 25, 2023-one day before Prime met with Nevada regulators-Swan notified Prime it wanted to transfer its entire business away from the custodian.

Prime Trust was shut down by Nevada regulators in June 2023 after regulators found the firm heavily indebted and unable to service customer accounts. The custodian filed for Chapter 11 in August 2023. Early disclosures by the estate indicated Prime may have owed as much as $82 million to customers related to missing fiat deposits.

The trust says Swan anticipated that moving its business could create large preference liability and therefore took actions to shield itself from such exposure. The complaint seeks recovery of the transfers as preferential or otherwise avoidable under bankruptcy law.

Swan responded in writing, asserting that customer property was held in individually owned trust accounts and therefore not available to general unsecured creditors. Swan’s statement read: “Prime Trust held customer property in individually-owned trust accounts. The bankruptcy estate is now trying to take assets it held in trust as custodian, from a party that never received them. Customer assets held by a trust company are not available to general unsecured creditors, and we expect the courts to say so.”

The Delaware Bankruptcy Court will determine whether the transfers to Swan can be unwound and whether the assets should be returned to Prime’s estate for distribution to creditors.