Prime Trust’s post-bankruptcy litigation trust has filed a lawsuit against Swan Bitcoin, alleging that the company capitalized on insider knowledge to transfer nearly $1 billion in assets from Prime Trust shortly before its bankruptcy. The complaint, filed in Delaware bankruptcy court, claims that Electric Solidus, the corporate entity behind Swan Bitcoin, received millions in cash, thousands of Bitcoin, and millions more in stablecoins and other digital assets prior to Prime Trust’s August 2023 collapse.
Central to the allegations is a Prime Trust senior executive who concurrently acted as a paid adviser to Swan Bitcoin under an arrangement dating back to 2019. The suit points to encrypted message exchanges between this executive and Swan’s CEO Cory Klippsten during a critical period leading up to a regulatory meeting with Nevada officials. Notably, the executive started an encrypted chat with a 24-hour auto-delete function days before the meeting, which was disabled immediately after Swan withdrew over 10,000 Bitcoin from Prime Trust.
The lawsuit forms part of Prime Trust’s broader efforts to reclaim assets transferred out before its financial downfall. It asserts that Swan Bitcoin moved funds ahead of other customers as Prime Trust’s liquidity worsened, effectively trying to shield its assets from bankruptcy losses. Internal communication records and filings suggest that Swan expanded an initial partial fund transfer into a full withdrawal of assets just one day before the regulatory meeting.
In an apparent attempt to obscure these moves, Prime Trust created a special ledger account to make Swan’s assets appear segregated within a trust—an account that did not previously exist. The litigation trust argues these assets were never properly held in trust for Swan’s customers, making the transfers subject to clawback under bankruptcy law.
The plaintiff seeks recovery under preferential and fraudulent transfer provisions of the Bankruptcy Code, requesting the court to block any future claims Swan may file against the bankruptcy estate until restitution is made. The lawsuit highlights growing scrutiny over asset management practices and insider dealings amid crypto custodian failures.