Swan Bitcoin Withdrawn All Assets Before Prime Trust Collapse

Key Points:

• Swan Bitcoin quickly withdrew all assets from Prime Trust weeks before the custodian collapse.
• All Swan client assets now belong to Fortress, a crypto custodian company that happens to be led by Scott Purcell, the former chief executive of Prime.
• Many wondered if companies like Swan could be revoked during Prime’s bankruptcy.

According to Decrypt, Bitcoin investment app Swan Bitcoin quickly withdrew all Prime Trust assets weeks before Prime Trust collapsed.

Many wondered if Swan Bitcoin could be recovered during the Prime Trust bankruptcy, even though it was withdrawn before the Prime Trust collapsed.

All Swan client assets now belong to Fortress, a crypto custodian company that happens to be led by Scott Purcell, the same CEO who led the Prime until January 2021. Klippsten denied Swan knew Prime Trust was in default before withdrawing, saying the company was prepared to leave the custodian for nine months.

Many suspect that companies like Swan may be subject to clawbacks during Prime Trust’s bankruptcy process, despite withdrawing before its collapse. However, Swan CEO Cory Klippsten claims that wouldn’t be possible due to “a century of trust legal structure precedent.”

“If there were somehow going to be clawbacks (illegal and contra a century of precedent), Swan would just make our users whole,” added Klippsten.

When asked why Swan did not take over assets internally, Klippsten told Decrypt that he doubted such an approach would give rise to legal problems, as he expected regulators to. The regulator will soon force the separation of brokerage and custody.

“I don’t think having the ledger/custody on the broker side is the answer because I expect regulations soon forcing the separation of brokerage and custody, which is required for the rest of the financial industry and is the best legal setup for users,” wrote Klippsten via DM.

Like Swan, the Bitcoin Strike lightning wallet narrowly escaped Prime with user assets intact. However, instead of choosing a new custodian, the company managed the assets itself, unlocking some new features for users.

On Tuesday, the Nevada Department of Financial Institutions (FDI) announced that it has applied to take over cryptocurrency custodian Prime Trust and freeze all of its activities. FDI has petitioned the Nevada District Court to appoint a person to take over the day-to-day operations of the Prime and “thoroughly examine all of the company’s financial affairs to determine what is in the best interest of the company.” customers of Prime, or to remedy and return the company to private management,” or liquidate it.”

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