Swan Bitcoin is facing allegations that it withdrew nearly $1 billion in bitcoin and cash from Prime Trust just before the crypto custodian collapsed into bankruptcy in 2023. The accusation, brought by the trustee overseeing Prime Trust's estate, claims the withdrawals came as the firm was already teetering — and that the move drained assets that should have been available to creditors.
The $1 Billion Withdrawal Claim
According to court filings, Swan Bitcoin allegedly moved a combination of bitcoin and fiat currency out of Prime Trust in the weeks leading up to the custodian's June 2023 bankruptcy filing. The exact timing and nature of the transfers are now under scrutiny, with the trustee arguing the withdrawals amounted to a preferential transfer — one that gave Swan an unfair edge over other creditors.
The figure — nearly $1 billion — would make it one of the largest single claims tied to Prime Trust's collapse. The trustee is seeking to claw back those assets for distribution among the custodian's other customers and creditors.
Prime Trust's Downfall
Prime Trust, a Nevada-based crypto custodian, filed for Chapter 11 bankruptcy in June 2023 after a series of operational and regulatory troubles. The company had served as a back-end infrastructure provider for numerous crypto firms, including Swan Bitcoin. Its failure left a long list of clients scrambling to recover funds and forced regulators in several states to step in.
The bankruptcy proceedings have been ongoing, with the trustee tasked with untangling Prime Trust's books and recovering assets. The Swan accusation is the latest — and by dollar volume, the largest — to emerge from that process.
Swan Bitcoin has not yet filed a formal response in court. Legal experts following the case expect the company to contest the allegations, likely arguing that the withdrawals were ordinary business transactions made before Prime Trust's financial distress became public knowledge. A hearing on the trustee's motion is expected later this summer.
The outcome could have ripple effects for other firms that pulled funds from Prime Trust in its final weeks — and for how bankruptcy courts treat crypto asset transfers made on the edge of insolvency.
