Swan Bitcoin is facing a lawsuit that alleges the crypto financial services firm used insider access to pull nearly $1 billion in Bitcoin and cash from Prime Trust — just days before the embattled custodian filed for bankruptcy in 2023. The complaint, filed this week, claims Swan exploited its position at Prime Trust to move the funds out ahead of other creditors, leaving a massive hole in the estate.
The alleged insider play
The lawsuit, obtained by GFdaily, accuses Swan Bitcoin of taking advantage of its close ties to Prime Trust to execute the transfers. The $1 billion figure includes both Bitcoin and cash. Swan had been a major client of Prime Trust, which acted as a custodian for digital assets. The timing is the crux of the case: the transfers happened right before Prime Trust's collapse, which sent shockwaves through the industry in 2023.
Prime Trust's bankruptcy filing in late 2023 revealed that the company had a shortfall in customer funds. The new lawsuit suggests that Swan's withdrawals may have deepened that shortfall, potentially to the detriment of other users and creditors.
What's at stake
If the allegations hold up in court, Swan could be on the hook for returning nearly a billion dollars in assets. The case also raises fresh questions about how custodians and their clients interact when a firm is on the brink of failure. Insider access — and the ability to jump the queue — is a recurring nightmare in crypto, where bankruptcy proceedings have turned into multiyear legal brawls.
For Prime Trust's other creditors, the lawsuit offers a potential path to recovery. The bankruptcy estate has been trying to claw back funds from various parties. This suit basically hands them a specific target.
Swan's side
Swan Bitcoin has not yet filed a formal response in court. The company has previously marketed itself as a secure, transparent platform for Bitcoin accumulation. That image could take a hit regardless of the outcome. The lawsuit is still in its early stages, and no trial date has been set.
Neither Swan nor Prime Trust's bankruptcy administrators responded to requests for comment by press time.
What happens next
The court will likely schedule a preliminary hearing in the coming weeks. Discovery — if it gets that far — would be a monster, given the amount of money involved and the technical nature of the transfers. For now, the crypto world is watching to see whether this case becomes another cautionary tale about the dangers of custodial risk and cozy relationships between service providers.
