Banq, a subsidiary of Prime Trust Payments, declares bankruptcy citing “unauthorized” asset transfers to Fortress NFT Group.
The payments division of cryptocurrency custodian Prime Trust, Banq, filed for bankruptcy in the US on June 13th. The application cited $17.72 million in assets and $5.4 million in liabilities, according to court records. According to the bankruptcy complaint, $17.5 million in assets were improperly transferred to Fortress NFT Group, a business founded by Banq’s former CEO, CTO, and CPO. Regarding these accusations, including the unauthorized transfer of trade secrets and sensitive information, Banq is currently in arbitration with Fortress.
The bankruptcy filing raises questions about the recently announced non-binding letter of intent for BitGo to acquire Prime Trust. The terms of the deal were not disclosed, but if completed, BitGo would acquire Prime Trust’s payment rails and cryptocurrency IRA fund, expanding its wealth management offerings.
The timing of the bankruptcy filing, coinciding with the BitGo acquisition announcement, adds uncertainty to the agreement’s outcome. It remains to be seen how the bankruptcy proceedings will impact the proposed acquisition.
This development occurs in the midst of a fast developing cryptocurrency custody business, which has seen major transactions including Ripple’s $250 million acquisition of Swiss digital asset custody operator Metaco in May.
In addition, the Securities and Exchange Commission of the United States has proposed rule changes that might put harsher restrictions on cryptocurrency companies acting as custodians of customer funds, posing additional regulatory problems for the sector.
The bankruptcy filing by Banq serves as a reminder of the industry’s potential dangers and difficulties, notably in the areas of custody and payment services. Concerns about security and compliance within the industry are raised by the illicit transfer of assets and the suspected dissemination of trade secrets.
In order to safeguard investors and maintain the integrity of the market, regulators may decide to examine the industry more closely and establish stronger monitoring rules as a result of these instances.
As the cryptocurrency custody market continues to develop and deal with regulatory changes, BitGo’s proposed acquisition of Prime Trust comes at a crucial time for both businesses. If the agreement is approved, BitGo will add payment rails and a bitcoin IRA fund from Prime Trust to its wealth management capabilities.
The bankruptcy filing of Banq, Prime Trust’s payments subsidiary, raises questions about the acquisition’s completion and emphasizes the value of conducting due diligence when determining the viability and integrity of crypto-related firms.