Swan Bitcoin is facing a Delaware bankruptcy lawsuit over alleged transfers from Prime Trust before its 2023 collapse. The post-bankruptcy trust claims the firm used insider access to move nearly $1 billion in Bitcoin, cash, stablecoins, and other crypto assets.
The complaint files Electric Solidus, the corporate entity behind Swan Bitcoin. It alleges the company received more than $24.6 million in cash, 11,994 Bitcoin, about 5 million USDt, and smaller amounts of other digital assets before Prime Trust filed for bankruptcy in August 2023.
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Swan Bitcoin Case Centers on $923M Bitcoin Transfer
According to the filing, the disputed Bitcoin is now valued at about $923 million. Prime Trust’s litigation trust is seeking to recover assets it says left the custodian as its financial condition worsened.
The case centers on an unnamed senior Prime Trust executive. The complaint says that the executive also served as a paid adviser to Swan Bitcoin through a side arrangement that began in July 2019.
According to the filing, the executive opened an encrypted chat with Swan CEO Cory Klippsten four days before Prime Trust met Nevada regulators on May 26, 2023. The chat allegedly used auto-deleting messages set to disappear every 24 hours.
The lawsuit says that feature was turned off the day after the regulator meeting. Swan Bitcoin then withdrew more than 10,000 Bitcoin from Prime Trust, according to the complaint.
Prime Trust’s post-bankruptcy trust claims the company gained an unfair advantage over other customers. It alleges Swan Bitcoin knew to transfer fiat and crypto before the bankruptcy filing to avoid major losses.
Swan Bitcoin Withdrawal Request Draws Ledger Scrutiny
The complaint also says Swan widened the scope of its withdrawal request before the Nevada meeting. The request allegedly changed from a partial transfer to a full withdrawal of funds from Prime Trust.
Prime Trust employees then rushed to complete the request before the end of business that day. The filing cites Slack messages that allegedly show staff working to process the transfers.
The lawsuit also focuses on an internal ledger created on May 25. The account was labeled “PT FBO Swan Customers,” though the complaint says that the account did not previously exist.
According to the plaintiff, the ledger made it appear that Swan customer assets had always been held separately in trust. The complaint rejects that position and says the assets were not held in trust for those customers.
Prime Trust’s litigation trust is seeking recovery under preferential transfer and actual fraudulent transfer provisions of the Bankruptcy Code. It also wants the court to block any future Swan Bitcoin claims against the estate until restitution is made.
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