Swan Bitcoin Hit With $1B Lawsuit Over Prime Trust Pre-Bankruptcy Transfers

Swan Bitcoin has been sued for nearly $1 billion in Delaware bankruptcy court over alleged pre-bankruptcy transfers connected to the 2023 collapse of crypto custodian Prime Trust. The complaint claims Swan Bitcoin (via Electric Solidus) used alleged insider access to move assets days before Prime Trust filed for bankruptcy. The trustee alleges Swan Bitcoin received $24.66M in cash plus 11,994 BTC, around $5M in USDT, and other smaller crypto positions before Prime Trust’s August 2023 bankruptcy filing. A central claim involves a Prime Trust senior executive who, while working at the custodian, was reportedly also a paid adviser to Swan Bitcoin under a side arrangement dating back to July 2019. The lawsuit highlights timing around Prime Trust’s Nevada regulator meeting on May 26, 2023. It alleges the executive started an encrypted, auto-deleting chat with Swan CEO Cory Klippsten four days earlier and that withdrawals escalated into a “full evacuation” one day before the meeting. The plaintiff also says Prime Trust created an internal ledger entry (“PT FBO Swan Customers”) on May 25 to make transfers appear as customer-held trust assets. Swan Bitcoin disputes these allegations, arguing the assets were held in individually owned trust accounts and should not be treated as part of Prime Trust’s general unsecured creditor pool. The court will weigh custody agreements, transfer timing, and asset ownership, while the plaintiff seeks to recover value and block any future Swan Bitcoin claims against the bankruptcy estate until restitution is made. For traders, the Swan Bitcoin case reinforces ongoing custody/settlement legal risk in crypto. It can heighten near-term sentiment around custody providers and custody-related tokens, even if spot market impact depends on any subsequent court rulings and exposure confirmations.