Prime Trust subsidiary Banq files for bankruptcy amid BitGo acquisition deal

Prime Trust payment subsidiary Banq files for bankruptcy, citing “unauthorized’ asset transfers to Fortress NFT Group.

The payments subsidiary of crypto custodian Prime Trust, Banq, filed for bankruptcy protection in the United States on June 13, court documents show.

The move comes just days after wallet infrastructure provider and digital asset custodian BitGo signed a non-binding letter of intent to acquire Prime Trust, which was announced on June 8.

Banq’s bankruptcy filing listed $17.72 million in assets and $5.4 million of liabilities, and cited the “unauthorized transfer” of $17.5 million in assets to Fortress NFT Group, as well as the illicit transmission of trade secrets and proprietary information to Fortress.

Fortress NFT Group was set up by Banq’s former CEO, chief technology officer and chief product officer, reports say, and Banq is currently in arbitration with Fortress over these allegations.

The timing of the filing, just after the BitGo acquisition deal of Banq’s parent Prime Trust was announced, raises questions about how it might affect the agreement.

While the terms of the deal were not disclosed, if it goes through, BitGo will acquire Prime Trust’s payment rails and cryptocurrency IRA fund, increasing its wealth management offerings.

Prime Trust’s Nevada Trust Company will also join BitGo’s network of regulated trust companies in South Dakota, New York, Germany and Switzerland. Prime Trust’s API infrastructure and exchange network will “map over 1:1” with BitGo services. BitGo stated:

“This acquisition makes BitGo the first global digital asset company to provide a full suite of solutions for institutions and fintech platforms.”

The crypto custody market is evolving rapidly, with recent deals, including Ripple’s acquisition of Swiss digital asset custody provider Metaco in May for $250 million.

The BitGo/Prime Trust deal, if it goes ahead, comes just as the United States Securities and Exchange Commission has proposed rule changes that would make it harder for crypto companies to act as custodians of their customers’ funds.

Related: Prometheum subsidiary receives FINRA approval for digital asset qualified custody

Prime Trust has been under pressure for a while, reportedly laid off a third of its staff in January. Later, it stepped in to hold Binance.US customer funds through a network of partner banks after the banking crisis in March.

In 2022, it was at the center of a scandal in the U.S. state of Oregon when it was identified as the source of a $500,000 contribution to the state Democratic Party that later turned out to have come from former FTX executive Nishad Singh.

BitGo itself was close to being acquired by Galaxy Digital for $1.2 billion in 2022 and later sued Galaxy for acquisition breach after the deal was canceled.

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