Last year, when Terra went bankrupt, the popular crypto platform claimed that it did not suffer any losses during the collapse. However, the truth has finally come out. Many crypto companies went bankrupt as a result of Terra’s collapse. The FTX collapse was significantly linked to the $40 billion Terra collapse.
Effects of Terra Collapse
Prime Trust, a partner of Binance‘s US exchange, recently announced its bankruptcy. The company initially tried to acquire BitGo, but gave up when the extent of the losses became clear. Similarly, in late 2022, Binance also attempted to acquire FTX, but backed out when it realized it would be detrimental.
Crypto custody provider Prime Trust admitted to losing $8 million in customer and institutional funds due to the collapse of TerraUSD. The custody provider lost $6 million from customer funds and $2 million from its institutional treasury.
Prime Trust Bankruptcy
In June, Prime Trust was placed under receivership after losing access to a third-party hosted crypto wallet in 2021. According to court documents, the company owes approximately $82 million in fiat and $861,000 in crypto to its customers. The Nevada Financial Institutions Division also accused the company of using customer funds to purchase crypto companies. Regulators also ordered the company to cease serving individual customers.
Since filing for bankruptcy, the company has removed the executives responsible for the wallet scandal. Prime Trust began serving crypto customers in 2018, when the banking sector largely stayed away from the industry. In addition to holding assets on behalf of customers, the company played a significant role by keeping customer dollars in various banking partners.
One of its first customers, Celsius, filed a lawsuit to collect $17 million worth of crypto assets. Celsius also went bankrupt due to the Terra collapse. New laws in Hong Kong, South Korea, and new regulations in Singapore require the separation of customer and company assets. Earlier this year, the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance for allegedly mishandling customer funds. Regulators also accuse former FTX CEO Sam Bankman-Fried of trading with customer funds.
