Crypto brokerage firm Swan Bitcoin is facing a staggering $970 million lawsuit. The case is linked to the dramatic collapse of crypto custodian Prime Trust. This lawsuit reignites industry concerns over digital asset custody, bankruptcy risks, and insider information allegations.
The lawsuit was filed by the PCT Litigation Trust, the entity created to recover funds for creditors after Prime Trust entered Chapter 11 bankruptcy proceedings in 2023. Court filings claim Swan Bitcoin withdrew nearly $1 billion in crypto and cash assets shortly before Prime Trust collapsed. Notably, Swan allegedly used insider knowledge about the custodian’s worsening financial condition.
Prime Trust Bankruptcy Fallout Intensifies
The legal complaint centers around approximately 11,994 BTC, alongside $24.66 million in cash, nearly $5 million in stablecoins, and more than 91,000 XRP tokens. At current market prices, the combined assets are valued close to $970 million.
According to the lawsuit, these transfers occurred during the critical 90-day “preference period” before Prime Trust officially filed for bankruptcy protection on August 14, 2023. Bankruptcy trustees often scrutinize transactions made during this window. They aim to determine whether certain creditors or partners unfairly received preferential treatment.
The complaint alleges Swan Bitcoin rapidly moved customer assets away from Prime Trust after receiving confidential warnings from a senior Prime executive. That executive reportedly advised Swan CEO Cory Klippsten about the firm’s deteriorating financial situation.
Court documents claim encrypted and auto-deleting messages between parties began in May 2023. This was weeks before Nevada regulators took action against Prime Trust.
Swan Bitcoin Denies Wrongdoing
Swan Bitcoin has strongly disputed the accusations. The company argues that the assets in question belonged to customers. They were held in segregated trust accounts rather than being part of Prime Trust’s bankruptcy estate.
A company representative stated that customer-held crypto assets should not be used to repay general unsecured creditors in the bankruptcy proceedings.
The legal battle now hinges on whether those funds were genuinely segregated customer assets or whether they were commingled with Prime Trust’s broader holdings. A previous Delaware bankruptcy ruling in 2025 reportedly determined that some assets held by Prime Trust qualified as estate property. This was because of commingling practices and contractual terms.
How Prime Trust Collapsed
Prime Trust was once considered a major crypto infrastructure and custody provider serving exchanges, fintech firms, and institutional crypto businesses. However, the company’s financial troubles surfaced publicly in 2023 after Nevada regulators accused it of severe operational and financial failures.
Regulators alleged the firm lost access to wallets containing tens of millions of dollars in customer funds and used customer assets to fulfill withdrawal requests. Prime Trust later entered receivership before filing for Chapter 11 bankruptcy protection.
The collapse became one of the crypto industry’s biggest custody failures following the earlier bankruptcies of firms like FTX and Celsius Network.
Crypto Industry Watches Landmark Bankruptcy Case Closely
The Swan Bitcoin lawsuit is expected to become a landmark legal case for the cryptocurrency industry. This is because it could shape how courts treat digital assets held by failed custodians.
Legal experts say the outcome may redefine standards for crypto custody agreements, trust account protections, and clawback claims in future bankruptcies.
The PCT Litigation Trust has reportedly launched similar recovery lawsuits against several other crypto firms connected to Prime Trust. These include Strike, Fold, Compass Mining, and Galaxy Digital.
As Bitcoin adoption continues growing worldwide, the case highlights ongoing concerns around transparency, custody infrastructure, and the risks associated with centralized crypto service providers.
For now, Swan Bitcoin has not filed a formal court response to the latest complaint. However, the legal showdown is likely to draw intense attention from investors, regulators, and the broader cryptocurrency market in the coming months.
