The bankruptcy estate of Prime Trust has filed a nearly $1 billion lawsuit against Swan Bitcoin, alleging the Bitcoin-only brokerage used insider information from an encrypted chat to pull its assets out of the collapsing custodian weeks before other customers and creditors knew the firm was insolvent.
The PCT Litigation Trust, created under Prime Core Technologies’ confirmed Chapter 11 plan, filed the 94-page adversary complaint on May 15 in the U.S. Bankruptcy Court for the District of Delaware against Electric Solidus, Inc., the parent entity operating under the Swan Bitcoin name. The case is assigned to Judge J. Kate Stickles under Adversary Proceeding No. 26-50331.
The trust is seeking to recover approximately 11,994 BTC (worth roughly $938 million at current prices), $24.66 million in cash, approximately $5 million in stablecoins including USDT and USDC, and 91,144 XRP — totaling approximately $970 million.
The Encrypted Chat Allegation
The central allegation involves what the trust describes as an insider tip delivered through a disappearing messaging channel.
According to the complaint, a senior Prime Trust executive who also served as a compensated outside advisor to Swan — and who reportedly lived near Swan CEO Cory Klippsten — initiated an encrypted chat thread with Klippsten on May 22, 2023.
The executive immediately set the chat to auto-delete messages after 24 hours. The conversation began four days before a critical meeting between Prime Trust and the Nevada Financial Institutions Division (FID) that would ultimately trigger the custodian’s regulatory shutdown.
The next available notification between the executive and Klippsten appeared on May 27, 2023 — the day after the Nevada FID meeting and the same day Swan transferred 10,080.1085 BTC from Prime. That notification showed the executive turned off the auto-delete feature.
“Swan—unlike most of Prime’s customers—did not suffer significant losses because Swan had insider, non-public information,” the complaint states. “Swan knew to transfer fiat and crypto from Prime immediately prior to Prime filing for bankruptcy to avoid catastrophic losses.”
The 90-Day Preference Window
The trust alleges that during the 90-day preference window before Prime’s August 14, 2023, Chapter 11 filing—specifically between May 16 and August 14 — Swan withdrew massive volumes of BTC, cash, stablecoins, and XRP while the custodian was insolvent.
On May 25, 2023, in the midst of the encrypted communications and one day before Prime’s meeting with Nevada regulators, Swan notified Prime that it wanted to transfer its entire business away from the custodian. Swan subsequently moved client assets to Fortress and BitGo, completing the transfers well ahead of other creditors and customers.
Swan informed its customers at the time that the moves were related to “system upgrades.”
The trust acknowledges that Swan contributed some new value to its accounts during the preference period — approximately 1.44 BTC and $2.22 million in cash — but argues the net transfers heavily favored Swan at the expense of the bankruptcy estate.
The Commingling and Segregation Dispute
The complaint challenges the legal structure under which assets were held. The governing agreements between Swan and Prime — including Order Forms, an API Agreement, and a Custodial Agreement — explicitly disclaimed fiduciary duties and allowed Prime to commingle customer assets.
The trust alleges that a ledger entry labeled “PT FBO Swan Customers” was created on May 25, 2023, to give the false appearance that Swan’s assets had been held in segregated accounts for the benefit of Swan’s customers the entire time. The timing is notable: the entry was created one day before Prime’s meeting with Nevada regulators and days after the alleged encrypted communication began.
This is not an abstract legal question. A July 18, 2025, ruling by Judge Stickles already determined that assets in Prime’s possession at the time of filing were part of the bankruptcy estate due to commingling and the contractual terms of its agreements. That decision enabled the Plan Administrator to treat partner assets as estate property, with certain carve-outs reserved for parties including Swan during earlier proceedings.
Swan’s Defense
Swan has disputed the litigation trust’s theory in prior court filings and in a statement to Blockspace.
“Prime Trust held customer property in individually owned trust accounts. The bankruptcy estate is now trying to take assets it held in trust as custodian, from a party that never received them. Customer assets held by a trust company are not available to general unsecured creditors, and we expect the courts to say so,” a representative for Swan Bitcoin said.
Swan had not filed a formal response to the May 15 adversary complaint as of May 18, 2026.
Prime Trust’s Collapse: The Backstory
Prime Trust, a Nevada-regulated crypto custodian, was one of the most widely used custody providers in the industry during the 2021–2023 cycle, serving as the backend for dozens of crypto companies, including Swan, Strike, Compass Mining, Fold, and Galaxy Digital.
The company’s financial condition deteriorated rapidly in 2023. Prime Trust lost access to a wallet holding approximately $80 million, reportedly used customer funds to cover front-facing withdrawals, and carried fiat liabilities exceeding $85 million against roughly $3 million in available cash. Nevada regulators issued a cease-and-desist order in June 2023, placed Prime in receivership, and the company filed for Chapter 11 on August 14, 2023.
Interim CEO Jor Law cited excessive spending, risky investments including a failed stablecoin venture, and a loss of customer trust as the primary causes.
Part of a Broader Clawback Campaign
The PCT Litigation Trust has filed similar clawback actions against other former Prime partners, including Strike, Compass Mining, Fold, and Galaxy Digital. Each case centers on the same core legal questions: whether assets were properly segregated, whether transfers qualify as preferences under bankruptcy law, and whether partner firms can assert fiduciary defenses against clawback claims.
How the Delaware Bankruptcy Court rules on Swan’s fiduciary and preference defenses will likely shape outcomes across several related actions still working through the docket. The case is being closely watched by the broader crypto custody industry, as it could establish precedent for how customer assets held by failed custodians are treated in bankruptcy — a question that has implications far beyond Prime Trust.
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