A new lawsuit tied to the collapse of crypto custodian Prime Trust is targeting Swan Bitcoin over nearly $1 billion in digital assets allegedly moved before the firm entered bankruptcy.
The case, filed in Delaware Bankruptcy Court by PCT Litigation Trust, accuses Swan Bitcoin of using privileged internal knowledge to escape the worst of Prime Trust’s financial meltdown in 2023. The complaint claims Swan withdrew large amounts of cryptocurrency and cash shortly before regulators shut down Prime Trust, avoiding losses that affected many other customers.
At the center of the dispute is nearly 12,000 Bitcoin—worth about $917 million at current market prices—along with millions in cash, stablecoins, and XRP. The lawsuit argues those assets should belong to Prime Trust’s bankruptcy estate.
“Swan—unlike most of Prime’s customers—did not suffer significant losses because Swan had insider, non-public information,” the suit says. “Swan knew to transfer fiat and crypto from Prime immediately prior to Prime filing for bankruptcy to avoid catastrophic losses.”
Prime Trust collapsed in mid-2023 after Nevada regulators determined the company was deeply insolvent and unable to meet customer obligations. The firm later filed for Chapter 11 bankruptcy protection in August of that year. Early filings suggested the company owed customers as much as $82 million tied to missing fiat deposits.
The lawsuit alleges Swan Bitcoin acted quickly once it became aware of Prime Trust’s worsening condition. According to the filing, Swan transferred its entire business relationship away from Prime just before key regulatory meetings took place.
“Upon learning non-public information indicating that Prime was on the cusp of bankruptcy, Swan recognized that offloading its entire business from Prime could expose it to enormous preference liability. Swan thus undertook efforts to shield itself from such exposure,” the suit reads.
Bankruptcy cases often allow courts to recover payments or transfers made shortly before a company collapses. This process, known as a “clawback,” usually applies within a 90-day preference period. The filing claims Swan structured its actions specifically to avoid that risk.
The complaint also points to a relationship between Swan and a senior Prime Trust executive who allegedly served as a paid outside adviser to Swan Bitcoin at the same time.
According to court documents, the executive maintained encrypted communications with Swan CEO Cory Klippsten before important meetings with Nevada financial regulators. The filing describes those exchanges as evidence Swan may have received confidential warnings about Prime Trust’s condition.
“On May 25, 2023, in the midst of these communications and one day before Prime’s meeting with Nevada FID, Swan notified Prime that it wanted to transfer its entire business from Prime,” the filing says.
The legal exposure listed in the complaint includes approximately $22.4 million in U.S. dollars, $5 million in stablecoins, and 91,444 XRP valued at roughly $126,000.
Swan Bitcoin has pushed back strongly against the allegations. In comments provided to Blockspace, a company representative argued the disputed assets were customer property held in trust accounts and therefore should not be treated as part of the bankruptcy estate.
“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 told Blockspace.
The lawsuit adds another chapter to the growing list of crypto bankruptcy disputes now moving through U.S. courts. Since the industry downturn of 2022 and 2023, regulators and creditors have increased scrutiny on custody practices, insider relationships, and how customer assets were handled before major firms failed.
