Prime Trust Files Chapter 11, Withdrawals Frozen and Receivership Begins

Prime Trust and certain affiliates have filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, the company disclosed in court papers filed on December 30, 2025. The petition lists estimated liabilities between one hundred million and five hundred million dollars and estimated assets between fifty million and one hundred million dollars, and indicates between twenty five thousand and fifty thousand creditors, a scale that underscores how many retail customers and institutional counterparties could be affected.

The filing arrives after months of state level intervention. Nevada’s Financial Institutions Division issued a cease and desist order on June 22 directing Prime Trust not to accept fiat or crypto from any new clients and petitioned a state court to place the company into receivership. The Eighth Judicial District Court of Nevada subsequently ordered temporary receivership, a step regulators said was necessary amid allegations the firm was approaching insolvency and could not meet withdrawal demands. Withdrawals remain frozen while federal bankruptcy procedures unfold and the Nevada receivership continues to operate in parallel.

Regulatory filings submitted by Nevada regulators allege a meaningful shortfall in customer fiat balances. Those filings state Prime Trust owed clients more than eighty five million dollars in fiat yet had roughly three million dollars in fiat on hand. By contrast the filings showed crypto balances largely in line with obligations, noting about sixty nine point five million dollars owed in crypto and approximately sixty eight point six million dollars in crypto on hand. Regulators also alleged that customer funds had been used to satisfy withdrawal requests from what they termed legacy wallets, assertions that are likely to figure prominently in litigation and creditor claims.

The collapse of a proposed acquisition by fellow custodian BitGo this summer removed what had been described internally as a last major lifeline. Emergency fundraising efforts in June also failed to secure the liquidity needed to stabilize operations. Prime Trust said in a statement it believes Chapter 11 will provide a "transparent and value maximizing process" for the benefit of its clients and stakeholders.

Legal practitioners tracking the case say the Chapter 11 is likely to usher in a prolonged claims and adversary proceeding period. Notes from bankruptcy counsel identify Stretto Inc as the official claims and noticing agent and reference a Prime Trust claims portal for creditors to file proofs of claim. Observers have catalogued nearly eighty adversary proceedings and a wider set of preference and clawback litigation that began after an earlier regulatory collapse in 2023 and extended through administration by a litigation trust in 2024 and 2025.

Market participants say the filing exacerbates worries about concentration risk in the custody market and the adequacy of state level oversight for firms that serve national and global clients. With tens of thousands of creditors potentially affected and litigation likely to unfold over months or years, stakeholders from institutional investors to retail holders will be watching the Delaware docket, Nevada court actions, and the claims portal closely for clarity on recoveries and priorities. Policymakers and industry leaders may face renewed pressure to tighten custody standards and to consider clearer federal rules that reduce regulatory fragmentation and limit the systemic spillovers of future failures.