Prime Trust, the crypto custodian which filed for Chapter 11 bankruptcy earlier this month, revealed that it lost $8 million by investing funds in TerraUSD (UST).
In an Aug. 24 filing with the United States Bankruptcy Court for the District of Delaware, the interim CEO of Prime Trust’s parent company Prime Core Technologies disclosed that the firm’s prior management lost $6 million in client funds and $2 million in corporate treasury funds from the UST investments.
In May 2022, Terra’s $18 billion native algorithmic stablecoin UST lost its peg and crashed to 35 cents, along with Terra’s native token LUNA, which dropped to near zero.
The Terra ecosystem’s crash had a catastrophic impact on the wider crypto industry – the effects of which played out immediately for some firms like Three Arrows Capital (3AC), while the extent of the event’s damage came to be known much later for other firms like Alameda Research.
In the filing, Prime Trust also addressed the so-called “wallet event,” in which the company lost access to $45 million worth of crypto locked in its Legacy wallets. When the firm migrated its assets to Fireblocks’ platform, it sought to deprecate the “98f” Legacy wallet and stop all customer deposits to them.
“In January 2021, the Company inadvertently provided customers with Contribution Addresses that allowed customers to make contributions of cryptocurrency into the 98f Wallet,” stated the filing.
It was only when a customer requested a significant withdrawal of ETH in December 2021, that employees realized that crypto deposits had been forwarded to the 98f wallet outside of Fireblocks’ platform.
“It was around this time that they discovered that the Company did not have the Wallet Access Devices and thus, could not access the cryptocurrency stored in the 98f Wallet,” read the filing.