Swan Bitcoin Sued for Transferring Nearly $1 Billion in Assets Using Insider Information from Prime Trust Bankruptcy
Financial services company Swan Bitcoin has been sued by PCT Litigation Trust, accused of using insider information to transfer client fiat and crypto assets ahead of Prime Trust's bankruptcy in 2023, thereby avoiding significant losses.
The transferred assets are valued at nearly $1 billion at current prices, including 11,992 bitcoins (approximately $917 million), $22.4 million in cash, $5 million in stablecoins, and 91,444 XRP. A senior executive at Prime Trust also served as a paid external advisor to Swan, providing information channels.
The crypto custody and wealth management platforms in the market are facing a crisis of trust, with the lawsuit holding accountable those involved in insider operations. Compliant custody institutions may benefit, while platforms accused of evading losses face short-term pressure, leading to a rapid shift of funds from gray custody services to transparent, regulated platforms.
Source: Public Information
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Swan Bitcoin, as a Bitcoin-focused wealth management platform, previously relied heavily on Prime Trust for custody of client assets. Ahead of Prime Trust's bankruptcy filing in 2023, assets were transferred early through internal advisory channels. This lawsuit continues the controversy over information asymmetry in multiple custody bankruptcies in the crypto industry. Swan argues that the assets were placed in independent trust accounts and should not be pursued by general unsecured creditors.
In terms of capital pathways, the PCT Litigation Trust represents bankruptcy creditors attempting to include Swan's transferred assets in the liquidation pool for recovery. Swan, on the other hand, is using legal defenses to protect client Bitcoin holdings, motivated by the need to maintain the platform's reputation and continuity of subsequent wealth management operations, avoiding a chain reaction of withdrawals.
Similar to the disputes over early transfers by custodians in bankruptcy cases like Celsius and Voyager from 2022-2023, and the accountability of related parties in the aftermath of FTX, Swan is currently under litigation pressure as the crypto custody industry transitions from gray information operations to strict asset isolation and compliance regulation.
Structural judgment: Essentially a matter of regulatory change. The combination of trust structures and insider channels in crypto custody makes it easier to evade liquidation before bankruptcy, with the mechanism rooted in a regulatory vacuum that amplifies moral hazards, forcing the industry's value to shift from reliance on a single custodian platform to compliant service providers with strict audits, isolation, and licensing.
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The earlier the insider information, the faster the asset transfer.
The stricter the trust isolation, the more lawsuits still pursue accountability.
The more gray operations, the harsher the regulatory cleanup.