A buzzy startup offering financial infrastructure to crypto companies has found itself bankrupt primarily because it can’t gain access to a physical crypto wallet with $38.9 million in it. The company also did not write down recovery phrases, locking itself out of the wallet forever in something it has called “The Wallet Event” to a bankruptcy judge.
Prime Trust pitches itself as a crypto fintech company designed to help other startups offer crypto retirement plans, know-your-customer interfaces, ensure liquidity, and a host of other services. It says it can help companies build crypto exchanges, payment platforms, and create stablecoins for its clients. The company has not had a good few months. In June, the state of Nevada filed to seize control of the company because it was near insolvency. It was then ordered to cease all operations by a federal judge because it allegedly used customers’ money to cover withdrawal requests from other companies.
The company filed for bankruptcy, and, according to a filing by its interim CEO, which you really should read in full, the company offers an “all-in-one solution for customers that remains unmatched in the marketplace.” A large problem, among more run-of-the-mill crypto economy problems such as “lack of operational and spending oversight” and “regulatory issues,” is the fact that it lost access to a physical wallet it was keeping a tens of millions of dollars in, and cannot get back into it.
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It called one of these wallets the “98f Wallet,” because its address ended in “98f.”
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If a user loses both the hardware device and the seed phrases, it is virtually impossible for that user to regain access to the digital wallet.”
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Prime Trust opted to laser etch them into a piece of steel called “Cryptosteel Hardware,” which are called “Wallet Access Devices” in the court filings, and which look like this:
Image: Court records
According to the filing, it lost these devices, which is why it can’t get back into the wallet.
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For several years, the company then took customer deposits into this address, to the tune of tens of millions of dollars. In December, 2021, “when a customer requested a significant withdrawal of ETH that the company could not fulfill [from other wallets,]” it went to withdraw it from this hardware wallet. “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.”
