Banq, a crypto custodian Prime Trust subsidiary, has filed for bankruptcy in the Nevada District Court.
Prime Trust, Banq’s parent company, is attempting to conclude an acquisition with BitGo after experiencing a financial crisis due to the Celsius bankruptcy.
Banq also accuses its former executives of stealing its trade secrets and assets to launch rival NFT platforms.
According to the bankruptcy petition, Banq listed around $17.72 million in assets versus $5.4 million in liabilities. The company said it filed for Chapter 11 protection to preserve its assets and reorganize its business.
Banq is a subsidiary of Prime Trust, a crypto custodian that offers banking and compliance services to various crypto platforms, including TrueUSD, BitGo, and Haru Invest.
Prime Trust is also facing financial difficulties after one of its major clients, Celsius, filed for bankruptcy in April following a hack that resulted in losing $400 million worth of crypto assets.
Prime Trust is currently in talks to be acquired by BitGo, another crypto custodian, for $1.2 billion.
Banq’s legal battles
Banq’s bankruptcy filing comes amid legal disputes involving its former executives and rival NFT platforms.
In May, Banq filed a lawsuit against Fortress NFT Group, a company founded by Banq’s former CEO Scott Purcell, CTO Kevin Lehtiniitty, and CPO Ryan Breen.
Banq accused them of stealing its trade secrets, confidential information, and technology to create competing NFT platforms, Fortress NFT and Planet NFT. It also claimed they engaged in deceptive practices to conceal their wrongdoing.
The lawsuit alleged that Purcell intended to steer Banq toward NFTs but faced resistance from the board and shareholders.
Purcell then founded Fortress NFT and sold Banq’s computers, intellectual property, and corporate infrastructure to the new company without authorization.
Additionally, he acquired Banq’s seat licenses for Las Vegas Raiders games at Allegiant Stadium.
In June, a judge ordered the case to be arbitrated in early 2023, as Purcell and the other defendants in the lawsuit signed arbitration provisions. Banq is seeking damages and injunctive relief from Fortress NFT Group.
Banq’s Impact on the crypto industry
Banq’s bankruptcy filing has also affected some of its partners and clients in the crypto industry. TrueUSD, a stablecoin that has a banking relationship with Prime Trust, said that it paused the minting and exchange of its tokens due to Prime Trust’s bandwidth issues.
TrueUSD assured its users that their funds are safe and that it is working with Prime Trust to resume normal operations as soon as possible.
Haru Invest Korea, a crypto yield platform that also used Prime Trust as a service provider, has halted deposits and withdrawals due to issues with an unidentified partner, believed to be either Banq or Prime Trust.
Haru Invest reported that it had closed its office and is trying to recover its funds from the partner.
Banq’s bankruptcy filing is one of several cases involving crypto platforms that have faced regulatory scrutiny or legal troubles in recent months.
