Trusted Counsel for Complex Matters
Introduction: A Case Study in Ongoing Risk
The bankruptcy of Prime Trust, LLC—a once-prominent crypto custodian and fintech infrastructure provider—has shifted from a 2023 regulatory collapse to a 2025 battleground for complex adversary proceedings and clawback litigation. While headlines may have faded, the legal and financial stakes for creditors are still mounting.
At The Law Office of Magdalena Zalewski, PLLC, we represent sophisticated commercial creditors—vendors, service providers, counterparties, and institutional clients—in recovering claims, defending preference actions, and navigating strategic litigation exposure.
This post outlines the current posture of the Prime Trust bankruptcy, explains ongoing adversary complaints, and delivers strategic insight for creditors still at risk.
Timeline Overview
- August 2023: Prime Trust files for Chapter 11 in the District of Delaware
- Mid–2024 to 2025: PCT Litigation Trust assumes administration and begins preference litigation
- 2025: Nearly 80 adversary proceedings filed, targeting a wide array of vendors and service providers
- Ongoing: Issues surrounding entitlement to custodial assets, KYC verification, and pro rata cash distributions
Adversary Proceedings: The Latest Wave of Risk
The PCT Litigation Trust (the successor-in-interest under Prime Trust’s confirmed plan) has begun aggressively pursuing preference claims under §§ 547 and 550 of the Bankruptcy Code. These actions are aimed at recovering payments made in the 90 days prior to filing.
Recent adversary proceedings include:
- PCT Litigation Trust v. Foris Capital US, LLC
- PCT Litigation Trust v. Pinttosoft LLC
- PCT Litigation Trust v. Crescent Financial, Inc.
Most complaints seek to claw back between $50,000 and $500,000 in alleged preferential transfers. If you received payments from Prime Trust in 2023, you may already be—or soon become—a target.
Are You at Risk?
Creditors should immediately evaluate their exposure based on:
- Payment Timing: Did you receive payment within 90 days of the August 2023 filing?
- Contract Terms: Were your services governed by terms invoking Article 8 of the UCC?
- Nature of Relationship: Were your transactions ordinary course? Did you provide contemporaneous value?
- Assets Held by Prime Trust: Were you a customer or platform partner with digital assets in their system?
Even if you’re not listed on the docket now, you may still face exposure if you’re identified as a key vendor or counterparty.
Key Legal Themes Emerging from the Case
1. Preference & Fraudulent Transfer Allegations
The core of most current litigation is a push to recover payments made to creditors shortly before the petition date. We help clients raise affirmative defenses under §547(c), such as:
- Contemporaneous exchange for new value
- Ordinary course of business (both objective and subjective tests)
- Subsequent new value
2. UCC Article 8 and Entitlement Disputes
In a major pending motion, the Plan Administrator is seeking to classify all digital and fiat assets as property of the estate. Coinbase and others have pushed back, arguing that assets governed under Article 8 of the UCC are client entitlements—not estate property.
If your custodial relationship with Prime Trust was properly structured under Article 8, your rights may differ substantially.
3. KYC Deadlines and Distribution Procedures
Court-approved distribution protocols require that all creditors submit updated Know-Your-Customer (KYC) documentation to receive pro-rata cash distributions.
Key issues include:
- Fiat and crypto holdings are treated as estate property
- USD equivalents are calculated at petition-date rates
- Small distributions under ~$10 may not be issued
- Missed KYC deadlines may result in forfeited rights
4. Procedural Consolidation & Sale Impacts
With affiliated entities and intercompany transactions at play, creditors should watch for efforts at substantive consolidation or tech asset sales that might affect IP access, contract enforceability, or recovery projections.
Immediate Action Steps for Creditors
- Check Adversary Filings — Search your company name on the Prime Trust docket to see if you’ve been sued.
- Audit Prior Payments — Review if any payments were made to your business within the 90-day prepetition period.
- Review Contractual Terms — Confirm whether you have UCC Article 8 protections or indemnities.
- File Proof of Claim — If not already filed, act immediately to preserve your rights.
- Respond to KYC Requests — Complete and verify identity documentation or risk losing your distribution.
- Engage Counsel Early — Our firm can handle all aspects of defense, claim filing, and creditor positioning.
Filing a Claim or Monitoring Litigation?
The official claims and noticing agent for the Prime Trust bankruptcy is:
Stretto, Inc.
(Attn: Alexa Westmoreland)
How We Help
At The Law Office of Magdalena Zalewski, PLLC, we exclusively represent commercial creditors in high-risk bankruptcies. Our work in crypto-adjacent and financial infrastructure cases includes:
- Defense in adversary preference litigation
- Strategic proof-of-claim drafting
- Asset recovery litigation involving UCC and Article 8
- Negotiation of critical vendor status or cure obligations
- Monitoring of DIP financing and sale-related risks
Representation is available on a competitive hourly basis, exclusive of costs and expenses. For matters involving urgent timelines or complex multiparty claims, premium terms may apply.
Final Thoughts
Even after a bankruptcy is filed, the legal landscape for creditors continues to shift. The Prime Trust case is a reminder that preference exposure, asset entitlement, and regulatory crossover can affect recovery long after the petition date.
Don’t let a passive claim strategy cost you. If you’re facing litigation or need clarity on your rights, we’re here to help.