The conflict is related to a vast collection of assets that Prime Trust is holding for Celsius clients in New York and Washington.
In an effort to recover $17 million in cryptocurrency that the insolvent lender claims its former business partner still possesses, Celsius Network filed a lawsuit against cryptocurrency custodian Prime Trust on Tuesday.
The 54-page lawsuit, which was filed in federal bankruptcy court, concerns assets connected to users of Celsius’ yield product in Washington, D.C., and New York. These assets were kept by Prime Trust, which, according to Celsius, returned $119 million of the total to him when the two ended their contract in June 2021.
However, Prime Trust “has refused to fulfill its obligations to transfer” 398 BTC, 196,268 CEL tokens, 3,740 ETH, and 2.2 million USDC that it valued at $17 million, according to Celsius, which just filed for bankruptcy protection and owes its creditors billions of dollars.
“Upon the commencement of these bankruptcy proceedings, Prime Trust was obligated under the Bankruptcy Code to deliver all property belonging to Celsius that is in Prime Trust’s possession to Celsius, including these remaining crypto assets, and should be ordered to turn them over now pursuant to section 542 of the Bankruptcy Code,” Celsius stated in the filing.
In June 2021, Prime Trust severed ties with Celsius due to “red flags,” although at the time it did not state why. According to those familiar with the matter, the 12-month relationship was terminated by the Prime Trust risk team because they were concerned about Celsius’ strategy of “endlessly re-hypothecating assets.”