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Issue #1357: Two oddities with the Prime Trust revelations

Issue #1357: Two oddities with the Prime Trust revelations

Jun 29, 2023
Marty's Ƀent

Issue #1357: Two oddities with the Prime Trust revelations

Earlier this week allegations surrounding the series events that led to Prime Trust having to file for bankruptcy. Apparently Prime Trust made a transition from a proprietary custody set up for their client's different "crypto assets" to Fireblocks' enterprise solution. According to the allegations (above), for some reason Prime Trust reintroduced legacy wallet (their initial proprietary wallets) forwarding to their customers in 2021 and these wallets accumulated a significant amount of "crypto assets" that were inaccessible to Prime Trust. Presumably due to the fact that they lost access to the private keys that allowed Prime Trust to move those assets. In an attempt to fill the hole created by the incompetence that enabled customers to send assets to public addresses that were associated with private keys that had been "lost" or intentionally destroyed, Prime Trust began using their customers' dollar balances to speculate with shitcoins.

The overt fraud of using customer funds in an attempt to is really bad, but the conditions that led Prime Trust to that decision leave a couple of questions to be answered.

Firstly, there shouldn't be a timeline where Prime Trust loses access to the private keys they utilized before transitioning to Fireblocks. Anybody operating with more than two brain cells in this space and is tasked with securing and moving bitcoin on behalf of others should never burn or lose the private keys they use to perform those services. In the best case, Prime Trust's incompetence was such that they didn't have redundant private key back ups that would allow them to recover keys in extreme scenarios. In the "holy shit I can't believe you'd be that incompetent" case, Prime Trust's incompetence was such that they deleted the private keys that gained them access to their legacy addresses. If that is the case, the level of gross negligence involved is stunning. They would have to assume that none of their customers could mistakenly send bitcoin to an old address they had on file. This scenario isn't ideal, but it should be assumed by the custodian that it is a possibility, in which case the custodian should ensure that they have access to the private keys. In the "ultimate rug" case, Prime Trust was operating purely as a fraudulent way and is using the "we don't have access to the private keys" excuse as a way to mask an outright theft.

At this point, all of the scenarios described above are in play. To my knowledge, there has been no disclosure of the public addresses that the bitcoin and other "crypto assets" are held in, so it is hard to tell whether these funds are truly locked or have simply been stolen by Prime Trust's team.

The other oddity with this particular debacle involves Fireblocks. If Prime Trust made an enterprise agreement to transition to solely leveraging Fireblocks' custody products, one would think that Fireblocks would notice a lack of activity from one of their largest clients. How were there no alarm bells triggered by the massive holes being created in Prime Trust's business?

I do not have the answer to these questions, but I do think these are the particular questions that should be asked right now. This whole situation reeks and the companies and individuals who have been directly impacted by this epic blunder and overt fraud deserve answers.

Final thought...

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