A few months ago, Swan Bitcoin was climbing the ranks among the world’s largest Bitcoin companies. It passed $220 million in annualized revenue, planned to IPO on the Nasdaq, was mining 1.7% of the entire Bitcoin network (11.3 exahashes per second), and scheduled its third annual conference along with an additional events business.

Not only that, on May 7, Swan confirmed rumors that had circulated since January that it had partnered with Tether for its Managed Mining business.

As of January 12, the company had taken in approximately $25 million of a $30 million convertible note leading into its Series C financing. As Wall Street knows, by the time a company gets past a C or D round, an IPO is likely around the corner.

However, a few days ago, Swan announced a massive round of layoffs, canceled its conference, and suspended its IPO plans. According to CEO Cory Klippsten, the IPO plan was shelved because Swan “didn’t carry forward with a big financing partner for our Managed Mining business.”

Protos asked the Swan CEO to explain the cancellation.

Swan CEO Cory Klippsten on IPO, downsizing

According to Klippsten, the IPO plan depended on revenue from Swan’s mining joint venture that Swan managed since inception. “The recent disagreement with a major capital partner meant that we no longer have a path to IPO in the near term and also no longer have the expectation of significant near-term cash flow from mining,” he told Protos.

Klippsten also denied that there were ulterior reasons for the cancellation, explaining that four of Swan’s major products have been performing well. “Financial services revenue was up 132% year-over-year in the first half of 2024, with significant growth across all four of our major products: Swan App, Swan Private, Swan IRA, and Swan Vault,” he said.

Although Swan increased marketing expenses and deliberately hired more employees in anticipation of filing for SEC approval of its IPO documents, “With the reason and the cash for aggressive spending gone, we had to cut both marketing and staff,” Klippsten concluded.

Read more: Some Swan Bitcoin customers lose banking access

Swan responds to withdrawal processing times

In the wake of the disappointing IPO and downsizing news, critics were quick to sound alarms about customers withdrawing their bitcoin. The history of crypto has endless examples of small financial problems cascading into major catastrophes from Vauld, Celius, Voyager, FTX, or countless others, so their concerns were understandable.

So far, Swan has processed withdrawal requests and aims to assure its customers that it is unlike those failures. Swan co-founder Yan Pritzker responded to the most vocal criticism directly, clarifying that although compliance has extended withdrawal times recently, Swan is honoring all valid withdrawal requests.

Bitcoin transaction fees

Other critics highlighted a potential mismatch between the self-custody practice that Swan encourages and Bitcoin’s expensive fees for on-chain withdrawals. Indeed, Swan is a vocal proponent of self-custody, encouraging customers to withdraw their purchases. However, it is expensive to deal with small amounts of bitcoin due to persistently high bids for block space.

Specifically, bids for a single bitcoin transaction are currently $0.56 and occasionally spike above $100. For distinct withdrawals of just a few dollars apiece, critics speculated that Bitcoin’s fees might be a persistent drain on Swan’s profitability.

Klippsten responded to this speculation in a comment to Protos. “Swan offers free automated withdrawals at certain thresholds that create reasonably sized UTXOs. Some clients like to withdraw based on time, not amount. For these clients, we provide an option to withdraw weekly. We tell clients that withdrawing their Bitcoin once it reaches a certain threshold reduces future fees and improves privacy. It has no effect on Swan’s finances as we batch withdrawals anyway.”

Read more: Swan Bitcoin questioned over unnamed investor and new trading fund

Comments on Pacific Bitcoin, Vault, and Force

Protos also asked Klippsten to explain the reasons for canceling what would have been its third annual Pacific Bitcoin conference. “We’re fully focused on Swan’s core business right now, and after going through a staff reduction last month, it just doesn’t feel like the right time for a festival,” he explained. “We’re doing a smaller one-day event for clients and partners during the conference’s planned dates, and we hope to bring Pacific Bitcoin back in 2025.”

Klippsten also confirmed to Protos that, despite the latest round of staff cuts, Swan Vault and Swan Force are still operational.

“We already built and launched Swan Vault [which] gives clients full control over their money without having to go it alone,” he said.

“Swan Vault has its roots in our acquisition of Specter Solutions and its team in 2022, which drove development of the open-source Specter Desktop project.”

Klippsten also reiterated that “Swan Force, our referral program, still exists.”

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The post We asked Swan CEO about layoffs, withdrawal times, and the canceled IPO appeared first on Protos.

Earlier this week, customers of Binance US, Abra, and Swan, which all held bitcoin at custodian Prime Trust, began complaining about delayed withdrawals. By Wednesday, Bitcoin Magazine CEO David Bailey had tweeted, “Major custodian about to declare bankruptcy without last minute bailout. Take your Bitcoin off exchanges, even bitcoin-only platforms.”

Naturally, negative rumors about Prime Trust began to swirl.

On Thursday morning, during a Twitter Spaces live audio event, Bailey responded to a question about Prime Trust by implying that a major custodian might be trying to raise an emergency $25 million before a June 11 deadline.

After naming Prime Trust, the host relayed a question to Bailey: “How much money do they need? Do they need money?” Bailey responded, “I would pull $25 million by the start of business Monday. It’s possible that the timeline is off.”

The host then went on to press Bailey on meetings with investors and the sentiment surrounding a last-minute bailout, to which Bailey responded, “All I can say is, we’re a media company. They’re coming to us for funds? That’s not a positive sign.”

Some listeners interpreted his comment to mean that Prime Trust might have asked Bitcoin Magazine’s team for financial assistance.

Matt O’Dell of Citadel Dispatch called it plainly: there was a bank run on Prime Trust.

In any case, the need to speculate on rumors soon ended with definitive news of an imminent resolution. By Thursday afternoon, a CoinDesk source confirmed that BitGo was planning to acquire Prime Trust. This was seemingly corroborated by the Wall Street Journal.

For context, BitGo is a qualified custodian with over 1,500 clients. The company processes approximately one-fifth of all bitcoin transactions by value and holds $4 billion worth of bitcoin backing the ERC-20 token, Wrapped Bitcoin (WBTC).

Prime Trust withdrawals slow after SEC sues Binance

Given the size of Binance US — and the fact that it’s managed by the world’s largest crypto exchange, Binance — it’s possible that Binance US was one of Prime Trust’s largest customers.

The SEC sued Binance on Monday and requested a temporary restraining order to freeze over $2 billion dollars of Binance US assets. Not good for Prime Trust.

Not good for Binance US, either, with its customers set to lose all USD access this weekend.

Read more: SEC lawsuit: What’s next for Binance?

Customers have withdrawn billions of dollars worth of USD and crypto assets from Binance and Binance US since the lawsuit.

Throughout this week, Swan Bitcoin has been migrating customer assets away from Prime Trust to another custodian, Fortress. Swan’s website displays a notice saying it’s undergoing a “major system upgrade.” Co-founder Brady Swenson responded to several critical tweets saying that it was going through the upgrade and it could handle withdrawals manually for the users who still could not withdraw funds.

What happened with that $107 million?

In June 2022, Prime Trust raised $107 million in a Series B funding round with the intention of building a digital asset IRA with Swan and some tokenized asset products. This large sum raised eyebrows this week. Many asked how it could have possibly burned through over $100 million in one year.

The custodian once claimed to have helped Swan Bitcoin achieve a run rate of $1 billion and it also worked with lending platform Abra, which used it for ACH fiat services. TrueUSD also once used Prime Trust as a custodian for the funds backing its stablecoin, but moved away from it.

However, the red flags have been there for some time. Indeed, earlier this year, Prime Trust announced that it was laying off one-third of its staff, mostly from its communications and compliance departments.

At the time, the company claimed this was a “cost-cutting measure.”

Prime Trust raised $107 million with the promise of growing its business and supporting more customers like Binance US, Abra, and Swan but now it’s rushing a deal with BitGo amid rumors of a bank run.

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Edit 16:40 UTC, Jun 9: Removed reference to Galaxy Digital’s failed acquisition of BitGo in 2021.

The post Prime Trust delays withdrawals, spooks Binance US, Swan users amid acquisition appeared first on Protos.