Kingdom Trust locks in legal fight with BitGo and Bitcoin IRA after 5 purported clients file suit

Kingdom Trust, one of the oldest custodians in the cryptocurrency market, may have jinxed itself. 

In August, the South Dakota-incorporated company brought BitGo and Bitcoin IRA to court, accusing the two of deceiving its clients and even misleading some to sue the company. A few weeks later, five alleged Kingdom Trust clients indeed filed a complaint in the district court of South Dakota against Kingdom Trust, charging it for obstructing the transfers of their digital assets to the rival custodian BitGo. 

For Kingdom Trust, these five alleged clients may not be entirely unfamiliar. In the original lawsuit dated in August, Kingdom Trust singled out five clients who had contacted South Dakota banking regulators to complain about a delay in transferring their assets. The lawsuit states that this is part of BitGo and Bitcoin IRA’s plan to convert Kingdom Trust clients, by directly soliciting them to transfer their assets and encourage them to bring Kingdom Trust to court. 

According to Kingdom Trust, only one of these five clients had indeed submitted a transfer request. The company further accused Bitcoin IRA for contacting Kingdom Trust clients and telling them that their assets were not safe or had gone missing. Moreover, Bitcoin IRA has “purposefully withheld” transfer requests, in an attempt to force users to turn to banking regulators for help, Kingdom Trust alleged.

More transfer requests

Although it is not clear whether the five who filed the lawsuit in South Dakota are the same five individuals who contacted South Dakota banking regulators, they are certainly not the only Kingdom Trust clients that have been spurred to action.

In July alone, Kingdom Trust received a total of 344 disclosed transfer requests, per the company’s lawsuit. Some of these requests were sent with the belief that their assets with Kingdom Trust were no longer safe, while other clients were not even aware that they had sent a transfer request, Kingdom Trust stated. According to the lawsuit, these clients might have fallen prey to one of several alleged schemes by Bitcoin IRA to convert Kingdom Trust clients. These include posting links on Bitcoin IRA's website which “deceptively directed the Kingdom Trust client to sign an asset transfer request,” or sending emails that included “a veiled solicitation to change trust custodians from Kingdom Trust to BitGo Trust."

In late August, Kingdom Trust sent out an email to clients informing them it was terminating its relationship with Bitcoin IRA. The email states that Bitcoin IRA had been spreading misinformation about the custodian among its clients and tried to damage the company’s reputation in the market. In a follow-up email, Kingdom Trust assured its clients that their assets were still with Kingdom Trust, and that users who had been using Kingdom Trust’s custody services via Bitcoin IRA accounts should sign up for new accounts with Kingdom Trust directly. 

The strike back 

Meanwhile, the five individuals are charging Kingdom Trust for engaging “in numerous unfair and deceptive practices" to prevent or delay them from transferring their funds from Kingdom Trust to BitGo. 

According to their lawsuit, these individuals started sending transfer requests to Kingdom Trust in early July, after BitGo announced a partnership with Bitcoin IRA to offer cryptocurrency retirement investment services. Previously, via a partnership between Bitcoin IRA and Kingdom Trust, these plaintiffs owned IRA accounts with Bitcoin IRA and designated Kingdom Trust as the custodian of their digital assets. Citing the Traditional IRA Custody Agreement, which Kingdom Trust is allegedly obliged by, the lawsuit stated that the plaintiffs have the right to “at any time remove the custodian and name a successor of the depositor's choice.”

However, when these account holders asked their assets be transferred to BitGo from Kingdom Trust, the older custodian allegedly delayed processing these requests and continued to charge them monthly fees with various “aggressive sales tactics,” claim the five plaintiffs. According to the suit, some of these tactics included increasing transfer fees and subjecting Kingdom Trust account holders to “unreasonable hold times” that lasted more than 45 minutes.

“This legal action by concerned account holders provides further evidence that clients should transfer out of Kingdom Trust as quickly as possible, to ensure the safety and accountability of their crypto retirement assets,” Bitcoin IRA COO Chris Kline told The Block. 

Kingdom Trust has not replied to The Block's request for comments. 

Immediately after Kingdom Trust sued Bitcoin IRA, the defendant filed a countersuit. However, the court found the countersuit to be in parallel to Kingdom Trust’s original lawsuit and put it on stay.