diff --git a/core/src/main/java/bisq/core/btc/wallet/XmrWalletService.java b/core/src/main/java/bisq/core/btc/wallet/XmrWalletService.java
index a85cbc1d..11ac7e24 100644
--- a/core/src/main/java/bisq/core/btc/wallet/XmrWalletService.java
+++ b/core/src/main/java/bisq/core/btc/wallet/XmrWalletService.java
@@ -278,6 +278,15 @@ public class XmrWalletService {
         }
     }
 
+    public void deleteMultisigWalletBackups(String tradeId) {
+        log.info("{}.deleteMultisigWalletBackups({})", getClass().getSimpleName(), tradeId);
+        initWalletLock(tradeId);
+        synchronized (walletLocks.get(tradeId)) {
+            String walletName = MONERO_MULTISIG_WALLET_PREFIX + tradeId;
+            deleteWalletBackups(walletName);
+        }
+    }
+
     public MoneroTxWallet createTx(List<MoneroDestination> destinations) {
         try {
             synchronized (wallet) {
@@ -726,7 +735,6 @@ public class XmrWalletService {
         if (!new File(path).delete()) throw new RuntimeException("Failed to delete wallet file: " + path);
         if (!new File(path + ".keys").delete()) throw new RuntimeException("Failed to delete wallet file: " + path);
         if (!new File(path + ".address.txt").delete()) throw new RuntimeException("Failed to delete wallet file: " + path);
-        deleteBackupWallets(walletName); // TODO: retain backup for some time?
     }
 
     private void closeAllWallets() {
@@ -761,7 +769,7 @@ public class XmrWalletService {
         FileUtil.rollingBackup(walletDir, walletName + ".address.txt", NUM_MAX_BACKUP_WALLETS);
     }
 
-    private void deleteBackupWallets(String walletName) {
+    private void deleteWalletBackups(String walletName) {
         FileUtil.deleteRollingBackup(walletDir, walletName);
         FileUtil.deleteRollingBackup(walletDir, walletName + ".keys");
         FileUtil.deleteRollingBackup(walletDir, walletName + ".address.txt");
diff --git a/core/src/main/java/bisq/core/trade/Trade.java b/core/src/main/java/bisq/core/trade/Trade.java
index 03d908e6..f5bbef42 100644
--- a/core/src/main/java/bisq/core/trade/Trade.java
+++ b/core/src/main/java/bisq/core/trade/Trade.java
@@ -133,6 +133,7 @@ public abstract class Trade implements Tradable, Model {
         SENT_PUBLISH_DEPOSIT_TX_REQUEST(Phase.DEPOSIT_REQUESTED),
         SEND_FAILED_PUBLISH_DEPOSIT_TX_REQUEST(Phase.DEPOSIT_REQUESTED),
         SAW_ARRIVED_PUBLISH_DEPOSIT_TX_REQUEST(Phase.DEPOSIT_REQUESTED),
+        PUBLISH_DEPOSIT_TX_REQUEST_FAILED(Phase.DEPOSIT_REQUESTED),
 
         // deposit published
         ARBITRATOR_PUBLISHED_DEPOSIT_TXS(Phase.DEPOSITS_PUBLISHED),
@@ -935,8 +936,24 @@ public abstract class Trade implements Tradable, Model {
     }
 
     public void deleteWallet() {
-        if (xmrWalletService.multisigWalletExists(getId())) xmrWalletService.deleteMultisigWallet(getId());
-        else log.warn("Multisig wallet to delete for trade {} does not exist", getId());
+        if (xmrWalletService.multisigWalletExists(getId())) {
+
+            // delete trade wallet unless funded
+            if (isDepositPublished() && !isPayoutUnlocked()) {
+                log.warn("Refusing to delete wallet for {} {} because it could be funded", getClass().getSimpleName(), getId());
+                return;
+            }
+            xmrWalletService.deleteMultisigWallet(getId());
+
+            // delete trade wallet backups unless possibly funded
+            boolean possiblyFunded = isDepositRequested() && !isPayoutUnlocked();
+            if (possiblyFunded) {
+                log.warn("Refusing to delete backup wallet for {} {} in the small chance it becomes funded", getClass().getSimpleName(), getId());
+                return;
+            }
+        } else {
+            log.warn("Multisig wallet to delete for trade {} does not exist", getId());
+        }
     }
 
     public void shutDown() {
@@ -1266,6 +1283,10 @@ public abstract class Trade implements Tradable, Model {
         return getState().getPhase().ordinal() >= Phase.DEPOSIT_REQUESTED.ordinal();
     }
 
+    public boolean isDepositFailed() {
+        return getState() == Trade.State.PUBLISH_DEPOSIT_TX_REQUEST_FAILED;
+    }
+
     public boolean isDepositPublished() {
         return getState().getPhase().ordinal() >= Phase.DEPOSITS_PUBLISHED.ordinal();
     }
diff --git a/core/src/main/java/bisq/core/trade/TradeManager.java b/core/src/main/java/bisq/core/trade/TradeManager.java
index 6400c1bb..892e186f 100644
--- a/core/src/main/java/bisq/core/trade/TradeManager.java
+++ b/core/src/main/java/bisq/core/trade/TradeManager.java
@@ -1078,9 +1078,8 @@ public class TradeManager implements PersistedDataHost, DecryptedDirectMessageLi
                 return;
             }
 
-            // remove trade and wallet unless timeout after deposit requested
-            boolean isTimeoutError = TradeProtocol.isTimeoutError(trade.getErrorMessage());
-            if (!trade.isDepositRequested() || !isTimeoutError) {
+            // remove trade and wallet unless deposit requested without nack
+            if (!trade.isDepositRequested() || trade.isDepositFailed()) {
                 removeTrade(trade);
                 if (xmrWalletService.multisigWalletExists(trade.getId())) trade.deleteWallet();
             } else {
@@ -1100,13 +1099,13 @@ public class TradeManager implements PersistedDataHost, DecryptedDirectMessageLi
                 MoneroTx takerDepositTx = xmrWalletService.getDaemon().getTx(trade.getTaker().getDepositTxHash());
         
                 // delete multisig trade wallet if neither deposit tx published
-                if ((makerDepositTx != null && makerDepositTx.isRelayed()) || (takerDepositTx != null && takerDepositTx.isRelayed())) {
-                    log.warn("Refusing to delete {} {} after protocol timeout because its wallet might be funded", trade.getClass().getSimpleName(), trade.getId());
-                } else {
+                if (makerDepositTx == null && takerDepositTx == null) {
                     log.warn("Deleting {} {} after protocol timeout", trade.getClass().getSimpleName(), trade.getId());
                     removeTrade(trade);
                     failedTradesManager.removeTrade(trade);
                     if (xmrWalletService.multisigWalletExists(trade.getId())) trade.deleteWallet();
+                } else {
+                    log.warn("Refusing to delete {} {} after protocol timeout because its wallet might be funded", trade.getClass().getSimpleName(), trade.getId());
                 }
             }, 60);
         }
diff --git a/core/src/main/java/bisq/core/trade/protocol/TradeProtocol.java b/core/src/main/java/bisq/core/trade/protocol/TradeProtocol.java
index e9dafc3f..9c1fbaca 100644
--- a/core/src/main/java/bisq/core/trade/protocol/TradeProtocol.java
+++ b/core/src/main/java/bisq/core/trade/protocol/TradeProtocol.java
@@ -27,6 +27,7 @@ import bisq.core.trade.HavenoUtils;
 import bisq.core.trade.SellerTrade;
 import bisq.core.trade.handlers.TradeResultHandler;
 import bisq.core.trade.messages.PaymentSentMessage;
+import bisq.core.trade.messages.DepositRequest;
 import bisq.core.trade.messages.DepositResponse;
 import bisq.core.trade.messages.DepositsConfirmedMessage;
 import bisq.core.trade.messages.InitMultisigRequest;
@@ -549,6 +550,13 @@ public abstract class TradeProtocol implements DecryptedDirectMessageListener, D
             String err = "Received AckMessage with error state for " + ackMessage.getSourceMsgClassName() +
                     " from "+ peer + " with tradeId " + trade.getId() + " and errorMessage=" + ackMessage.getErrorMessage();
             log.warn(err);
+
+            // set trade state on deposit request nack
+            if (ackMessage.getSourceMsgClassName().equals(DepositRequest.class.getSimpleName())) {
+                trade.setStateIfValidTransitionTo(Trade.State.PUBLISH_DEPOSIT_TX_REQUEST_FAILED);
+                processModel.getTradeManager().requestPersistence();
+            }
+
             handleError(err);
         }
     }
diff --git a/core/src/main/java/bisq/core/trade/protocol/tasks/ProcessDepositResponse.java b/core/src/main/java/bisq/core/trade/protocol/tasks/ProcessDepositResponse.java
index 12d0c4a9..c5fdc548 100644
--- a/core/src/main/java/bisq/core/trade/protocol/tasks/ProcessDepositResponse.java
+++ b/core/src/main/java/bisq/core/trade/protocol/tasks/ProcessDepositResponse.java
@@ -47,6 +47,7 @@ public class ProcessDepositResponse extends TradeTask {
           processModel.getTradeManager().requestPersistence();
           complete();
         } catch (Throwable t) {
+          trade.setStateIfValidTransitionTo(Trade.State.PUBLISH_DEPOSIT_TX_REQUEST_FAILED);
           failed(t);
         }
     }
diff --git a/proto/src/main/proto/pb.proto b/proto/src/main/proto/pb.proto
index 13eb6b97..a1f292de 100644
--- a/proto/src/main/proto/pb.proto
+++ b/proto/src/main/proto/pb.proto
@@ -1573,22 +1573,23 @@ message Trade {
         SENT_PUBLISH_DEPOSIT_TX_REQUEST = 8;
         SEND_FAILED_PUBLISH_DEPOSIT_TX_REQUEST = 9;
         SAW_ARRIVED_PUBLISH_DEPOSIT_TX_REQUEST = 10;
-        ARBITRATOR_PUBLISHED_DEPOSIT_TXS = 11;
-        DEPOSIT_TXS_SEEN_IN_NETWORK = 12;
-        DEPOSIT_TXS_CONFIRMED_IN_BLOCKCHAIN = 13;
-        DEPOSIT_TXS_UNLOCKED_IN_BLOCKCHAIN = 14;
-        BUYER_CONFIRMED_IN_UI_PAYMENT_SENT = 15;
-        BUYER_SENT_PAYMENT_SENT_MSG = 16;
-        BUYER_SEND_FAILED_PAYMENT_SENT_MSG = 17;
-        BUYER_STORED_IN_MAILBOX_PAYMENT_SENT_MSG = 18;
-        BUYER_SAW_ARRIVED_PAYMENT_SENT_MSG = 19;
-        SELLER_RECEIVED_PAYMENT_SENT_MSG = 20;
-        SELLER_CONFIRMED_IN_UI_PAYMENT_RECEIPT = 21;
-        SELLER_SENT_PAYMENT_RECEIVED_MSG = 22;
-        SELLER_SEND_FAILED_PAYMENT_RECEIVED_MSG = 23;
-        SELLER_STORED_IN_MAILBOX_PAYMENT_RECEIVED_MSG = 24;
-        SELLER_SAW_ARRIVED_PAYMENT_RECEIVED_MSG = 25;
-        TRADE_COMPLETED = 26;
+        PUBLISH_DEPOSIT_TX_REQUEST_FAILED = 11;
+        ARBITRATOR_PUBLISHED_DEPOSIT_TXS = 12;
+        DEPOSIT_TXS_SEEN_IN_NETWORK = 13;
+        DEPOSIT_TXS_CONFIRMED_IN_BLOCKCHAIN = 14;
+        DEPOSIT_TXS_UNLOCKED_IN_BLOCKCHAIN = 15;
+        BUYER_CONFIRMED_IN_UI_PAYMENT_SENT = 16;
+        BUYER_SENT_PAYMENT_SENT_MSG = 17;
+        BUYER_SEND_FAILED_PAYMENT_SENT_MSG = 18;
+        BUYER_STORED_IN_MAILBOX_PAYMENT_SENT_MSG = 19;
+        BUYER_SAW_ARRIVED_PAYMENT_SENT_MSG = 20;
+        SELLER_RECEIVED_PAYMENT_SENT_MSG = 21;
+        SELLER_CONFIRMED_IN_UI_PAYMENT_RECEIPT = 22;
+        SELLER_SENT_PAYMENT_RECEIVED_MSG = 23;
+        SELLER_SEND_FAILED_PAYMENT_RECEIVED_MSG = 24;
+        SELLER_STORED_IN_MAILBOX_PAYMENT_RECEIVED_MSG = 25;
+        SELLER_SAW_ARRIVED_PAYMENT_RECEIVED_MSG = 26;
+        TRADE_COMPLETED = 27;
     }
 
     enum Phase {