In response to a cease and desist order, Nevada’s Financial Institutions Division (FID) has taken further action against crypto custodian Prime Trust, seeking the appointment of a receiver. The move comes as Prime Trust’s financial condition has significantly deteriorated, leading to concerns about customer funds and the overall stability of the cryptocurrency market.
In a filing, the regulator petitioned the Eighth Judicial District Court of Nevada for a temporary restraining order and the appointment of a receiver for Prime Trust Technologies, which includes its crypto custodian arm. Prime Trust, acknowledging the substantial deficit between its assets and liabilities, has agreed to the receivership alongside the regulator.
The petition emphasizes the urgent need for an appointment, citing the risk of “irreparable harm” to customers, the general public, and “confidence in the emerging cryptocurrency market.”
“Prime is in an unsafe financial condition and/or is insolvent. Additionally, Prime’s condition will only progressively worsen as customers continue to withdraw from Prime,” the petition read.
The filing by the FID includes allegations that Prime Trust engaged the services of Fireblocks to store its crypto assets in 2019 and underwent a change in management in 2020. In January 2021, Prime Trust reintroduced legacy wallet forwarding addresses to customers due to limitations with Fireblocks. However, the company has been unable to access its users’ legacy wallets since December 2021 and reportedly used customer funds to purchase cryptocurrencies.
According to the petition, Prime Trust owes over $85 million to its clients in fiat currency but only has approximately $2.9 million at the time of the filing. In terms of digital assets, the company’s liability stands at more than $69.5 million, while it holds roughly $68.6 million.
This legal action follows the Nevada regulator’s issuance of a cease and desist order on June 21, highlighting Prime Trust’s deteriorating financial condition and its inability to fulfill customer withdrawals due to a shortfall of customer funds. The regulator alleges a significant shortfall in customer funds, leading to a critically deficient financial state.
As a result, wallet infrastructure provider and digital asset custodian BitGo announced the cancellation of its acquisition of Prime Trust on June 22.
Troubles began to unfold soon after that agreement was initially made public. Within a week of the deal, Banq, a subsidiary of Prime Trust and a crypto payments and savings platform based in Nevada, filed for bankruptcy due to alleged mismanagement and legal issues. The bankruptcy documents revealed assets worth $17.72 million and liabilities amounting to $5.4 million.
Information for this briefing was found via Coin Telegraph and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
