Prime Trust Faces Regulatory Intervention as Nevada Financial Regulator Urges Court for Receivership

In a recent development, Nevada’s Financial Institutions Division has taken decisive steps against cryptocurrency custodian Prime Trust. Following the issuance of a cease and desist order, the regulator has now petitioned the Eighth Judicial District Court of Nevada for the appointment of a receiver for Prime Trust Technologies, including its crypto custodian arm. The move comes as both Prime Trust and the regulator acknowledge the significant gap between the company’s assets and liabilities.

The petition, filed on June 26, requests the court’s immediate intervention, citing the potential for “irreparable harm” to customers, the general public, and the overall confidence in the cryptocurrency market. The regulator states, “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.”

According to the Financial Institutions Division’s filing, Prime Trust engaged Fireblocks in 2019 to store all of its crypto assets and underwent a change in management in 2020. In January 2021, the custodian reintroduced legacy wallet forwarding addresses to customers due to limitations with Fireblocks. However, Prime Trust has been unable to access its users’ legacy wallets since December 2021 and has reportedly utilized customer funds to purchase cryptocurrencies.

The petition reveals that Prime Trust currently owes over $85 million to its clients in fiat currency, but its available funds amount to approximately $2.9 million. While the liability in digital assets is comparatively smaller, Prime Trust still owes more than $69.5 million in crypto while holding around $68.6 million.

This legal action follows the Nevada regulator’s cease and desist order issued on June 21, which highlighted Prime Trust’s deteriorating financial condition and its inability to fulfill customer withdrawal requests due to a shortfall in customer funds. Furthermore, BitGo, a leading wallet infrastructure provider and digital asset custodian, announced on June 22 that it intends to cancel its acquisition of Prime Trust.

Please note: This article has been created for illustrative purposes and does not reflect actual events. Any resemblance to real-world entities or situations is purely coincidental.

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