Nevada regulator says Prime Trust can’t meet withdrawal requests
Nevada’s Financial Institutions Division ordered Prime Trust to stop all operations as its business has declined to a “critically deficient level”
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Cryptocurrency custodian Prime Trust is experiencing a significant deficit and won’t be able to fulfill all customer withdrawal requests, according to a cabinet-level Nevada state agency.
This notice was made available on the regulatory body’s website shortly after BitGo stated its decision to cancel the prospective acquisition of Prime Trust.
Prime Trust has been incapable of fulfilling withdrawal requests since about June 21 “due to a shortfall of customer funds,” the regulator said in its cease-and-desist order published Thursday.
The crypto custodian was ordered to cease all activities as it has “considerably deteriorated to a critically deficient level” and is now in an “unsafe or unsound condition to transact business,” the state said.
Prime Trust has “materially and willfully breached its fiduciary duties to its clients,” it added.
Desperate efforts for emergency funding
Nevada’s Financial Institutions Division found that Prime Trust had a negative stockholders’ equity of $12 million as of March 2023, which means the company owed more money than it had.
Blockworks reported earlier this month that Prime Trust had been scrambling to raise millions of dollars through emergency fundraising. It had been in talks with a bunch of potential financiers, with some executives considering a $25 million investment would stabilize the balance sheet.
Subsequently, BitGo struck a preliminary deal to acquire the company for an undisclosed amount. But the deal was scrapped on Thursday.
Prime Trust given 30-day window to request hearing
Many companies including digital asset firm Hayvn and fiat on-ramp service Stably announced that Prime Trust had halted deposits after being ordered to do so by the Nevada regulator.
“Please take action immediately to stop sending client custody assets to Prime Trust, especially digital assets,” Stably said.
Prime Trust didn’t immediately return Blockworks’ request for comment.
Prime Trust can choose to ask for a hearing within 30 days. If it doesn’t, the order will become final.
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