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”

article-image

esfera/Shutterstock, modified by Blockworks

share

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.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

Plus, Sotheby’s auctions an EtherRock and telecom giants get in on Web3

article-image

Elsewhere, Cowen’s crypto employees moved to StoneX and Nomura’s crypto custody firm CEO stepped down

article-image

If DeFi can just figure out how to improve both security and compliance, nothing would stop traditional finance from entering the game

article-image

Earnings from Coinbase and Robinhood boosted stock prices, while bitcoin’s open interest hits highs not seen since 2021, 2022

article-image

Ethereum Dencun will enable Ethereum transactions to be submitted as blobs, potentially alleviating the costs of posting data on the blockchain

article-image

After a rocky start, bitcoin ETF shareholders are now well in the green