Prime Trust, a company specializing in cryptocurrency custody, is facing a “customer funds deficit” and has been unable to meet all withdrawal requests this month, the Nevada Department of Business and Industry said on Thursday. The company may even be insolvent.
Details of the regulator’s order
The department’s Division of Financial Institutions, which oversees state-regulated trust companies, ordered Prime Trust to cease all activities that violate Nevada regulations. According to the order, the “overall financial condition […] has significantly deteriorated to a critical level”. Prime Trust is “operating with a substantial deficit” and may be insolvent.
The order states that “on or about June 21, 2023, the defendant was unable to honor customer withdrawals due to a deficit in customer funds caused by a significant liability on the defendant’s balance sheet owed to customers”. In addition, Prime Trust “has failed to protect the assets in its custody and is unable to meet all customer withdrawals”.
The regulator asserts that Prime Trust could not operate in a sound manner if it were to continue, and that it would have breached its fiduciary duties. The company reported a negative equity position of over $12 million at the end of March 2023.
Consequences for Prime Trust
Prime Trust may request a hearing within 30 days of the order. If it fails to do so, the cease and desist order will be considered final. The order was published on the Nevada regulator’s website a few hours after cryptocurrency company BitGo announced it was terminating its potential acquisition of Prime Trust.
Several companies announced shortly after the deal was cancelled that Prime Trust had halted all fiat currency deposits in response to the Nevada order, although they did not share the actual details of the order. Prime Trust’s acting CEO, Jor Law, did not immediately respond to a request for comment.
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Disclaimer: This article does not constitute investment advice, and it is important to remember that investing in the markets can result in capital losses.
