Nevada’s Financial Institutions Division has taken action against Prime Trust, a crypto custodian, in response to a cease and desist order. The division has filed a petition to appoint a receiver for Prime Trust, seeking further intervention in the matter.
Through a recent filing on June 26, the regulatory body requested the Eighth Judicial District Court of Nevada to grant a temporary restraining order and appoint a receiver for Prime Trust Technologies, which encompasses its crypto custodian division.
The decision for receivership was reached by mutual agreement between Prime Trust and the Regulator, considering the significant gap between the company’s assets and liabilities.
The petition emphasized the urgency of the appointment, citing the potential for irreparable harm to customers, the general public, and the overall trust in the growing cryptocurrency market.
According to the filing, “Prime is operating in an unsafe and unsound manner and is insolvent as specified in the Cease-and-Desist Order issued on June 21, 2023.”
The Financial Institutions Division further emphasized that Prime Trust enlisted the services of Fireblocks in 2019 to store its crypto assets and underwent a change in management in 2020.
In January 2021, the custodian reintroduced legacy wallet forwarding addresses to its customers, citing limitations with Fireblocks as the reason behind this decision. Since December 2021, Prime Trust has been unable to access its users’ legacy wallets and has allegedly used customer funds to purchase cryptocurrencies.
As per the petition, Prime Trust’s outstanding debt to its clients in fiat currency amounted to over $85 million, while the company had only around $2.9 million at the time of filing.
The Nevada regulator noted that Prime Trust’s liability in digital assets was relatively smaller but still substantial, with the firm owing over $69.5 million in cryptocurrency but golding approximately $68.6 million.
Subsequent to the issuance of a cease and desist order by the Nevada regulator on June 21, the legal action was initiated, citing Prime Trust’s significant deterioration in financial condition. The regulator alleged that the firm was unable to fulfill customer withdrawal requests due to a shortfall of customer funds.
Also Read: Prime Trust Temporarily Halt Deposit and Withdrawal Services
