Nevada’s financial watchdog earlier warned that Prime Trust is in serious financial trouble.
Nevada regulators have taken legal action against crypto custodian Prime Trust, filing a court petition to place the company in receivership.
The Nevada financial regulator has asked a court to appoint a receiver to take control of crypto custodian Prime Trust. The receiver will examine the company and decide whether to return it to private management or liquidate it.
Prime Trust’s woes continue after BitGo called off its acquisition bid and Nevada regulators issued a cease-and-desist order alleging the company was near insolvency.
Nevada regulators are seeking to restrict Prime Trust members from accessing and moving company funds. A receiver would be appointed to take control of Prime Trust’s property and assets and could take any action necessary to protect customers.
Prime Trust has requested receivership, and a show-cause hearing is scheduled to take place within 15 days.
The Nevada Financial Institutions Division (NFID) has taken further action against Prime Trust, following an earlier cease and desist order on June 23. The NFID said that Prime Trust could not meet client withdrawals, and ordered the firm to stop accepting fiat currency and cryptocurrency.
Prime Trust lost access to some of its cryptocurrency wallets in December 2021 but continued to buy cryptocurrency to meet customer withdrawals. The company is now unable to access those wallets, and regulators are not happy.
Regulators stated Prime Trust’s inability to meet withdrawals was caused by two factors: increased withdrawals and lost access to cryptocurrency wallets.
Prime Trust is in financial trouble. The company owes its customers $85.7 million but only has $2.9 million on hand. This means that it has an $82.8 million fiat deficit. It also has a smaller cryptocurrency deficit of $861,000.