Following the cease and desist order, the Nevada Department of Financial Institutions has filed another application against cryptocurrency custodian Prime Trust, this time seeking to appoint a receiver. The regulator applied to the 8th Judicial District Court of Nevada for a temporary restraining order and the appointment of receivers for Prime Trust Technologies, including its cryptocurrency custody unit. Prime Trust has agreed to enter receivership due to a significant deficit between its assets and liabilities.
The petition argues that immediate action is necessary to prevent irreparable harm to customers, the public, and confidence in the cryptocurrency market. The regulator claims that Prime Trust is in an insecure financial position and possibly insolvent, with its situation worsening as customers continue to withdraw funds. According to documents from the Financial Institutions Department, Prime Trust contracted Fireblocks to store its crypto assets in 2019 and underwent a management change in 2020. In January 2021. the custodian reintroduced an old wallet forwarding address to customers due to limitations with Fireblocks. Since December 2021. Prime Trust has been unable to access users' old wallets and use customer funds to purchase cryptocurrencies.
The petition charges that Prime Trust owes its clients over $85 million in fiat currency, while its liabilities at the time of filing were approximately $2.9 million. Although the custodian's liabilities in digital assets are relatively small, they are st ill significant, with the company owning over $69.5 million in debt but holding about $68.6 million. On June 21. Nevada regulators issued the cease and desist order, citing Prime Trust's deteriorating financial condition and its inability to honor customer withdrawals due to a shortage of customer fund s. Wallet infrastructure provider and digital asset custodian BitGo announced on June 22 that it intends to cancel its acquisition of Prime Trust.
