Nevada regulator says Prime Trust can't meet all client withdrawals

Quick Take

  • The Nevada Financial Institutions Division said Thursday that crypto custodian Prime Trust could not meet all customer withdrawals.

The Nevada Financial Institutions Division said Thursday that crypto custodian Prime Trust could not meet all customer withdrawals.

The regulator said it had been monitoring the company's solvency ahead of the planned acquisition by BitGo that was called off on Thursday. 

"Prime failed to safeguard assets under its custody and cannot meet all client withdrawals," the regulator said in an emailed response to questions. "As such, Prime has breached its fiduciary duties to its clients, in violation of Nevada trust laws."

"NFID’s primary objective is to preserve any enterprise value remaining in Prime for the benefit of Prime’s clients," the regulator added. It said it sent a cease-and-desist order to the company on June 21, ordering it to stop accepting fiat and cryptocurrency from existing and new clients for custody purposes. 

BitGo earlier this month had signed a non-binding term sheet to acquire 100% of the equity of Prime Core Technologies, the parent company of Prime Trust. It said Thursday that the decision to end the deal came "after considerable effort and work to find a path forward."

Prime Trust enforcement action

In the Nevada enforcement action, the regulator said it started a "safety and soundness examination" of the firm on Nov. 7. The firm reported a negative $12.1 million stockholders' equity position in a March report.

"The overall financial condition of Respondent has considerably deteriorated to a critically deficient level, and Respondent is now in position where it is in an unsafe or unsound condition to transact business and/or if it were to continue to operate it would be in an inviable and/or unsafe manner," the regulator said.

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