According to the Nevada Department of Business and Industry, the cryptocurrency custody company Prime Trust is experiencing “a shortfall in customer funds” and is unable to process all withdrawal requests this month.
The Financial Institutions Division (FID) of the Department, which is responsible for monitoring trust companies subject to state regulation, ordered Prime Trust to stop all activities that were in contravention of Nevada law, claiming that the business’ “overall financial condition… has considerably deteriorated to a critically deficient level.”
The order stated that Prime Trust is “operating at a substantial deficit” and may perhaps be insolvent.
In accordance with the ruling, “On or about June 21, 2023, Respondent was unable to honor Customer Withdrawals due to a shortfall of Customer Funds caused by a material liability on the Respondent’s balance sheet owed to Customers.” Additionally, the respondent was unable to protect the assets in its care and could not pay all consumer withdrawals.
The regulator asserted that Prime Trust violated its fiduciary obligations and suggested that, if it were to continue, it might not be able to conduct itself soundly.
According to the order, Prime Trust’s shareholder equity position was more than negative $12 million at the end of March 2023. Within 30 days after the order, Prime Trust may ask for a hearing. The cease-and-desist order will be regarded as definitive if it doesn’t request one.
A few hours after another cryptocurrency business BitGo said it was ending its proposed acquisition of Prime Trust, the order was posted on the Nevada regulator’s website.
Several businesses declared shortly after the agreement was scrapped that Prime Trust had stopped all fiat deposits in response to Nevada’s directive, albeit they did not disclose the specifics of the order.