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The Nevada regulator, which oversees financial activities within the state, has initiated an investigation into Prime Trust’s operations.
They allege that the institution is currently unable to meet its obligations to its customers, resulting in this shortfall of customer funds. This revelation has raised serious concerns among the customers who have entrusted their assets to Prime Trust.
Nevada Regulator Accuses Prime Trust of Breaching Custodian Duties
The Department’s Financial Institutions Division (FID), responsible for overseeing trust companies in Nevada, has taken action by issuing a cease-and-desist order against Prime Trust for alleged violations of state regulations. The FID claims that Prime Trust’s financial condition has significantly deteriorated, potentially rendering the company insolvent.
According to the order, Prime Trust faced a shortage of customer funds on June 21, 2023, resulting from a substantial liability owed to customers. Furthermore, the firm failed to safeguard assets under its custody and was unable to fulfill all customer withdrawal requests. The regulator warns that if Prime Trust continues its operations, it may not be able to function soundly, and accuses the company of breaching its fiduciary duties.
The order highlights Prime Trust’s negative stockholders’ equity position of over $12 million as of March 2023. Prime Trust has the option to request a hearing within 30 days, failing which the cease-and-desist order will become final.
Prime Trust Acquisition Deal Crumbles as BitGo Cites Concerns and CEO Keeps Silent
Shortly after this outcome, BitGo, another crypto company, announced the termination of its potential acquisition of Prime Trust. In response to the regulatory order, Prime Trust suspended all fiat deposits, affecting various businesses. However, specific details of the order have not been disclosed by the concerned parties.
Prime Trust’s interim CEO, Jor Law, did not provide immediate comments on the matter. Meanwhile, a spokesperson from the Nevada Financial Institutions Division clarified that the cease-and-desist order was issued on June 21, preventing Prime Trust from accepting fiat and cryptocurrency from new and existing clients for custody purposes.
The spokesperson further emphasized that NFID’s priority is to protect the remaining enterprise value of Prime Trust for the benefit of its clients, as the company has failed to fulfill its fiduciary responsibilities in accordance with Nevada trust laws.