Prime Trust “Shortfall Of Customer Funds”, Even Insolvency

Key Points:

• Prime Trust has been ordered to cease all activities that violate Nevada regulations.
• The Nevada regulator alleges that Prime Trust could not accommodate recent customer withdrawals.
• Reportedly, the company is operating in a significant deficit and may even be insolvent.

On Thursday, the Nevada Department of Industry and Commerce said that cryptocurrency custodian Prime Trust had “a shortfall in customer funds” and could not meet all withdrawal requests this month.

The regulator stated that the company may not be able to operate in a sane manner if it continues, saying it has breached its fiduciary duty.

The Nevada Financial Institutions Division (FID) has ordered Prime Trust to cease any activity that violates Nevada regulation, claiming that “the company’s overall financial condition has deteriorated significantly” and that the company is operating in substantial deficits and may even be insolvent.

The FID said Prime Trust could not reasonably continue to operate and has breached its fiduciary duty. As of the end of March 2023, it reported negative shareholder equity of more than $12 million.

The company may request a hearing within 30 days from the order date. Otherwise, the cease and desist order will be deemed final.

According to previous news, crypto custody company BitGo has announced that it will terminate its acquisition of Prime Trust for an undisclosed amount amid speculation that the company is facing a significant threat of bankruptcy.

Prime Trust has had a bumpy ride in recent months. It replaced CEO Tom Pageler in November and, in January, laid off about a third of its employees just days after shutting down its Texas operations. Its subsidiary Banq filed for bankruptcy last week. The company has been losing customers and deposits to competitors for weeks amid growing concerns about its business.

In light of the recent news, TrueUSD, which has a close relationship, quickly announced that “it is not affected by the situation” at Prime Trust. TrueUSD emphasized that it has diversified its partnerships and maintained “multi-dollar rails” elsewhere.

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