Prime Trust Now Plunges Into Receivership With Accusations Of Funds Shortfall
- Crypto custodian Prime Trust was ordered into receivership amid accusations of using customer funds and a shortfall in customer funds.
- Eighth Judicial District Court of Nevada grants a petition for receivership, appointing a receiver to take over Prime Trust’s operations.
- The company faces financial challenges with significant deficits between assets and liabilities, prompting regulatory intervention.
Crypto custodian Prime Trust has faced a significant setback as the Eighth Judicial District Court of Nevada has ordered the company to be put into receivership.
The court’s decision comes after the state’s Financial Institutions Division ordered the company to cease all activities due to concerns over a shortfall in customer funds and allegations that the company used customer funds to meet withdrawal requests.
According to documents filed with Nevada’s Department of Business and Industry Financial Institutions Division, Prime Trust’s financial condition has deteriorated to a critically deficient level, rendering the company in an unsafe or unsound condition to transact business. As a result, the court has appointed John Guedry, the president of the Bank of Nevada, to take over the operations of Prime Trust.
This latest development follows the regulator’s actions in June when it filed to take over Prime Trust and freeze all of its businesses, citing the company’s near insolvency. The court order was issued just hours after BitGo, another crypto custodian, terminated its acquisition of the company.
The court filing reveals that Prime Trust owes its clients over $85 million in fiat currency while having only around $3 million in fiat currency on hand. Additionally, the company owes approximately $69.5 million in cryptocurrency to its customers, with $68.6 million in cryptocurrency available. The filing also accuses the company of using funds from its customer accounts to fulfill withdrawal requests from its “legacy wallets.”
In response to the court order, the Financial Institutions Division stated that the court-appointed receiver would assume control of Prime Trust’s day-to-day operations and determine the best course of action to protect the interests of the company’s clients. The receiver will be responsible for assessing the overall situation and finding a resolution.
Prime Trust will have an opportunity to present its case and challenge the receivership petition during a hearing scheduled for August 22. The court order restricts the company’s employees and executives from interfering with the court’s decision.
The Nevada financial regulator’s swift action in placing Prime Trust into receivership highlights the importance of safeguarding users, the public and maintaining confidence in the emerging cryptocurrency market. The decision aims to address the concerns raised regarding the company’s financial stability and its ability to honor customer withdrawals.
It is worth noting that prior to these difficulties, Prime Trust was in talks for acquisition by BitGo. However, following the cease-and-desist order from the Financial Institutions Division, BitGo officially called off the acquisition, further adding to the challenges faced by the company.
The court’s decision to place Prime Trust into receivership marks a significant development in the company’s ongoing situation. The upcoming hearing in August will provide a platform for the company to present its arguments and potentially contest the receivership petition.
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