Nevada's regulator, which oversees financial activities within the state, has launched an investigation into Prime Trust's operations.
They allege that the institution is currently unable to meet its obligations to its clients, resulting in this shortfall in client funds. This disclosure has raised serious concerns among clients who have entrusted their assets to Prime Trust.
Nevada regulator accuses Prime Trust of violating custodian duties
The Department's Financial Institutions Division (FID), responsible for overseeing trust companies in Nevada, has took 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 situation has deteriorated significantly, which could lead to the insolvency of the company.
Under the order, Prime Trust faced a shortage of client funds on June 21, 2023, as a result of substantial liability owed to clients. In addition, the company failed to protect the assets in its custody and was unable to honor all withdrawal requests from customers. The regulator warns that if Prime Trust continues its operations, it may not be able to function properly and accuses the company of breaching its fiduciary duties.
He order highlights Prime Trust's negative stockholders' equity position of more than $12 million as of March 2023. Prime Trust has the option to request a hearing within 30 days, otherwise the cease and desist order will be final.
Prime Trust Takeover Deal Falls Apart As BitGo Cites Concerns, CEO Stays Silent
Shortly after this result, BitGo, another cryptocurrency company, Announced the termination of its potential acquisition of Prime Trust. In response to the regulatory order, Prime Trust suspended all trust deposits, affecting several businesses. However, the specific details of the order have not been disclosed by the interested parties.
Prime Trust Interim CEO, Jor Law, did not provide immediate comment on the matter. Meanwhile, a spokesperson for the Nevada Division of Financial Institutions clarified that the cease and desist order was issued on June 21, preventing Prime Trust from accepting fiat and cryptocurrencies from new and existing customers for custody purposes.
The spokesperson further emphasized that NFID's priority is to protect Prime Trust's remaining business value for the benefit of its clients, as the company has failed to meet its fiduciary responsibilities under Nevada trust laws.
