It is believed that Prime Trust already agreed to the receivership.
Nevada's Financial Institutions Division has ramped up its actions against crypto custodian Prime Trust.
On June 26th, the regulator submitted a petition to the Eighth Judicial District Court of Nevada, seeking a temporary restraining order and a receiver for Prime Trust Technologies, which encompasses its crypto custodian arm.
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The petition was made on the grounds of a significant disparity between Prime Trust's assets and liabilities. It is worth noting that Prime Trus has already agreed to receivership.
In the submitted petition, the regulator expressed urgency in appointing a receiver. They argued that there was an imminent threat of "irreparable harm" to customers and the public, as well as the burgeoning reputation of the cryptocurrency market.
Prime is in an unsafe financial condition and/or is insolvent. Additionally, Prime’s condition will only progressively worsen as customers continue to withdraw from Prime.
On top of that, in its petition, the Financial Institutions Division alleges that, in 2019, Prime Trust partnered with Fireblocks to safeguard its crypto assets. Moreover, it is believed that Fireblocks helped Prime Trust to undergo management reshuffling in 2020.
However, due to Fireblocks' "limitations," Prime Trust reintroduced its customers to legacy wallet forwarding addresses in January 2021. Since December 2021, the custodian has had no access to its users' legacy wallets, thus, bought crypto using customer funds.
According to the petition, as of the filing date, Prime Trust owed its clients more than $85 million in fiat but only had around $2.9 million in its accounts. While the firm's liability in digital assets was smaller, it was still substantial, as Prime Trust owed over $69.5 million in crypto but had just about $68.6 million.
This legal action follows a cease and desist order issued by the Nevada regulator on June 21st, accusing Prime Trust's financial condition of significant deterioration. The order also claimed that the firm couldn't meet customer withdrawal requests due to insufficient funds.
In a related development, on June 22nd, BitGo, a wallet infrastructure provider and digital asset custodian, called off the acquisition of Prime Trust.
The precarious financial condition of Prime Trust has led to Nevada's Financial Institutions Division petitioning for the firm to be put into receivership. As the crypto custodian sector grapples with the fallout, the market will keenly watch the next steps in the evolving saga of Prime Trust.
