Prime Trust can’t honor customer withdrawals, says Nevada regulator

Nevada’s business regulator issued a cease and desist order to the crypto custodian alleging it has a “shortfall of customer funds.”

Prime Trust’s financial condition is “critically deficient,” and the crypto custodian has been unable to honor customer withdrawals since June 21, according to Nevada’s business regulator.

In a June 21 cease and desist order, Nevada’s Department of Business and Industry claimed Prime Trust’s financial condition had “considerably deteriorated,” and the firm is now in an “unsafe or unsound condition” to continue business:

“On or about June 21, 2023, Respondent’s [Prime Trust] was unable to honor customer withdrawals due to a shortfall of customer funds caused by a significant liability on the Respondent’s balance sheet owed to customers.”

The order added Prime Trust has “materially and willfully breached its fiduciary duties to its customers by failing to safeguard assets under its custody.” The regulator again alleged the firm is “unable to meet all customer disbursement requests.”

*Statements made by the Nevada Department of Business and Industry against Prime Trust. Source: Nevada government*

Prime Trust has 30 days to respond to the cease and desist order and can request an administrative hearing to contest the order.

If Prime Trust fails to contest, the cease and desist order will be considered final.

On June 13, the payments subsidiary of Prime Trust, Banq, filed for bankruptcy protection in the United States.

Since then, wallet infrastructure provider and digital asset custodian BitGo confirmed on June 22 that it decided to cancel its acquisition of Prime Trust.

After considerable effort and work to find a path forward with Prime Trust, BitGo has made the hard decision to terminate its acquisition of Prime Trust. This decision was not made lightly and BitGo remains committed to our mission to deliver trust in digital assets.

— BitGo (@BitGo) June 22, 2023