Carlos Fernandes The Nevada Financial Institutions Division has recently informed the Eighth Judicial District Court in Las Vegas of its plans to take assertive measures against the cryptocurrency custodian, Prime Trust. The regulator not only intends to close Prime Trust, but it also wants to swiftly take possession of its property, assets, books, papers, documents, and records. The state’s financial overseer is aiming to put Prime Trust into receivership, which would provide an all-encompassing solution to the problem.
Nevada Regulatory Body to Close Prime Trust Amid Insolvency and Asset Access Concerns for the Crypto Custodian
Concerns regarding the financial health of crypto custodian Prime Trust have been raised by Nevada’s financial authority. Recent revelations from the Nevada Financial Institutions Division exposed Prime Trust’s insolvency and its inability to meet customer withdrawal demands.
The regulator announced these concerns five days ago, leading to the assertion that Prime Trust had failed its fiduciary duties. In response, Prime Trust decided to suspend deposits and withdrawals, which only exacerbated the existing issue.
The regulator’s commissioner, Sandy O’laughlin, recently submitted a filing to the Eighth Judicial District Court in Las Vegas. The filing emphasizes the urgency of placing Prime Trust into receivership.
The authority is pushing for an immediate confiscation of all property, documents, assets, and the company’s application programming interface (API). It aims to “appoint a receiver over Prime Trust who has the power to enter the business and directly supervise operations.”
The filing discloses that in 2019, Prime Trust hired Fireblocks, a digital asset security company, to protect its assets. The transition to Fireblocks’ platform was completed in 2020, leaving Prime Trust’s original wallet dormant.
When the company saw a change in management in the same year, the former team assured the new one that all cryptocurrency assets could be accessed via the Fireblocks platform. Legacy wallet forwarding addresses for customers were reintroduced by the company in January 2021.
The filing explains that Prime Trust assumed that these legacy wallets were either located on the Fireblocks platform or were set up to forward to wallets that could be accessed from this platform. However, in December 2021, the company discovered that it was unable to access the legacy wallets and the digital currency they held.
Between December 2021 and March 2022, the company allegedly used customer funds to buy additional digital currency to meet withdrawal requests from the inaccessible legacy wallets.
Despite continuous efforts, Prime Trust has not managed to access the elusive legacy wallets. Although it attempted to meet withdrawal requests with other available funds, Nevada’s financial authority noted that withdrawals have recently become larger and more frequent.
The court filing reveals that “at or around the time of the current petition, it is understood that Prime’s financial status owes clients $85,670,000 in fiat currency but only has $2,904,000 in fiat currency (equaling an $82,766,000 fiat currency liability). As for digital currency, Prime owes $69,509,000 to its clients but only has $68,648,000 in digital currency.”
What are your views on the regulatory steps taken against Prime Trust? Share your thoughts and opinions about this issue in the comments section below.
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Frequently Asked Questions (FAQs) about Prime Trust insolvency
What action is the Nevada Financial Institutions Division taking against Prime Trust?
The Nevada Financial Institutions Division is planning to take decisive action against crypto custodian Prime Trust due to insolvency and asset accessibility issues. The regulator aims to shut down Prime Trust, seize its property, assets, and documents, and place the company under receivership.
What prompted the regulator to assert that Prime Trust had breached its fiduciary responsibilities?
The regulator made this assertion after it was revealed that Prime Trust faced insolvency and was unable to fulfill customer withdrawal requests.
What does it mean for Prime Trust to be placed into receivership?
Being placed into receivership means an appointed receiver would have authority to enter the business, immediately oversee operations, and manage the resolution of Prime Trust’s financial situation.
What was the issue with Prime Trust’s access to legacy wallets?
Prime Trust found itself unable to access the legacy wallets and the digital currency they contained. The company allegedly resorted to using customer funds to purchase additional digital currency in order to fulfill withdrawal requests.
What is the current financial status of Prime Trust according to the court filing?
As per the court filing, Prime Trust owes its clients $85,670,000 in fiat currency but only has $2,904,000 in hand. Regarding digital currency, it owes $69,509,000 to clients but only possesses $68,648,000.
5 comments
ain’t no regulations gonna slow down crypto! this is just a bump in the road. HODL!
Seriously? What’s with these custodians messing up so much. If we cant trust prime trust then who can we trust…
Prime trust under receivership? didn’t see that one coming. Shocked and disappointed, tbh. thought they were more stable.
man, this crypto world is wild, aint it? never know who’s gonna go belly up next. prime trust sounded solid but here we are.
Feels like the wild west of finance here. hard to trust any1 these days.