Key takeaways:
- In a hearing on August 22, Prime Trust will have the chance to argue against the permanent approval of a petition from the NFID.
- The president of the Bank of Nevada will take over the company’s management.
In order to put cryptocurrency custodian Prime Trust into receivership pending a hearing to show cause, the state of Nevada’s Financial Institutions Division (NFID) filed a petition with the Eighth Judicial District Court.
After receiving a petition from the state financial watchdog on June 26, the Nevada court ruled in a file dated July 14 that a receiver be appointed for Prime Trust. At a hearing on August 22, Prime Trust will have the chance to argue against the petition’s permanent approval.
According to the statement, John Guedry, president of the Bank of Nevada, will take over management of the company. The NFID stated:
“The court appointed receiver will take over the day-to-day operations of the company to determine the best option to protect Prime’s clients,”
The order essentially prohibits Prime Trust’s executives and staff from doing anything that would impede the court’s ruling. In accordance with court documents, Prime Trust consented to the Financial Institutions Division’s request for receivership due to the “substantial deficit” between its assets and liabilities.
Additionally, Prime Trust was charged with taking funds from user accounts to fulfill withdrawal requests from its “legacy wallets.”
The Nevada financial regulator at the time demanded the appointment of a receiver immediately due to the possibility of “irreparable harm” to users, the general public, and “confidence in the emerging market of cryptocurrency.” The Financial Institutions Division noted that Prime Trust had no ability to honor customer withdrawals in compliance with a cease and desist order imposed on June 21.
According to the June 26 petition, Prime Trust owed more than $85 million in fiat and $69.5 million in crypto to its clients. The company apparently only had $68.6 million in cryptocurrency and $2.9 million in fiat currency. In the petition, the regulator claimed that Prime had failed and owed its clients millions of dollars.
BitGo, a provider of wallet technology and a custodian of digital assets, had been contemplating buying Prime Trust before its financial difficulties. On June 22, about one day after the NFID issued its cease and desist order, BitGo formally terminated the transaction.
