Following the filing of a cease and desist order, Nevada Financial Institutions Division moved to protect crypto custodian Prime Trust’s clients by petitioning the Eight Judicial District Court of Nevada to appoint a receiver to the business, which includes its crypto custodian arm. The regulators contended that the firm’s substantial deficit between assets and liabilities created risk of “irreparable harm” to clients, while updating customers over a change in management made in 2020 and introducing legacy wallet forwarding address further constituted this risk. The petition included a total of $85 million debt owed to Prime Trust clients, as a Fireblocks restriction had prohibited access to legacy wallets since December 2021. Because of these circumstances, the Division then called for Prime Trust’s appointment of a receiver to gain back control of financial performance and re-establish customer’s trust in the crypto industry.
In response, Prime Trust accepted the receivership, claiming to cover their clients’ debt with their cryptocurrency assets’ worth of $68.6 million as of the filing, alongside BitGo announcing it would pull out of Prime Trust’s acquisition. TrueUSD also guaranteed their customer wouldn’t feel any repercussions through their exposure to the organization. Aiming to provide guidance following the incident, the Nevada Financial Institutions Division wrote in a statement, “Our hope is to provide some closure and regain the public’s confidence in the digital currency market and other asset classes in Nevada using methods involving natural laws”.
