Nevada regulator seeks to put Prime Trust in receivership.

After a cease and desist order was filed, Nevada’s Financial Institutions Division has taken further action against crypto custodian Prime Trust by requesting the appointment of a receiver.

In a filing dated June 26, the regulator submitted a petition to the Eighth Judicial District Court of Nevada, seeking a temporary restraining order and an order to appoint a receiver to Prime Trust Technologies, including its crypto custodian division. Prime Trust has agreed to the receivership along with the regulator due to the significant deficit between its assets and liabilities.

The petition requested an immediate appointment, citing a risk of “irreparable harm” to customers, the public, and “confidence in the emerging market of cryptocurrency”:

“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.”

The Nevada Financial Institutions Division has filed a petition to place Prime Trust LLC in receivership with the Eight Judicial District Court of Nevada. Read the full release and find a copy of the petition here: https://t.co/1A1NzChBGx pic.twitter.com/78vaHKrhPu

— Nevada Department of Business & Industry (@NevadaDBI) June 27, 2023

The Financial Institutions Division’s filing claimed that Prime Trust had contracted Fireblocks to store all its crypto assets in 2019 and underwent a change in management in 2020. Due to limitations with Fireblocks, the custodian reintroduced legacy wallet forwarding addresses to customers in January 2021. Prime Trust has not had access to its users’ legacy wallets since December 2021 and it purchased crypto using customer funds.

Related: TrueUSD assures users it has no exposure to troubled Prime Trust

According to the petition, Prime Trust owed its clients more than $85 million in fiat but had only about $2.9 million as of the filing. The Nevada regulator said Prime Trust’s liability in digital assets was smaller but still significant: The company owed more than $69.5 million in crypto but held just roughly $68.6 million.

The legal action followed the Nevada regulator issuing a cease and desist order on June 21, stating that Prime Trust’s financial condition had “considerably deteriorated” and the firm was “unable to honor customer withdrawals due to a shortfall of customer funds.” Wallet infrastructure provider and digital asset custodian BitGo announced on June 22 that it planned to cancel its acquisition of Prime Trust.

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