Regulatory Orders Says Prime Trust Has 'Shortfall of Customer Funds'

Friday, 23/06/2023 | 07:35 GMT by Arnab Shome

The regulator ordered the crypto custodian to cease operations.

The company had a negative amount of $12 million in stockholders' equity position at the end of March.

Prime Trust is the latest crypto custody platform to be in trouble, as it received a cease-and-desist order from the Nevada Department of Business and Industry for a "shortfall in customer funds" and not being able to handle customers' withdrawal requests.

Troubled Prime Trust

The regulatory order was published publicly on Thursday, hours after BitGo, another digital asset custody provider, terminated its deal to acquire Prime Trust. Although, a spokesperson from the Nevada regulator confirmed to the media that the order was issued on June 21.

According to the Nevada regulator's Financial Institutions Division (FID), Prime Trust's "overall financial condition ... has considerably deteriorated to a critically deficient level," and thus, the company has been ordered to cease all activities. The regulator further highlighted that the crypto custodian might be on the brink of liquidation.

"On or about June 21, 2023, Respondent 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 regulatory order stated. "Additionally, Respondent failed to safeguard assets under its custody and is unable to meet all customer withdrawals."

Halted Deposits

Prime Trust has already halted all deposits of fiat and crypto assets on Thursday, which was confirmed by several companies.

Additionally, the regulatory order highlighted that Prime Trust had more than a negative amount of $12 million in stockholders' equity position at the end of March 2023, which signifies the company is "operating at a substantial deficit."

Based in Nevada, Prime Trust has been in business difficulties for a while now. It quit its service provision in Texas in January after previously withdrawing its application for a Texas Money Transmitter License (MTL), Finance Magnates recently highlighted. Further, Banq, a mobile software solutions provider and a subsidiary of Prime Trust, filed for bankruptcy last week in a US court in Nevada, declaring $17.72 million in assets and $5.4 million in liabilities.