Prime Trust
Prime Trust was issued a cease and desist order by the SEC in 2019 for operating as a custodian without the proper licensing. The company has since obtained the necessary licenses and is now a qualified custodian.
Last Updated: 2023-05-21
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Prime Trust, a crypto custody firm, has been facing significant regulatory issues recently. The Nevada Department of Business and Industry reported that Prime Trust had a "shortfall in customer funds" and was unable to fulfill all withdrawal requests. This situation led the Department's Financial Institutions Division (FID), which oversees state-regulated trust companies, to order Prime Trust to cease all activities violating Nevada regulations. The order highlighted that the company's overall financial condition had "considerably deteriorated to a critically deficient level," indicating that Prime Trust was operating at a substantial deficit, potentially even being insolvent.
As of June 21, 2023, Prime Trust was unable to honor customer withdrawals due to a significant liability on its balance sheet owed to customers. This failure to safeguard assets under its custody and meet customer withdrawal demands led the regulator to claim that Prime Trust may not be able to operate in a sound manner if it were to continue, accusing it of breaching its fiduciary duties.
Further, Prime Trust reported more than negative $12 million in stockholders' equity position at the end of March 2023. This financial situation was made public shortly after the crypto company BitGo announced the termination of its potential acquisition of Prime Trust. In response to Nevada's order, Prime Trust reportedly halted all fiat deposits, though the specific details of the order were not widely shared.
A Nevada FID spokesperson stated that the regulator issued a cease-and-desist on June 21, blocking Prime Trust from accepting fiat and cryptocurrency from existing and new clients for custody purposes. The NFID had been actively monitoring Prime Trust's solvency in anticipation of a potential acquisition or merger. However, Prime Trust's failure to safeguard assets and inability to meet client withdrawals led to a breach of its fiduciary duties and Nevada trust laws. The primary objective of the NFID now is to preserve any remaining enterprise value in Prime Trust for the benefit of its clients.