The Eighth Judicial District Court of Nevada has granted approval for Prime Trust, a prominent crypto custodian, to enter receivership, following a petition from the state’s Financial Institutions Division (NFID).
The Eighth Judicial District Court of Nevada has ordered Prime Trust LLC into temporary receivership pending an August order to show cause hearing. NFID has modified its Order to Cease and Desist. Read both here: https://t.co/buQKb9PNWe pic.twitter.com/nXBn0xB5jH
— Nevada Department of Business & Industry (@NevadaDBI) July 18, 2023
Court Order Paves the Way
The court’s decision, made in response to a filing by the state financial regulator on June 26, sets Prime Trust on a path to receivership.
Prime Trust will have an opportunity to present its case against permanent receivership in an upcoming hearing scheduled for August 22.
Receiver to Assume Control
In the wake of the court’s ruling, 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 financial regulator’s goal is to safeguard the interests of Prime Trust’s clients amidst the company’s financial challenges.
Financial Deficit Uncovered
In a petition filed on June 26, it was revealed that Prime Trust owed its clients over $85 million in fiat currency and $69.5 million in cryptocurrency.
However, the reported holdings of the firm were significantly lower, with only approximately $2.9 million in fiat and $68.6 million in crypto.
Agreement to Receivership
Court filings indicate that Prime Trust agreed to the receivership petition, recognizing the substantial deficit between its assets and liabilities.
The Nevada financial regulator stressed the need for immediate receivership to prevent “irreparable harm” to users, the public, and confidence in the emerging market of cryptocurrency.
The Financial Institutions Division had issued a cease-and-desist order on June 21, revealing that Prime Trust was “unable to honor customer withdrawals.”
The situation escalated further when BitGo, a wallet infrastructure provider and digital asset custodian, called off its acquisition deal with Prime Trust on June 22.
Prime Trust now faces critical decisions during the upcoming show cause hearing in August.
The company’s leadership will need to present compelling arguments to sway the court against granting permanent receivership.
The court’s approval of receivership has sparked discussions in the crypto community about the importance of robust financial controls and transparency in the industry.
Investors and stakeholders are closely watching the developments surrounding Prime Trust, as the outcome could have implications for the broader cryptocurrency market.
As the hearing date approaches, the crypto custodian will be working diligently to chart a course towards financial stability and to restore confidence among its clients and industry peers.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial or investment advice. Always conduct thorough research and seek professional advice before investing in cryptocurrencies or any financial instruments.