The Eighth Judicial District Court of Nevada has granted a petition from the state’s Financial Institutions Division (NFID) placing crypto custodian Prime Trust into receivership, pending a hearing to show cause.
In a July 14 filing, the Nevada court ordered the appointment of a receiver for Prime Trust following a June 26 petition from the state financial regulator. Prime Trust will have an opportunity to show cause why the petition should not be permanently granted in an Aug. 22 hearing.
“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,” said the 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
The order requires Prime Trust’s employees and executives to largely not take any actions interfering with the court’s decision. According to court filings, Prime Trust agreed to the petition for receivership with the Financial Institutions Division based on the “substantial deficit between its assets and liabilities.”
At the time, the Nevada financial regulator called for the immediate appointment of a receiver due to the risk of “irreparable harm” to users, the public and “confidence in the emerging market of cryptocurrency.” The Financial Institutions Division said Prime Trust was “unable to honor customer withdrawals” as part of a June 21 cease-and-desist order.
According to the June 26 petition, Prime Trust owed more than $85 million in fiat and $69.5 million in crypto to its clients. However, the firm reportedly only held roughly $2.9 million in fiat and $68.6 million in crypto.
Prior to Prime Trust’s financial woes, wallet infrastructure provider and digital asset custodian BitGo had been considering an acquisition of the firm. The deal was officially called off by BitGo on June 22, roughly one day after the NFID issued its cease-and-desist order.