Financial regulators in Nevada have taken decisive action against Prime Trust, a prominent financial institution, as they issued a cease and desist order on June 21. The Nevada Financial Institutions Division (NFID) had been closely monitoring the solvency of Prime Trust in anticipation of a potential acquisition or merger. However, these efforts unveiled alarming deficiencies, leading to regulatory intervention, media reports said.
The NFID revealed that Prime Trust failed to adequately safeguard assets held under its custody and was unable to fulfill client withdrawal requests. In response, the cease and desist order has been implemented to prohibit Prime Trust from accepting both fiat currency and cryptocurrencies from existing and prospective clients.
The order explicitly states that Prime Trust’s financial condition has deteriorated to a critically deficient level, rendering the company unsafe and unsound. It further indicates that the firm is currently operating at a substantial deficit and potentially insolvent. Additionally, Prime Trust is accused of materially and willfully breaching its fiduciary duties to clients. As a result, the company has been given a 30-day window to request an administrative hearing.
The repercussions of Prime Trust’s regulatory troubles are beginning to reverberate through the cryptocurrency industry. Stablecoin firm Stably has announced that it will temporarily pause the minting of new tokens and user withdrawals due to its reliance on Prime Trust as a custodian. This development underscores the far-reaching implications of Prime Trust’s solvency issues, impacting other entities within the ecosystem.
The recent abandonment of the anticipated acquisition of Prime Trust by BitGo further compounds the company’s challenges. This turn of events has left Prime Trust in a precarious position as it grapples with the fallout from the cease and desist order and its broader financial predicament.
It remains to be seen how Prime Trust will respond to the regulatory action and whether the company can rectify its solvency concerns within the allotted timeframe. The NFID’s intervention serves as a stark reminder of the importance of robust financial oversight in the rapidly evolving cryptocurrency landscape, emphasizing the need for responsible custodial practices and regulatory compliance.
