Prime Trust freezes withdrawals after Nevada regulator order

Crypto custodian Prime Trust приостановил deposits and withdrawals in fiat and digital assets after the corresponding order from the Nevada Department of Business and Industry.

The regulator cited a ‘capital deficit’, as a result of which the firm was unable to fully satisfy withdrawal requests.

The company’s overall financial condition […] has deteriorated significantly to a critically insufficient level. […] Prime Trust breached its fiduciary duties under Nevada trust laws, — the order states.

The department suggested that the custodian would not be able to operate properly if it continued to operate. As of the end of March 2023, the company’s own funds stood at -$12 million.

Prime Trust may challenge the order within 30 days.

The news was initially reported by its partner—the startup Stably.

ANNOUNCEMENT: Our regulated custodian, @PrimeTrustCo, has temporarily suspended all deposits and withdrawals. More information here: https://t.co/j1B65mP6yY

As Prime Trust continues working to restore normal operations as quickly as possible, we are diligently working on…

— Stably (@Stably_Official) June 22, 2023

During this period we will suspend business expansion, notably signing new client contracts. Prime Trust is actively engaging with NV FID to determine the next steps to address any issues and return to normal operations — the custodian’s letter states.

In response to Stably’s actions, some operations were also suspended. The company said it would enter into additional custody agreements with cryptocurrency custody firms.

The Coinmetro project found itself in a situation similar to Stably.

⚠️ Important announcement: unexpected disruption in USD transactions. We regret to inform you that our partner for USD payments PrimeTrust has temporarily suspended USD deposits and withdrawals. This means that Coinmetro is currently unable to process new USD transactions.

While…

— Coinmetro (@CoinMetro) June 22, 2023

The issuer TrueUSD said that the stablecoin’s functioning was not affected; the company has several banking partners. Prime Trust’s actions did not affect the ability to mint and redeem the asset. Clients were assured that their funds are safe.

PrimeTrust has suspended all deposits of fiat and digital assets. #TrueUSD (#TUSD) is not affected by this situation. We have no exposure to Prime Trust and maintain multiple USD rails for minting and redemption. Rest assured, all your funds are safe with TUSD.

— TrueUSD (@tusdio) June 22, 2023

According to CoinGecko, the TUSD rate deviated from parity with the US dollar by 0.1%. In the last 24 hours, the maximum spread reached 0.5%.

Earlier on June 22, BitGo declined to acquire Prime Trust. A preliminary agreement was reached two weeks earlier.

On June 14, Prime Trust‘s payments division filed for bankruptcy.

In August 2022, the custodian became embroiled in a lawsuit with the bankrupt crypto-lending platform Celsius Network, which demanded to return approximately ~$17 million in digital tokens.