The Nevada Department of Business and Industry filed in court a петицией to bar Prime Trust, the crypto custodian, from conducting any business operations and to appoint a bankruptcy trustee for the company.
“Prime is in an unsafe financial condition and/or insolvent. Moreover, the company’s condition is likely to deteriorate further as clients continue to withdraw funds,” the statement said.
According to the regulator, the company’s problems stem from losing access to old crypto wallets containing client funds after switching to the Fireblocks platform. This occurred during Prime Trust’s leadership change.
From December 2021 to March 2022, the company purchased additional digital assets to satisfy withdrawal requests. It used client funds to do so.
According to authorities, the recent surge in asset withdrawals by Prime Trust users is linked to negative news about the company, including Banq bankruptcy, which had been erroneously listed as a subsidiary of the crypto custodian.
Prime Trust’s fiat liabilities amount to $85.67 million, while assets at hand barely exceed $2.9 million. In digital assets, the firm owes clients $69.5 million but holds only $68.65 million.
The department urged the court to immediately bar management and employees from any use of corporate funds and disposition of assets. An appointed bankruptcy trustee will oversee the wind-down or reorganization of the business.
Earlier the agency ordered Prime Trust to freeze deposits and withdrawals of assets.
Earlier in January, the press reported layoffs at the company. In June, BitGo decided to exit the deal to acquire the crypto custodian.