Nevada Regulator Applies to Take Control of Crisis-Ridden Prime Trust
In Brief
The Nevada Department of Financial Institutions (DFI) announced on Tuesday that it has applied to take over crypto custodian Prime Trust and freeze its activities.
The Nevada Department of Financial Institutions (FDI) has launched an audacious move to take over the operations of Prime Trust, a beleaguered cryptocurrency custodian facing default. The regulator is also seeking to freeze the company’s activities amid growing concerns over the company’s ability to satisfy customer obligations.
In a bid to manage the brewing crisis, the FDI has appealed to the Nevada District Court to appoint a representative to take over the day-to-day operations of Prime Trust. The goal is to “thoroughly examine all of the company’s financial affairs to determine what is in the best interest of the company, Prime customers, or to remedy and return the company to private management, or liquidate it”.
Documents attached to the filing reveal that Prime Trust’s management has consented to the takeover. This move comes in light of FDI’s claims that Prime Trust lost access to old wallets in early 2021 and has been using customer assets to repurchase cryptocurrencies.
Prime Trust had earlier signed an agreement with Fireblocks, another company to manage its crypto assets, a deal concluded in 2020. In 2021, with a new management team in place, Prime Trust set up “old wallet forwarding” for wallets on the Fireblocks platform.
However, by December 2021, Prime Trust reportedly “discovered that it could not access” the old wallets or the cryptocurrencies held within them. Fireblocks’ head of communications, Gaby Hui, told CoinDesk that both Prime Trust and Fireblocks maintain control over all legacy wallets and hold no funds.
Prime Trust Numbers
The crisis has plunged Prime Trust into a financial hole. It owes its customers $85.67 million in fiat and $69.509 million in crypto, but currently possesses only $2,904 million in fiat and $68,648 million in crypto. Last week, the Nevada Division of Financial Institutions announced that Prime Trust could not fulfill all customer withdrawal requests. The company, they revealed, is operating under unsafe conditions and has been insolvent since June 21.
This move by the Nevada regulator underscores the growing need for more stringent regulation in the cryptocurrency sector. It also serves as a grim reminder of the challenges and pitfalls that lie ahead for crypto custodians amid increased customer scrutiny and the continuous evolution of blockchain technology.
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About The Author
Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.
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Nik is an accomplished analyst and writer at Metaverse Post, specializing in delivering cutting-edge insights into the fast-paced world of technology, with a particular emphasis on AI/ML, XR, VR, on-chain analytics, and blockchain development. His articles engage and inform a diverse audience, helping them stay ahead of the technological curve. Possessing a Master's degree in Economics and Management, Nik has a solid grasp of the nuances of the business world and its intersection with emergent technologies.
