Cryptocurrency custody provider BitGo has announced the termination of its planned acquisition of Prime Trust, a cash-strapped rival, dealing a blow to the struggling firm. The decision comes just two weeks after the preliminary deal was announced, and it follows a series of challenges faced by Prime Trust, including regulatory issues and financial difficulties.

BitGo took to Twitter to convey the news, expressing the company’s difficult decision. “After extensive effort and deliberation to find a way forward with Prime Trust, BitGo has made the tough call to terminate the acquisition,” the company tweeted. It emphasized its unwavering commitment to its mission of instilling trust in digital assets despite this setback.

The acquisition, which was initially unveiled on June 9, emerged amidst rumours of Prime Trust’s struggle to meet withdrawal requests from customers of prominent platforms like Binance.US, Abra, and Swan Bitcoin.

Several Twitter users shared details of an email sent by Prime Trust to its customers on Wednesday. The email disclosed that the firm had ceased all deposits and withdrawals with immediate effect, following the receipt of a cease and desist letter from Nevada state regulators.

In the email, Prime Trust regretfully informed its customers of the halt in fiat and digital asset deposits and withdrawals. “Please refrain from sending any client custody assets, especially digital assets, to Prime Trust,” the email read. The company assured customers that it is actively engaging with the Nevada Financial Institution Division to resolve regulatory concerns and return to normal operations as soon as possible.

The difficulties faced by Prime Trust are widely perceived as consequences of the lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against major cryptocurrency exchanges Coinbase and Binance. The legal actions have cast a shadow over the industry and have had ripple effects on companies like Prime Trust.

Prior to the acquisition announcement, Prime Trust had been actively seeking emergency funding of up to £25 million, as rumours of a potential cash crunch and impending bankruptcy circulated. Having offered services to crypto companies since 2018, Prime Trust has built a substantial clientele, serving nearly 700 fintech and crypto clients over the past five years.

However, the company’s fortunes began to wane in 2022 during the prolonged cryptocurrency market downturn. The collapse of Terra/Luna and the bankruptcy of FTX further compounded Prime Trust’s challenges, resulting in the loss of several high-profile clients.

Swan Bitcoin, for instance, recently underwent a “major system upgrade,” as indicated on its website, and CEO Cory Klippsten confirmed via Twitter that the platform’s Bitcoin and U.S. dollar holdings are now held with Fortress or BitGo. Additionally, Binance.US severed ties with Prime Trust following the charges filed against the exchange by the SEC. Speculation on social media has linked Prime Trust to the “Trust Company B” mentioned in the regulator’s lawsuit, further exacerbating the company’s difficulties.