Prime Trust, a prominent crypto custody platform, is under regulatory scrutiny as the Nevada Department of Business and Industry issues a cease-and-desist order. The order comes in response to a “shortfall in customer funds” and Prime Trust’s inability to meet customer withdrawal requests.
The regulatory order, issued on June 21, reveals that Prime Trust’s overall financial condition has deteriorated to a critically deficient level, as stated by the Financial Institutions Division (FID) of the Nevada regulator. As a result, the company has been directed to cease all operations immediately, raising concerns about potential liquidation.
Prime Trust faced challenges honouring customer withdrawals on or around June 21, 2023, due to a shortfall of customer funds. The order highlights a significant liability on Prime Trust’s balance sheet owed to customers, which has led to the company’s inability to safeguard assets under its custody and meet all customer withdrawal requests.
In response to the regulatory order, Prime Trust took swift action by suspending all deposits of fiat and crypto assets on Thursday. This suspension has been confirmed by several industry companies.
The regulatory order also sheds light on Prime Trust’s precarious financial position. As of the end of March 2023, the company reported a negative stockholders’ equity position exceeding $12 million, indicating significant operating deficits.
Prime Trust has been grappling with various business challenges, including the withdrawal of service provision in Texas earlier this year. The company had previously withdrawn its application for a Texas Money Transmitter License (MTL), resulting in the discontinuation of its operations in the state.
Additionally, Banq, a subsidiary of Prime Trust and a mobile software solutions provider, filed for bankruptcy in a Nevada court last week, disclosing $17.72 million in assets and $5.4 million in liabilities.
