A U.S. District Court has accepted a petition from the U.S. state of Nevada's financial regulator, the Nevada Financial Institutions Division (NFID), to put the troubled crypto custodian Prime Trust into receivership. As part of the ruling, the Bank of Nevada's former CEO, John Guedry, has been appointed as the receiver. Guedry will take over the day-to-day operations of Prime Trust and determine the best option to protect clients. - The receiver will not be able to spend more than $500,000 without a court order.
- The move followed the allegations that the company used customer funds to buy cryptocurrency and cover lost deposits after losing access to digital wallets containing tens of millions of dollars.
- The NFID's petition pointed out that the firm used customer money to satisfy withdrawals from December 2021 to March 2022.
- In June, the NFID also issued a cease-and-desist order against Prime Trust after reviewing the company's solvency to prevent it from accepting funds from existing and new customers.
- Prime Trust currently owes its customers $85M in fiat currencies and $69.5M in crypto, as opposed to $3M in fiat and $68.6M in crypto on hand.
Prime Trust held funds in dollars and crypto on behalf of its customers, including FTX, Binance.US, and Celsius Network. - The regulatory tension around the firm came shortly after digital asset trust company BitGo terminated its acquisition deal with Prime Trust.
- The two firms initially reached an agreement after Prime Trust faced financial difficulties due to its exposure to the bankrupt crypto lender Celsius.
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