The U.S. state of Nevada's financial regulator, the Nevada Financial Institutions Division (NFID), has filed a petition to appoint a receiver to the crypto custodian Prime Trust to take over daily operations of the company and examine its finances, freezing all of its businesses. The filing was signed by Prime Trust's board and interim CEO. The petition pointed out that Prime Trust 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. - The filing also stated that the company was operating with a $12M equity deficit.
- In the petition, the state regulator said the shortfall mainly stemmed from the use of customer funds to cover lost deposits, and the firm's condition would only progressively worsen if customers continued to withdraw.
- The receivership was requested both by the NFID and Prime Trust, and the two entities agreed upon the former Bank of Nevada CEO John Guedry, Meadows Bank Director Paul Huygens, or former Meadows Bank CEO Arvind Menon as possible receivers.
- Besides, the petition asked the court to prohibit Prime Trust, its officers, directors, and stakeholders from disposing of any company assets or conducting any transactions.
- Earlier 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.
The regulatory tension around Prime Trust 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.
- Prime Trust's subsidiary Banq also recently filed for Chapter 11 bankruptcy protection in the U.S. District Court of Nevada.
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