• Nevada regulator alleges that Prime Trust was unable to meet customer withdrawals and is operating at a substantial deficit or may even be insolvent.
• The Department’s Financial Institutions Division ordered Prime Trust to cease activities which violate Nevada regulations.
• BitGo CEO Mike Belshe joins “First Mover” to address why the custodian terminated its acquisition of rival Prime Trust after reaching a preliminary agreement.
Nevada Regulator Alleges Shortfall in Customer Funds for Prime Trust
The Nevada Department of Business and Industry has issued an order to crypto custody firm Prime Trust, alleging that the company has “a shortfall in customer funds” and was unable to meet all withdrawal requests this month. The Financial Institutions Division (FID) of the department ordered Prime Trust to cease all activities which violate Nevada regulations, claiming that the company’s “overall financial condition … has considerably deteriorated to a critically deficient level.” Additionally, FID claims that Prime Trust is “operating at a substantial deficit” or may even be insolvent. If it does not file for a hearing within 30 days of the order, it will be deemed final.
BitGo Terminates Acquisition of Rival Crypto Custodian
BitGo announced recently that it had terminated its acquisition of rival crypto custodian Prime Trust, after having reached a preliminary agreement to acquire the firm for an undisclosed amount. BitGo CEO Mike Belshe joined “First Mover” on CNBC for an interview about why he decided to terminate the agreement and other insights into BitGo’s Go Network and his outlook on crypto regulation.
Prime Trust Reports Negative Stockholder Equity Position
At the end of March 2023, Prime Trust reported more than negative $12 million in stockholders’ equity position according to FID’s order against them. This is likely one factor leading up to their inability to pay out customers who have requested withdrawals this month due to their lack of available funds.
Implications for Crypto Regulation
This incident involving two major players in crypto custody raises questions about how well regulated this industry really is and if there are further implications regarding regulatory oversight with regards to cryptocurrencies as a whole moving forward. As such, it will be interesting to see what actions are taken by regulators regarding this case as well as how future cases are handled by both state-level institutions as well as federal government entities like FinCEN and SEC going forward..
In conclusion, it appears that there were some issues with regard to financial management on behalf of PrimeTrust which led up towards their inability meet customer withdrawals due along with some other violations they committed according the Nevada regulator’s orders against them. It will remain interesting how federal regulatory authorities handle similar cases going forward but also how they decide if stricter measures need implemented across cryptocurrency companies in general moving ahead too