Nevada’s Financial Institutions Division has taken legal action against Prime Trust LLC, filing a court petition to place the company in receivership. The Division cited concerns about Prime Trust’s unsafe and unsound operations as well as its insolvency. This move follows a Cease-and-Desist Order issued on June 21, 2023.
The court petition revealed that the company owes more than $82 million in fiat cash, and that the company lost access to what it describes as “legacy” wallets holding cryptocurrency in 2021.
The petition states:
“In January 2021, PRIME reintroduced specific legacy wallet forwarding addresses to customers (“Legacy Wallets”). It is understood PRIME did so because of limitations associated with creating new wallets within the Fireblocks platform. PRIME purportedly believed that these legacy wallets existed on the Fireblocks platform or were configured to forward to wallets accessible on the Fireblocks platform. However, it is understood that on or about December 2021, PRIME discovered that it was unable to access the Legacy Wallets and the cryptocurrency therein. It is understood that from December 2021 to March 2022, to satisfy the withdrawals from the inaccessible Legacy Wallets, PRIME purchased additional digital currency using customer money from its omnibus customer accounts. PRIME is reported to have been making efforts to regain access to the Legacy Wallets. However, as of the date of this Petition, PRIME has been unable to do so.”
On top of this previously unknown blunder, the petition detailed the “unsafe” financial state of the firm, saying:
“In addition to the above, it is reported that the frequency of customer withdrawals from PRIME have recently increased. Furthermore, many of the withdrawals were for large sums. As such, at or about the time of the instant Petition, it is understood that PRIME’s financial status is such that it owes, in fiat currency, $85,670,000 to its clients but has $2,904,000 in fiat currency (equaling an $82,766,000 fiat currency liability). As to digital currency, PRIME owes $69,509,000 to its clients but only has $68,648,000 in digital currency … As such, PRIME would be unable to satisfy all of its withdrawals.”
According to the released statement, the Division’s petition seeks the appointment of a receiver who will assume control over Prime Trust’s day-to-day operations and conduct a thorough financial examination. The receiver will then determine the best course of action to protect the company’s clients, which may involve rehabilitating Prime and returning it to private management or liquidating the company altogether.
In a statement, the Nevada Financial Institutions Division emphasized that it is unable to provide legal advice or counsel to Prime’s customers. Customers with inquiries about the impact of this action on their business are advised to contact Prime Trust directly at email@example.com.