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Nevada’s Financial Institutions Division has placed crypto firm Prime into receivership, having taken control of the company, and has frozen its businesses and operations. 
The Financial Institutions Division had earlier indicated that Prime Trust had a significant deficit on its books, alleging that it had lost access to several legacy crypto wallets in 2021.&nbsp; Prime Trust Holds A Fraction Of What Is Owed To Clients&nbsp; 
Prime Trust was previously a financial infrastructure provider for Binance US and several others. According to the receivership request filed in Nevada, Prime Trust owes its clients over $85 million in fiat but currently has only around $3 million available on hand. Furthermore, the company also owes its clients $69.5 million in crypto but holds around $68 million in crypto assets.&nbsp; 
The move by the Nevada Financial Institutions Division comes just days after BitGo called off its bid to acquire the embattled crypto firm. Furthermore, it also follows a cease-and-desist order filed by the state alleging that Prime Trust was on the verge of insolvency. The filing also added that the crypto custodian was operating with a $12 million equity deficit. According to the filing, at least some part of this shortfall comes from Prime Trust losing access to its legacy crypto wallets.&nbsp; The Fireblocks Agreement&nbsp; 
In 2020, Prime Trust entered into an agreement with Fireblocks, with the latter to manage its crypto assets. In 2021, Prime Trust’s new management set up “legacy wallet forwarding” for wallets that were earlier on the Fireblocks platform. After reverting back to legacy wallets in January 2021, the company discovered in December 2021 that it could not access its legacy wallets, losing access to all the cryptocurrencies held within them as well.&nbsp; 
It was alleged that while Prime Trust could not access these wallets, it allegedly used its clients’ fiat currency accounts to purchase crypto assets, which were used to process crypto-denominated withdrawals. The company’s efforts to access its legacy wallets have proven unsuccessful. The filing stated,&nbsp; 
“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.” 
The filing also stated that the company’s financial condition could only worsen as customers withdraw their funds. According to Fireblocks communications head Gaby Hui, the legacy wallets in question are all controlled by Prime Trust, and no Fireblock funds are in limbo.&nbsp; 
“After Prime Trust became a Fireblocks customer, new management made a decision to deposit Prime Trust’s customer assets in old legacy wallets. Once management moved those assets to the legacy wallets, the customer assets were not recoverable. These legacy wallets were not Fireblocks wallets.” Prime Trust And FID Both Requested Receivership&nbsp; 
The filing also indicated that both Prime Trust and the Financial Institutions Division requested the receivership. It also asks for preliminary injunctive relief, stating that such relief would be in the public’s interest, given there is a threat of immediate, irreparable harm. A press release by a spokesperson for the Financial Institutions Division stated,&nbsp; 
“The petition asks the court to appoint a receiver to take over the day-to-day operations of the company and thoroughly examine all its finances to determine the best option to protect Prime’s clients, either by rehabilitating and returning the company to private management or by liquidating the company.” 
The filing has also asked for a ban on Prime Trust, along with its officers, directors, stakeholders, and others associated with the firm, from disposing of its assets or conducting transactions on behalf of the firm. In an affidavit signed by Nevada Commissioner Sandy O’Laughlin, both FID and Prime Trust agreed that Meadows Bank Director Paul Huygens, Bank of Nevada CEO John Guedry, or former Meadows Bank CEO Arvind Menon could be possible receivers.&nbsp; 
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto Firm Prime Trust Placed Into Receivership By Nevada’s FID

Crypto Daily™

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