The Eighth Judicial District Court of Nevada has approved a request from the state’s Financial Institutions Division (NFID) to place cryptocurrency custodian Prime Trust under receivership until a hearing can be held to determine the reasons behind the petition.
On July 14, the Nevada court issued an order appointing a receiver for Prime Trust, following a petition filed by the state financial regulator on June 26.
Prime Trust will have an opportunity to present its case against the petition during a hearing scheduled for August 22.
According to the NFID, the court-appointed receiver will assume control of Prime Trust’s day-to-day operations to identify the best course of action to safeguard the interests of the company’s clients.
The court order explicitly restricts Prime Trust’s employees and executives from taking actions that would interfere with the court’s decision.
Court documents indicate that Prime Trust consented to the receivership petition brought forth by the Financial Institutions Division, citing a significant discrepancy between the company’s assets and liabilities.
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The Nevada financial regulator had urgently requested the appointment of a receiver due to concerns about the potential for irreparable harm to users, the public, and the overall confidence in the cryptocurrency market.
The Financial Institutions Division had previously issued a cease-and-desist order to Prime Trust on June 21, stating that the company was unable to fulfill customer withdrawal requests.
As stated in the petition filed on June 26, Prime Trust owed its clients more than $85 million in fiat currency and $69.5 million in cryptocurrency.
However, the firm reportedly held only around $2.9 million in fiat currency and $68.6 million in cryptocurrency.
Prior to encountering financial difficulties, Prime Trust had been in discussions with BitGo, a provider of wallet infrastructure and digital asset custody services, regarding a potential acquisition.
However, on June 22, shortly after the NFID issued the cease-and-desist order, BitGo officially called off the deal.
The court’s decision to place Prime Trust under receivership signifies a significant development in the ongoing situation, as it allows for an impartial assessment of the company’s financial state and potential actions to protect the interests of its clients.
The upcoming hearing will provide an opportunity for Prime Trust to present its arguments and potentially address the concerns raised by the Financial Institutions Division.
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