The blockchain industry has been hit by another wave of regulatory thunder, this time as Crypto custodian Prime Trust gets a metaphorical slap on the wrist ordered by the Eighth Judicial District Court of Nevada. Known to have its headquarters in the Silver state, the company now stands in receivership causing a situation reminiscent of frosty winter mornings; foggy and uncertain.
The Nevada Department’s filing paints a grim picture of the company’s financial health. The terms used, ‘critically deficient’ and ‘unsafe to conduct business’, are indicative of a dire financial predicament, thereby forcing the company to seize all operations instantly. John Guedry, president of the Bank of Nevada, has been appointed to take over operations.
The order followed closely on the heels of the Nevada regulator’s June announcement signalling their intent to take over Prime Trust, attributing their decision to alleged near insolvency of the company. Accompanying this, fellow crypto custodian BitGo abruptly halted its acquisition efforts, adding a cherry on top of the unfortunate circumstances surrounding Prime Trust.
What’s downright alarming about the whole order for receivership is the concerning sum of money owed to Prime Trust’s clients – more than $85 million in fiat. Moreover, the company is reported to have a minuscule balance of around $3 million in fiat currency. This stark contrast underpins the company’s compromised liquidity position.
To add to the financial misfortune, the firm also owes its customers a whopping $69.5 million in crypto assets, while the majority of the remainder of their holding stands at $68.6 million. Not to mention the allegations of misappropriation, where it was reported that Prime Trust used customer funds to quench withdrawal requests from its ‘legacy wallets.’
Amidst the whirlpool of regulatory crackdowns and financial mishaps, the Prime Trust saga serves as yet another stark reminder: regulatory oversight and sound financial management are not just simple buzzwords in the crypto industry. Thus, both stakeholders within the market, and regulators alike, must continue to strive for more robust control mechanisms to maintain trust, security, and stability in the ever-evolving blockchain sector.
Source: Coindesk
