The Eighth Judicial District Court of Nevada has approved a petition from the state’s Financial Institutions Division (NFID) to place Prime Trust, a prominent crypto custodian, into receivership.
The court’s order came after a filing on July 14, in response to a petition submitted by the state financial regulator on June 26.
Prime Trust now awaits an opportunity to show cause in an upcoming hearing scheduled for August 22, where the company can present its arguments against the permanent granting of the receivership.
“The court-appointed receiver will take over the day-to-day operations of the company to determine the best option to protect Prime’s clients,” said the NFID.
In a recent petition filed on June 26, it was revealed that Prime Trust, the crypto custodian, owed its clients over $85 million in fiat currency and $69.5 million in cryptocurrency.
However, the firm’s reported holdings were significantly lower, with approximately $2.9 million in fiat and $68.6 million in crypto.
According to court filings, Prime Trust agreed to the petition for receivership with the Financial Institutions Division based on the “substantial deficit between its assets and liabilities.”
At the time, the Nevada financial regulator called for the immediate appointment of a receiver due to the risk of “irreparable harm” to users, the public and “confidence in the emerging market of cryptocurrency.”
The Financial Institutions Division said Prime Trust was “unable to honor customer withdrawals” as part of a June 21 cease-and-desist order.
Prior to Prime Trust’s financial woes, wallet infrastructure provider and digital asset custodian BitGo had been considering an acquisition of the firm.
The deal was officially called off by BitGo on June 22, roughly one day after the NFID issued its cease-and-desist order.
