Officials have confirmed that Nevada courts have granted a petition from the Nevada Financial Institutions Division (NFID) to place Prime Trust, a prominent crypto custodian currently facing financial difficulties, into temporary receivership. The Eighth Judicial District Court of Nevada approved the petition, and John Guedry, a former executive at the Bank of Nevada and other financial institutions, has been appointed as the receiver until a permanent order is issued by the court. Guedry’s responsibilities include overseeing Prime Trust’s day-to-day operations, conducting a thorough examination of the company’s finances, and implementing the best strategies to protect the interests of Prime Trust’s clients.

Receiver’s Role and Show Cause Hearing

As the receiver, John Guedry will assume control of Prime Trust’s operations and work towards resolving the company’s financial issues. However, the NFID has clarified that it cannot provide legal counsel or advice to Prime Trust’s customers. Instead, customers are advised to contact John Guedry directly for any inquiries or concerns. Guedry’s receivership is expected to last until at least the show cause hearing scheduled for August 22, 2023. The outcome of this hearing could potentially impact Prime Trust’s ability to continue operating.

Background and Impact on the Crypto Industry

The NFID first issued a cease and desist order to Prime Trust on June 21, citing the company’s inability to fulfill customer withdrawal requests. Simultaneously, the NFID also instructed Prime Trust to stop accepting funds. As a result of insolvency concerns and the company’s failure to maintain a secure and regulated operational environment as mandated by NRS 669, the NFID filed a petition on June 26 to place Prime Trust in receivership. Importantly, Prime Trust LLC consented to this request, indicating the gravity of the situation.

Prime Trust’s financial troubles have had ripple effects throughout the crypto industry. Its subsidiary, Banq, declared bankruptcy on June 14, further exacerbating the company’s challenges. Additionally, Stably announced the suspension of certain services connected to Prime Trust on June 22. Furthermore, BitGo’s planned acquisition of Prime Trust fell through on the same day, as BitGo terminated the deal.

Reports have indicated that Prime Trust is facing a deficit of over $82 million. The company primarily provided custodial services to institutional crypto investors, alongside offering other related services.

In summary, the Nevada courts have taken action by placing Prime Trust into temporary receivership amid the company’s financial troubles. John Guedry has been appointed as the receiver and will oversee the daily operations of Prime Trust while conducting a comprehensive examination of the company’s finances. The show cause hearing scheduled for August 22, 2023, will play a crucial role in determining the future of Prime Trust. The impact of Prime Trust’s issues has extended beyond the company itself, affecting its subsidiary, Banq, and causing disruptions in services offered by Stably. BitGo’s failed acquisition attempt further complicates the situation. With a deficit exceeding $82 million, Prime Trust’s custodial services for institutional crypto investors are now in jeopardy.

Regulation

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