This week, court filings revealed that Prime Trust, a storied crypto custodian, owes customers more than $80 million in cash that it doesn’t have. This is only the latest digital asset firm to face a takeover due to financial issues. On June 8, 2023, BitGo began the process of acquiring Prime Trust, but two weeks later, they walked away from the deal. On June 22, the state of Nevada filed a cease-and-desist against Prime Trust, alleging that it had a massive deficiency of customer funds and may be insolvent. Four days later, the state of Nevada took things a step further, filing for receivership and alleging that Prime Trust owed clients about $82 million in fiat that it didn’t have access to.
The implications of this situation are serious, as it ties to the possible impact to TrueUSD, a stablecoin whose issuer said on June 22 it had no exposure to Prime Trust before later acknowledging it had a relatively small amount ($26,000) on the custodian. Lawmakers are already paying attention to stablecoin issues, and regulators will of course be paying attention to issues by a regulated custodian.