BitGo, the cryptocurrency custodian, has decided to withdraw from its acquisition discussions with Prime Trust, effectively terminating the short-lived deal. The announcement was made by BitGo in a carefully worded tweet on Thursday, emphasizing that the decision was not taken lightly and the company remains committed to its regular operations.
The tweet from BitGo stated, “After considerable effort and work to find a path forward with Prime Trust, BitGo has made the hard decision to terminate its acquisition of Prime Trust.” However, no specific reasons were provided for this abrupt about-face.
Coinciding with BitGo’s announcement, social media users started circulating screenshots of an email allegedly sent by Prime Trust to its customers. The message declared a suspension of all withdrawals for digital assets and fiat currencies, citing a cease and desist order issued by financial regulators in Nevada as the cause for the halt.
Strike, a Prime Trust client, has also sent to its customers notice that it is disabling card and direct deposits. However, it is not yet clear if this is related to the firm’s engagement with Prime Trust.
As of now, Prime Trust has not commented on BitGo’s decision, and both companies have refrained from responding to Decrypt’s request for further clarification. Meanwhile, CoinMetro, a prominent crypto exchange, has been forced to suspend U.S. dollar withdrawals due to its reliance on Prime Trust as its payments partner.
Coinmetro conveyed the news to its clients through a tweet, warning them about potential disruptions in USD transactions. The company assured its users that it is diligently working on integrating alternative payment partners into its ecosystem to mitigate the impact of this setback.
Prime Trust, known for its support of various cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Tether, remains the sole surviving “crypto bank” among the four industry players. Allegations of regulatory targeting have plagued the other three crypto-friendly institutions—Silvergate, Silicon Valley, and Signature Bank—in recent months due to their associations with the sector.
This terminated acquisition deal represents a rather ignominious conclusion to an agreement that had only been set in motion two weeks ago. On June 8, BitGo had announced the signing of a letter of intent to acquire Prime Core Technologies Inc., the parent company of Prime Trust. The proposed deal involved acquiring the entire equity of Prime Core Technologies Inc. and integrating the technical infrastructure of both companies while sharing BitGo’s banking services.
However, the troubles began to unfold soon after the agreement was made public. Within a week of the deal, Banq, a subsidiary of Prime Trust and a crypto payments and savings platform based in Nevada, filed for bankruptcy due to alleged mismanagement and legal issues. The bankruptcy documents revealed assets worth $17.72 million and liabilities amounting to $5.4 million.
Shortly after the news of the Nevada investigation surfaced, stablecoin issuer TrueUSD took to Twitter to provide reassurance to its customers regarding the situation. The company tweeted a statement affirming that the freeze had no impact on their TUSD. TrueUSD emphasized that they had no connection to Prime Trust and utilized multiple USD rails for the processes of minting and redemption.
Another blow came on June 16 when Abra, a crypto investment company, faced a cease and desist order and securities fraud accusations from Texas regulators. Prime Trust had served as the primary custodian for Abra, which managed approximately $49 million in assets under management (AUM) as of May.
Recently, the Nevada Department of Business and Industry stated that Prime Trust had a “shortfall in customer funds” and was unable to fulfill all withdrawal requests this month. The Financial Institutions Division (FID), responsible for overseeing state-regulated trust companies, issued a cease and desist order against Prime Trust on Wednesday, citing its precarious financial condition and potential insolvency. The FID alleged that Prime Trust had breached its fiduciary duties and failed to safeguard the assets under its custody.
Prime Trust now faces significant regulatory scrutiny and has been blocked from accepting fiat and cryptocurrency deposits for custody purposes. The Nevada FID spokesperson underscored the division’s commitment to preserving any remaining enterprise value in Prime Trust for the benefit of its clients, citing violations of Nevada trust laws.
Information for this briefing was found via Decrypt, CoinDesk, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
