These past weeks have been intense for the crypto sector, with the US SEC weighing down on the existing players on one hand, and institutional interest brewing around the digital assets industry on the other. In the midst of this industry turmoil, BitGo’s plan to acquire Prime Trust fell dramatically, just two weeks after it was finalised earlier this month. Both, BitGo and Prime Trust provide asset custody, borrowing, and lending services among others. By acquiring Prime Trust, BitGo aimed at expanding its services while also finetuning its internal security measures.
Prime Trust is currently “operating at a substantial deficit” and is not expected to be able to handle withdrawals if users were to initiate the process. Financial regulators from US’ Nevada have reportedly alleged that Prime Trust has a shortfall of funds owing to a significant liability on its balance sheets.
While BitGo did not specify exactly what made it pull out of an almost finalised deal, it did say that the decision would fare better for its own business in the coming times. The company made its decision Twitter official on June 22 saying, “this decision was not made lightly.”
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. This decision was not made lightly and BitGo remains committed to our mission to deliver trust in digital assets.
— BitGo (@BitGo) June 22, 2023
In the backdrop of this failed acquisition deal, Prime Trust has halted all deposits and withdrawals on its platform, as per the orders of Nevada’s Financial Institutions Division (FID).
:rotating_light::rotating_light:SCOOP: PRIME TRUST RECEIVED CEASE AND DESIST ORDER FROM NEVADA STATE REGULATORS.
PRIME IS HALTING ALL WITHDRAWALS OF FIAT AND CRYPTO EFFECTIVE IMMEDIATELY. https://t.co/0rLzOGZXlR pic.twitter.com/gsRYevAmJM
— DIRTY BUBBLE MEDIA: GOOD LUCK, GOOD BYE. (@MikeBurgersburg) June 22, 2023
The past few months have been particularly rough for Prime Trust. In January, the company fired one third of its staff. It also drew curtains over its operations in Texas. Clients had begun to sense the commotion had started exiting the platform.
Prime Trust reported more than negative $12 million (roughly Rs. 98 crore) in stockholders’ equity position by March end, a Coindesk report said, citing FID’s order.
Banq, a subsidiary of Prime Trust also declared bankruptcy last week.
The overall crypto market had been in a slumber these recent months, owing to consecutive interest rate hikes in the US. In addition, the SEC breathing down the necks of crypto players in the US amid lack of regulatory guidelines, also triggered an exodus of crypto firms from the country, seeking greener pastures outside.
Binance and Coinbase are among crypto companies that recorded mass outflows of funds from their custody this month, in the backdrop of the SEC initiating probe into their business affairs.
