Oh boy, trouble is happening in the cryptocurrency world, and this time it’s Prime Trust that’s caused the mess. The crypto custodian has been slapped with some serious allegations in court documents filed by Nevada’s Financial Institutions Division (FID). According to the FID, Prime Trust has been using customer funds and venture capital to cover up its own failures. Sounds like it’s not prime time for Prime Trust right now!
Financial Institutions Division Takes Action
The FID didn’t waste any time in going after Prime Trust. Attorneys filed a petition on Monday, demanding that Prime Trust assets be impounded, a receiver be appointed for rehabilitation, and Prime executives and employees be barred from accessing accounts. It seems the FID is not playing around and wants to get to the bottom of this mess. To make matters worse, Prime Trust is currently licensed as a money transmitter in 15 US states. That’s a lot of regulatory trouble!
Customers Flee as Prime Trust Sinks
If you thought things couldn’t get worse for Prime Trust, think again. Most major customers have decided to jump ship in the last few weeks, exacerbating the company’s financial woes. Regulators are now seriously concerned that Prime Trust might cause “irreparable harm” if someone doesn’t step in to save the day. Ouch, that’s gotta hurt!
Read more: The legal dangers of getting involved with DAOs
Crypto Custodian’s Shady Practices Revealed
The FID’s petition sheds light on some seriously shady practices by Prime Trust. It turns out that the company lost access to “legacy wallets” back in December 2021. But instead of owning up to the loss, Prime Trust decided to use customer funds to buy more crypto. Talk about a slippery slope! This is definitely not how you want your trusted custodian to handle things.
Prime Trust’s Massive Liability Crisis
Prime Trust is drowning in liabilities, and it’s not a pretty sight. With customer withdrawals skyrocketing, the company now owes nearly $86 million in fiat to its customers. But here’s the kicker: Prime Trust only has a measly $3 million on hand. That’s like trying to fill an Olympic-sized swimming pool with a garden hose! And let’s not forget the $70 million in crypto that the company owes its customers, while it only has $69 million in reserves. It’s a financial disaster waiting to happen.
TrueUSD Caught in the Crossfire
One of the casualties of Prime Trust’s meltdown is TrueUSD (TUSD), the fifth-largest stablecoin in the industry. TrueUSD relied on Prime Trust as a custodian and as an on- and off-ramp for US dollars. But with Prime Trust’s operations suspended, TrueUSD finds itself in a bind. The stablecoin’s most important avenue for handling US dollars has been abruptly cut off, leaving customers stranded.
TrueUSD’s Troubles Multiply
The TrueUSD drama doesn’t end there. While the stablecoin has enjoyed some support from Binance, it sent out a conflicting email to its customers. TrueUSD warned them that they won’t be able to mint and redeem TUSD or any of their TrueCoins while Prime Trust is in dire straits. This puts TrueUSD users in a tight spot, as they scramble to find alternative solutions. It seems like trouble never comes alone. he stability of TrueUSD hangs in the balance as it navigates these turbulent waters.
In the tumultuous world of cryptocurrencies, scandals and controversies are never far away.
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