BitGo, a leading cryptocurrency custody provider, has faced a setback in its bid to acquire Prime Trust, a financial institution specializing in custodial and escrow services for digital assets.
Quick facts:
- BitGo’s attempt to acquire Prime Trust has been thwarted due to regulatory issues faced by Prime Trust, leading to operational disruptions and the suspension of withdrawals and deposits.
- Prime Trust’s bankruptcy filing by its subsidiary, Banq, further complicates BitGo’s acquisition plans, raising concerns about the deal’s viability.
- Prime Trust has encountered various challenges, including layoffs and involvement in a political scandal, impacting its reputation and stability.
According to a recent tweet from BitGo’s official Twitter account, Prime Trust’s regulatory difficulties have caused the planned acquisition, which was just over two weeks ago, to fall through.
Prime Trust has recently come under scrutiny from state regulators, resulting in operational disruptions. Regulators in Texas have ordered the institution to cease its activities, leading to the suspension of fiat and cryptocurrency withdrawals and deposits.
These regulatory hurdles have significantly affected Prime Trust’s operations and raised concerns among its clients, including Binance US and Swan.
BitGo has also faced legal complications in relation to failed acquisitions in the past. The company recently experienced a lawsuit from Galaxy Digital, a cryptocurrency investment firm, although the case has since been dismissed by the court.
These legal challenges have further compounded the obstacles faced by BitGo in its pursuit of acquiring Prime Trust.
The difficulties encountered by Prime Trust have prompted many of its clients to seek alternative solutions.
Binance US, for instance, has increased its reliance on another service provider, Wyre, following the disruption caused by the regulatory actions. Similarly, Swan, a cryptocurrency lender, has decided to shift away from Prime Trust and opt for the services of Fortress Trust.
The ripple effect of Prime Trust’s troubles has impacted other entities connected to the financial institution. Stably, a client of Prime Trust, has received notification that the company has received a cease and desist order from the Nevada Financial Institute Division, leading to the suspension of fiat and digital asset deposits and withdrawals.
While some clients, like the stablecoin TrueUSD, intend to reinstate their Prime Trust-related features once the regulatory issues are resolved, the failure of BitGo’s acquisition attempt highlights the intricate regulatory landscape within the crypto industry.
This development underscores the challenges faced by companies navigating regulatory frameworks and the potential impact on the broader digital asset custody sector.
Bankruptcy Filing by Prime Trust’s Subsidiary Casts Shadow on BitGo’s Acquisition Plans
Court documents unveiled on June 13 shed light on Banq, the payments subsidiary of Prime Trust, filing for bankruptcy protection in the United States. The bankruptcy filing disclosed assets totaling $17.72 million and liabilities amounting to $5.4 million.
This development occurred shortly after BitGo expressed its intention to acquire Prime Trust on June 8. The timing of the bankruptcy filing raises questions about its potential impact on BitGo’s proposed acquisition of Banq’s parent company.
In addition to the recent bankruptcy filing, Prime Trust has faced significant challenges in recent times. Reports emerged in January suggesting that the company had laid off a third of its workforce.
Furthermore, Prime Trust was involved in a scandal in Oregon last year when it was revealed that the company was the source of a $500,000 contribution to the state Democratic Party, which was later traced back to former FTX executive Nishad Singh.
