BitGo Terminates Acquisition of Prime Trust as Users Suffer Frozen Withdrawals

The provider of crypto custodian services BitGo confirmed that it would terminate talks regarding acquiring rival Prime Trust.  It marks a sudden twist for an acquisition process that began a fortnight ago. 

The short-lived deal is leaving stakeholders of Prime Trust uncertain of the custodian services provider’s future.  BitGo revealed it was walking away in a Thursday, June 22 tweet.  The company downplayed speculations that the quit decision involved a light process.  Instead, the firm indicated the decision factored in the usual commitment to the business. 

BitGo Ditches Plans to Acquire Prime Trust

The tweet read that BitGo is retracting from the path to pursue the Prime Trust acquisition.  The decision to halt is difficult, given the considerable efforts, resources, and time allocated. 

BitGo’s announcement to terminate the acquisition coincided with social media users circulating images capturing the email sent by Prime Trust to the clients.  The email informs the users that Prime Trust is temporarily freezing digital assets and fiat currency withdrawals.  The message cited the pause was unavoidable, given the cease-and-a-desist order issued by Nevada financial regulators. 

While neither Prime Trust nor BitGo is yet to disclose further details, it leaves the acquisition process in limbo.  The death of the acquisition deal necessitated crypto exchange CoinMetro to pause the dollar-denominated withdrawals on the platform.  Given that it relies upon Prime Trust as the payments partner. 

Coinmetro tweet on Thursday, June 22, warned users of inconveniences involving disrupted USD transactions.  Nonetheless, the firm assured its users of exploring viable alternative payment partners to the Coinmetro ecosystem. 

Prime Trust outlines a list capturing several cryptos supported on the platform.  In particular, it supports Tether, Litecoin, Ethereum, and Bitcoin, among others. 

The news of Nevada issuing cease-and-desist order prompted stablecoin issuer TrueUSD to issue a statement via its official Twitter profile.  The tweet reassured clients that the Payment Trust’s decision to suspend withdrawals does not affect TUSD. 

The tweet dismissed speculation that TUSD is battling the strangling effect of the freeze order issued by Prime Trust.  TUSD ruled out having ties and exposure to the embattled custody service provider.  Instead, it utilizes several USD rails for minting and redemption.  As such, the TUSD tweet assured users of the funds’ safety, though it failed to clarify the payment rails it was using. 

Will Prime Trust Survive the Tide that Downed Other Crypto-Friendly Banks? 

While Prime Trust faces uncertainty in its financial health, it is the only remaining crypto bank.  Silvergate, Signature Bank, and Silicon Valley banks exited the stage leaving Prime Trust as the sole surviving crypto-friendly institution. 

Feeding into the speculative concern about Prime Trust’s financial health arose from the belief that regulators were plucking the crypto-friendly institutions individually.  The cancellation of its acquisition feeds into the buzz terming the acquisition halt as an inglorious end to the acquisition that started a fortnight ago.

The cancellation invalidates the letter of intent that BitGo revealed it signed on June 8 to declare the pursuit of a rival.  The deal allowed BitGo to buy parent entity Prime Core Technologies Inc.  The conclusion of the purchase would prompt the integration of their technical infrastructure with Prime Trust sharing BitGo’s banking services. 

Prime Trust Challenges Extend to Banq and Abra

The timing of BitGo’s ending talk with Prime Trust coincides with crypto investment firm Abra receiving an immediate cease-and-desist order issued by the Texas securities regulators.  The Texas state authorities alleged that Abra and its chief executive Bill Barhydt orchestrated the securities fraud. 

The order that identifies Abra as Plutus Financial is accused of offering investment products to investors without due accreditation of the beneficiaries.  Further, the Texas authorities accuse Abra of using deceptive financial statements when it was partially or fully insolvent by March 31 this year.

Prime Trust has been battling challenges ever since the deal to acquire it became public.  Banq, identified as its former subsidiary, initiated bankruptcy proceedings in the Nevada District Court.  The subsidiary is accused of mismanagement, a label that perhaps cost Nevada-based crypto payments platform Prime Trust the acquisition deal canceled by BitGo.  The bankruptcy filing identifies $17.72 million in assets value with liabilities estimated at $5.4 million. 

Abra would add to Prime Trust’s woes when the Texas regulators issued the cease-and-desist order on June 16.  The investment firm utilized Prime Trust as the primary custodian and is accused of perpetrating securities fraud.  At this stage, the link between Abra and Banq leading to BitGo’s decision to terminate the Prime Trust acquisition will remain speculative.

Editorial credit: Burdun Iliya / Shutterstock.com 

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