Prime Trust, a Las Vegas-based cryptocurrency group that state financial regulators have scrutinized over millions in misplaced funds, must temporarily hand over daily operations to a third-party, according to an order from Nevada’s Eighth Judicial District Court.

John Guedry, the former CEO of the Bank of Nevada, will take over daily operations and examine the company’s finances, also known as a receivership. The court has scheduled an Aug. 22 hearing for Prime to try to prove that the receivership should not be made permanent.

Until the August hearing, Guedry is the only person who can disburse, transmit, substitute or withdraw funds from Prime accounts, according to Friday’s court order. The court also impounded all of Prime’s property, including its assets, books, papers and documents, pending the August hearing. Any person associated with Prime is also prohibited from disposing of company assets and pursuing any transaction on behalf of Prime until the hearing.

Prime’s board and its interim CEO supported the receivership last month, according to an exhibit attached to a June court filing.

Nevada’s Financial Institutions Division (FID) called for a receivership last month after it found the group’s financial situation had “considerably deteriorated to a critically deficient level.” The state claims that Prime owes its customers more than $85 million and has only around $3 million in cash on hand, meaning it will have trouble honoring large withdrawal requests from customers. The company is also in a $12 million equity deficit.

A June court filing revealed the company discovered in December 2021 that it had lost access to so-called “Legacy Wallets” — new wallets for customers to store cryptocurrency — and the cryptocurrency contained in those wallets. Prime had created those wallets because of difficulty creating new wallets on Fireblocks, a digital asset security platform that the company contracted to handle its cryptocurrency in 2019. The group then used customer money to buy back cryptocurrencies, but the company still has not been able to access the Legacy Wallets.

The FID also modified a June cease-and-desist order on Friday to reflect the conditions outlined by the most recent court filing.

Susan McLaughlin, the FID commissioner, suggested last month three people who could serve as a receiver: Guedry, Meadows Bank Director Paul Huygens, and former Bank of America, Nevada, Chief Financial Officer Arvind Menon.

Guedry retired at the end of last year after serving as CEO of the Bank of Nevada and First Independent Bank for more than a decade. As CEO, he oversaw the launch of the company’s Gaming National Business Line and Utah expansion, according to a press release. He previously worked as CEO of Business Bank of NV and the executive vice president of City National Bank.

The legal battle represents a fall from grace for Prime Trust, which last year had reported $107 million in Series B funding — the second round of funding of a new business — with plans to expand its reach. 

It’s the latest cryptocurrency bank to suffer a downfall this year, prompting increased regulatory oversight. The U.S. Securities and Exchange Commission announced this month it is separately suing Binance and Coinbase, two cryptocurrency giants.

Any Prime customers who have questions about the effects of the receivership should contact Guedry at [email protected], according to a press release.