Nevada financial regulators are taking action against the Las Vegas-based cryptocurrency group Prime Trust, ordering it to shut down and calling for the immediate appointment of a third party to oversee the trust’s operations — an arrangement known as receivership.

The moves from the state’s Financial Institutions Division (FID) come as officials said last week that the company’s financial situation “has considerably deteriorated to a critically deficient level.” Officials said in a court filing on Monday that the group owes its customers more than $85 million and has only about $3 million in cash on hand. That means Prime Trust is unable to honor large withdrawal requests from customers.

The legal scrutiny represents a fast fall for Prime Trust, which just last year had reported $107 million in Series B funding — the second round of funding of a new business — with plans to grow its reach. In November, CEO Tom Pageler was fired, and in January, one-third of its staff members were laid off.

The court filing in Clark County District Court revealed that Prime Trust learned in December 2021 that it had lost access to so-called “Legacy Wallets” 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 Prime contracted to handle its cryptocurrency in 2019. The group then used customer money to buy back cryptocurrencies, and the company still has not been able to access the Legacy Wallets.

The company is also in a $12 million equity deficit, according to Monday’s court filing. Nevada officials asked the court to ban Prime from discarding any of its assets and conducting transactions. 

“Respondent has materially and willfully breached its fiduciary duties to its customers by failing to safeguard assets under its custody,” a FID court filing read last week.

Prime’s board and interim CEO also supported the receivership, according to an exhibit attached to the court filing.

Sandy O’Laughlin, the FID commissioner, suggested three people who would be qualified to serve as receiver: John Guedry, the former CEO of the Bank of Nevada; Paul Huygens, director of Meadows Bank; and Arvind Menon, former CFO of Bank of America, Nevada.

Bitgo, a cryptocurrency assets company, announced last week that it had terminated plans to acquire Prime Trust.

Prime Trust is the latest cryptocurrency bank to suffer a downfall this year. Economic groups including the International Monetary Fund have also implored regulators to act faster and stronger to rein in the volatile industry. 

Regulators have increased oversight efforts into cryptocurrency in recent years. The U.S. Securities and Exchange Commission announced this month it is separately suing Binance and Coinbase, two cryptocurrency giants.