Nevada Shuts Down Fortress Trust Over Insolvency

Nevada regulators issued a cease-and-desist order dated October 22 against crypto custodian Fortress Trust, now known as Elemental Financial Technologies Inc., citing the firm as on the verge of insolvency with a liquidity position “ wholly inadequate to meet customer obligations. ” According to Bloomberg , the state’s Financial Institutions Division found Fortress owes clients more than $8 million in fiat currency and $4 million in crypto at current prices, while holding less than $200,000 in cash and only around $1 million in crypto on ￰2￱ custodian admitted it cannot meet customer withdrawal requests and failed to produce basic financial documentation, including account reconciliations and recent monthly ￰3￱ Difficulties From Previous Leadership Current CEO Anthony Botticella, who assumed the position in December 2023, stated in a signed declaration, “ I learned after assuming the position of Chief Executive Officer that the Trust was experiencing severe financial difficulties and challenges related to events that occurred prior to assuming my role. ” “ These pre-existing issues materially affected the Trust’s ability to continue as an ongoing viable entity ,” he ￰4￱ was unable to provide financial statements for July, August, or September, according to the Nevada ￰5￱ shutdown follows a troubled history for Fortress Trust, which was founded by Scott Purcell, the former CEO of Prime ￰6￱ 2023, Ripple backed out of an acquisition deal after Fortune published a story revealing that Fortress had lost nearly $15 million in a hack involving third-party vendor ￰7￱ incident occurred just 20 days after Ripple initially announced its intent to acquire the custodian, with Purcell telling Bloomberg at the time that a third-party service was breached, but his company hadn’t been directly hacked.

I can’t express enough how upsetting this Fortress Trust episode is to me. I really don’t want to talk about it at all, because it actually has nothing to do with ￰8￱ because Fortress was not forthcoming about what actually did happen, we are now indirectly affected -… ￰0￱ — Mike Belshe (@mikebelshe) September 11, 2023 $15M Security Breach The security incident in September 2023 involved San Francisco-based ReTool, a company serving Fortune 500 clients that constructed the portal allowing several Fortress clients to manage cryptocurrency ￰9￱ confirmed it fell victim to a phishing attack affecting 27 of its customers, targeting a specific group of crypto-oriented ￰10￱ attack left those who configured ReTool’s software as recommended unaffected, with the company emphasizing “ Although an attacker had access to Retool cloud, there was nothing they could do to affect on-premise customers. “ Ripple made a $15 million down payment to help Fortress reimburse affected customers as part of their acquisition ￰11￱ initially covered most affected customers, with Ripple stepping in to ensure all clients were made whole within a ￰12￱ and Fireblocks, the wallet providers used by Fortress, clarified that their systems were not ￰13￱ Bitcoin, a brokerage firm that uses Fortress’ BitGo wallets for client funds, confirmed that the coins stored in those wallets remained secure throughout the ￰14￱ CEO Brad Garlinghouse announced the company would not proceed with the Fortress Trust acquisition just 20 days after the initial announcement.

A few weeks ago, we signed a letter of intent to acquire Fortress Trust – we’ve since made the decision not to move forward with an outright acquisition, though Ripple will remain an investor in @Fortress_io. — Brad Garlinghouse (@bgarlinghouse) September 28, 2023 Garlinghouse stated that while the Fortress team was “ incredibly talented and had built products solving real customer problems ,” the company decided to retract its acquisition ￰15￱ downplayed the acquisition’s cancellation to Cointelegraph, calling it “ not a big deal ” and saying the change in plans was unrelated to the security ￰16￱ Tightens Crypto Custody Oversight The Fortress case took a similar pattern to Nevada’s earlier enforcement against Prime Trust , which lost access to more than $80 million in customer funds and was later placed into ￰17￱ served over 250,000 clients before the cease-and-desist order effectively halted its ￰18￱ regulator barred Fortress from accepting new deposits or transferring assets, mirroring prior actions taken against other failed Nevada-based crypto custodians.

Nevada’s enforcement wave has extended beyond ￰19￱ this year, a federal judge upheld a cease-and-desist order blocking Robinhood from offering sports betting-related event contracts. Robinhood, however, sues back. @federalreserve @FDICgov @USOCC issue joint statement on risk-management considerations for crypto-asset safekeeping: ￰1￱ — Federal Reserve (@federalreserve) July 14, 2025 Following these repeated oversights, the Federal Reserve, FDIC, and OCC issued updated custody guidance that requires clearer insolvency protections and disclosures regarding smart contract and blockchain risks.