Nevada Halts Fortress Trust Operations
Nevada regulators have stopped Fortress Trust’s operations due to severe liquidity shortfalls. The Financial Institutions Division (FID) issued a cease-and-desist order on October 22. The order cited the custodian’s “unsafe and unsound” business practices. Fortress, now called Elemental Financial Technologies, faces insolvency accusations.
The FID found that Fortress cannot cover client withdrawals. It owes millions to customers. The firm also failed to provide key financial reports, including reconciliations and monthly statements. The order stated, “Fortress’ liquidity position is wholly inadequate to meet customer obligations.”
More than 250,000 users are affected. These include crypto companies and digital asset retirement accounts. The regulators warned that client funds are at “immediate risk.”
Regulatory Actions and Investigation
The cease-and-desist order prohibits Fortress from accepting deposits or processing withdrawals. It also bars the company from offering custody or money transmission services. Fortress must preserve all records. The FID may impose civil penalties up to $10,000 per violation. Regulators are investigating possible fraud and mismanagement.
Fortress began in 2021 under Scott Purcell, who founded Prime Trust. Prime Trust collapsed in 2023, leaving $80 million in stranded assets. The FID described Fortress’ failures as a “textbook case of custodial mismanagement.” The firm’s rebranding did not fix its balance sheet problems. It also ignored prior regulatory warnings and failed to submit audited financial reports.
Ripple Connection and Industry Impact
Fortress previously worked with Ripple Labs and was nearly acquired by Ripple for $15 million in 2023. Ripple canceled the deal after Fortress suffered a $15 million loss from a security breach. Since then, regulators in Connecticut and Maine have increased oversight of Fortress. Nevada’s latest action adds pressure to the crypto custody sector.
This case highlights the fragility of some crypto custodians. It also shows regulators are tightening controls to protect investors from losses.
