On October 22, 2025, the Nevada Department of Financial Institutions issued a cease-and-desist order against Fortress Trust, now known as Elemental Financial Technologies Inc., effectively shutting down the crypto custodian. Regulators found the company on the verge of insolvency, with a liquidity position “wholly inadequate to meet customer obligations”.
The state’s investigation revealed a severe financial shortfall. Fortress owes its clients over $8 million in fiat currency and $4 million in crypto assets, but holds less than $200,000 in cash and only about $1 million in crypto on hand to meet these obligations. The company acknowledged it could not fulfill customer withdrawal requests and had failed to produce basic financial documentation for the months leading up to the order.
A Pre-existing Condition
The current CEO, Anthony Botticella, stated that upon assuming his role in December 2023, he discovered the company was already experiencing “severe financial difficulties” stemming from events that occurred under prior management. This financial distress was not a sudden collapse but the result of pre-existing issues that “materially affected the Trust’s ability to continue as a going viable entity”.
This isn’t Fortress Trust’s first major public incident. The company’s troubles became public in September 2023 when a security breach through a third-party vendor, ReTool, led to losses of between $12 million and $15 million. At the time, Ripple stepped in with a $15 million payment to cover the losses as part of an announced acquisition deal. However, Ripple backed out of the acquisition just 20 days after it was announced.
The Bigger Picture for Crypto Custody
The failure of Fortress Trust is a stark reminder of the risks in the digital asset space and underscores why regulators are intensifying their focus. In the wake of such failures, there is a growing push from traditional financial institutions for stricter rules. Banks are urging the SEC to ensure that all crypto custodians adhere to the same rigorous standards they do, which include the segregation of client assets, and the separation of custody from other financial activities. These proven safeguards are designed to prevent the commingling of funds and simplify asset recovery if an institution fails.
Simultaneously, regulators are already adapting. The SEC’s recent no-action letter provides a pathway for state-chartered trust companies to serve as crypto custodians, but only if they meet stringent conditions, including robust auditing, segregation of customer assets, and strong cybersecurity controls. This move signals a shift towards more structured oversight while acknowledging the growing need for regulated digital asset services.
The closure of Fortress Trust serves as a critical lesson on the importance of financial integrity and robust, independent custody in the crypto world. For customers and investors, it highlights the necessity of choosing providers that not only have strong security but also demonstrate transparent financial health and adherence to evolving regulatory standards.
