Fortress Trust LLC - Consent and Cease and Desist Order

October 15, 2024

IN RE:

Fortress Trust LLC
10845 Griffith Peak Drive, Suite 200A
Las Vegas, Nevada

Docket # 2024-04

NOW COME the Parties and agree as follows:

  1. The State of Maine, Bureau of Consumer Credit Protection ("the Bureau") administers the state's Money Transmitters Act, ("the Act") 32 M.R.S. §§ 6101 et seq., and rules promulgated under the authority of the Act, including its requirements for licensing.

  2. The Bureau has authority pursuant to 10 M.R.S. § 8003(5) to take disciplinary action and enter into consent agreements with applicants and licensees, including the imposition of periods and terms of probation.

  3. Maine law requires that entities engaged in money transmission maintain at all times a net worth of not less than $100,000 calculated in accordance with generally accepted accounting principles. 32 M.R.S. § 6105.

  4. In addition to the authority provided in 10 M.R.S. 8003, Maine law provides that an administrator may suspend or revoke a licensee's license if the administrator finds, among other things, that the licensee's net worth has become inadequate, that a fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying that license, and that the licensee fails to promptly and adequately respond to communications from the administrator. 32 M.R.S. § 6116(1, 2, and 9).

  5. Fortress Trust LLC ("Fortress") has been licensed to engage in the business of money transmission in Maine since September 1, 2022. Fortress's NMLS license number is 2318097.

  6. On November 30, 2023, Fortress applied for renewal of its money transmitter license to engage in the business of money transmission in Maine for the calendar year, January 1, 2024, through December 31, 2024. Such renewal application was denied and Fortress timely appealed from that denial.

  7. On March 31, 2024, Fortress provided audited financial statements for 2022 - 2023 which indicated a net worth of -$14,743,665 and a net loss of -$18,992,142.

  8. Fortress indicated that this negative net worth was due to a promissory note held by Ripple Labs, Inc.

  9. On June 3, 2024, the Bureau served Fortress with a preliminary denial of its renewal application.

  10. On July 1, 2024, Fortress appealed. Fortress indicated that on May 31, 2024, its parent company, Elemental Financial Technologies, Inc f/k/a Fortress Blockchain Technologies, Inc. ("Elemental"), reportedly assumed responsibility for the promissory note of $15,000,000 plus interest to Ripple Labs, Inc.

  11. Fortress's net worth remained below $100,000 for approximately nine (9) months, until Elemental reportedly assumed responsibility for the Promissory Note.

  12. On July 3 and July 25, 2024, the Bureau requested, but Fortress did not provide the requested financial information, including without limitation audited financial statements, regarding the financial health of Elemental.

  13. On August 26, 2024, a Notice of Hearing ("Notice") related to the Bureau's Denial of Fortress's Money Transmitter Renewal Application was served on counsel for Fortress.

  14. The Bureau alleged in the Notice that Fortress failed to maintain the minimum net worth required of money transmission licensees, in violation of 32 M.R.S. § 6105(1), failed to continue a required surety, and failed to provide information requested by Bureau staff.

  15. The parties are entering into this Consent Order in order to economically and efficiently resolve the pending dispute regarding Fortress' renewal application.

NOW, THEREFORE, the parties agree to the following resolution:

  1. The Bureau agrees to withdraw as grounds for disciplinary ground the allegation regarding lack of proof of ongoing surety bond.

  2. PROBATION. Fortress agrees that its license to operate as a money transmitter shall be probationary for no longer than sixty (60) days from the effective date of this Order or the date or when the last Maine client, customer or user has departed its platform or reduced its account to zero, whichever is earlier. During the period of probation, its license shall be subject to the following conditions:

    1. Except as necessary to permit customers client or users to move their assets out of Fortress's platform, Fortress shall not engage in money transmission services in Maine.

    2. Fortress shall require and allow its existing Maine clients, customers, and users to transfer their funds out of Fortress for the sole purpose of closing their Maine accounts or reducing their balance with Fortress to zero. Funds that are not withdrawn in a timely fashion shall be presumed abandoned as of 60 days following the effective date of this Consent Order. Within 15 days following the effective date of this Order, Fortress shall file a report required pursuant to 33 M.R.S. 2091, reporting to the administrator, for any such property presumed abandoned. Prior to the time of filing such a report, Fortress shall provide Notice to any apparent owners pursuant to 33 M.R.S. 2101, per the timeframes as required by statute. Fortress shall deliver any such abandoned property, converted to dollars, to the administrator. Fortress's duties under this paragraph are more fully set forth in the Maine Revised Unclaimed Property Act, Title 33, ch. 45 and related rules.

    3. Fortress is prohibited from opening new accounts for Maine clients, customers, and users during the probationary period.

    4. Fortress agrees to not accept any new funds from new or existing Maine clients, customers, or users during the probationary period.

  3. Fortress shall voluntarily surrender its money transmission license at the conclusion of the probationary period or the date that the last Maine client, customer or user reduces its account(s) to zero leaves the Fortress platform, whichever is earliest.

  4. Fortress seeks dismissal of its appeal from denial of licensure without further findings.

  5. Fortress agrees not to seek re-licensure until it secures and provides to the Bureau an independent financial audit along with a license application and relevant fees. Fortress further agrees that it will provide additional information pursuant to Bureau staff reasonable requests regarding its financial safety and soundness.

  6. Fortress shall pay to the Bureau investigative costs in the amount of $3,000 for hearing preparation and negotiation of this agreement. The payment for such costs shall be made out to the "Treasurer, State of Maine" and mailed to 35 State House Station, Augusta, ME 04333.

  7. Fortress and the Bureau agree that this Consent Order settles all matters contained herein, and the Bureau agrees that it will not bring any further action against Fortress with respect to any alleged net worth deficiency for the 2024 licensure period. However, this Order shall not bar further action by the Bureau with respect to complaints received by the Bureau to the extent the complaint alleges actual damage to a user of the service, but the relief sought by the Bureau in such action shall be limited to redress of the complainant's damages and actual costs of the Bureau in resolving any dispute. Fortress agrees that this Consent Order may be used in a future proceeding before the Bureau.

  8. This agreement shall not limit in any way action the Bureau may take against Fortress for any violations of the terms of this Consent Order or applicable law in the future.

  9. Fortress hereby knowingly, willingly, voluntarily and irrevocably consents to the entry of this Order and agrees that it understands all of the terms and conditions contained herein. Fortress, by voluntarily entering into this Order, waives any right to a hearing or appeal concerning the terms, conditions and/or penalties set forth in this Order.

  10. This Order contains the entire agreement between the Bureau and Fortress. There are no other terms, obligations, covenants, representations, statements, conditions, or otherwise, of any kind whatsoever concerning this Order. This Order may only be amended in a writing signed by the Bureau and Fortress.

  11. This Order is entered into by the parties with full opportunity for legal advice from counsel.

  12. Fortress's representative, by consenting to and approving this Consent Order, hereby represents and warrants that the representative has full power and authority to consent to and approve this Consent Order for and on behalf of Fortress, and further represents and warrants that Fortress agrees to be bound by the terms and conditions of this Consent Order.

  13. Nothing in this Consent Agreement shall be construed to affect any right or interest of any person not a party hereto.

  14. This Consent Agreement may be signed in counterparts, and all counterparts together constitute one original instrument. Signatures below may be applied and/or saved electronically, with such electronic signatures and this entire document being saved electronically and given the same effect as a paper document signed in ink.

  15. Fortress acknowledges and agrees that this Order is binding only upon the Bureau and not any other local, state or federal agency, department or office regarding matters within this Order.

  16. The effective date of this Order is the date that the administrator signs below.

Dated: 10/10/2024

Signed by: /s/Anthony Botticella
Fortress Trust LLC.
By (print name): Anthony Botticella
Its: CEO

Dated: 10/15/2024

/s/Linda Conti
Linda Conti, Superintendent
Bureau of Consumer Credit Protection

Attachments

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