Background: Trust fuels team performance and contributes to build an effective and cohesive team. The self-organizing and collaborative nature of Agile teams increases the importance of trust in software development teams. Trust is, however, affected in distributed teams. Aim: Through a Grounded Theory study we investigate the impact of trust in distributed Agile teams. Method: We interviewed 45 Agile practitioners from 28 different software companies in the USA, India and Australia, over a period of 3 years, using semi-structured open-ended questions. Results: In this paper, we present the reasons for lack of trust and its adverse effects in distributed Agile teams that emerged from the analysis, using the causal-consequences theoretical model. Conclusion: Understanding the causes and consequences of lack of trust can develop awareness of the importance of trust in distributed teams and pave ways for effectively building trust in project-oriented contexts.