SEC Slaps $50,000 Fine on Delaware-Based Crypto Investment Fund

On December 7, 2018, the United States Securities and Exchange Commission (SEC) issued a cease and desist order and a penalty of $50,000 against Delaware-based crypto assets fund firm CoinAlpha Advisors LLC.

SEC Hits Crypto Fund for Violating Securities Law  

According to the filing published on the commission’s website, the SEC charged CoinAlpha Advisors LLC for acting as an unregistered securities dealer. Additionally, the filing highlights that the accused company violated SEC laws by offering securities through interstate commerce.

Reportedly, CoinAlpha LLC was established in July 2017 to act as manager of the investment fund dubbed CoinAlpha Flacon LP. The fund was launched in October 2017 with the sole purpose of investing in digital assets.

From October 2017 to May 2018, the investment fund managed to raise over $600,000 from twenty-two investors spread across multiple U.S. states. As part of the investment, investors gained limited partnership interest in the crypto-focused investment fund. The SEC filing states:

“Through this offering, the investors purchased limited partnership interests in the Fund in exchange for a pro rata share of any profits derived from the Fund’s investment in digital assets.”

The order notes that CoinAlpha filed for a “Notice of Exempt Offering of Securities” a month after it was set up. However, the request for exemption was turned down by the securities regulator citing that the firm was not eligible for such an indemnity.

Additionally, the agency pointed out a number of irregularities in the CoinAlpha’s know-your-customer (KYC) system. The SEC states that the investment fund failed to ensure the status of the accreditation status of its investors.

CoinAlpha Cooperates with the SEC

Notably, CoinAlpha agreed to halt its offering after being contacted by the securities regulator in October 2018. Furthermore, the Delaware-based fund cooperated with SEC to get its website, offering strategy materials, and social media posts audited.

The commission reached an agreement with CoinAlpha by imposing a $50,000 fine and instructing the firm to reimburse all its investors, to which the company has agreed. The filing read:

“Respondent further voluntarily reimbursed all fees it had already collected, surrendered all rights to future management and incentive fees, unwound the Fund, and made payments to ensure that no Fund investor suffered a loss. During the Commission staff’s investigation, Respondent retained a third party who determined that all 22 investors were accredited investors.”

Recently, the SEC has been aggressively pursuing crypto-related firms and individuals. Just a week back, the commission fined American professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for illegally promoting crypto projects. Both celebrities paid a combined penalty of over $750,000.


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Author: Pratik Makadiya
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Don’t Be Your Own Worst Enemy When Investing

Looking for someone to blame for the not-so-stellar performance of your investment portfolio? Try checking the mirror.

 

Decisions about money aren’t always rational, even when we think we’re acting logically. Common tendencies that make us our own worst enemies when investing include: selling winning investments too soon or holding onto losers for too long, loading up on too-similar assets or failing to assess the future implications of today’s decisions.

Researchers have found dozens of unconscious biases that can drive people to make money decisions they later regret. These behavioral economics concepts include things like “anchoring” — when a specific and perhaps arbitrary number you have in mind sways your decision-making, such as selling Apple just because the company’s stock hit a round number, like $200 a share. Or, the “endowment effect” can cause you to overvalue something simply because you own it, leading you to cling to a stock that’s tanking.

Here are some common human errors in investing, with strategies to overcome them.

Pursuing past predilections

Financial institutions remind us that past performance doesn’t guarantee future results. We don’t always listen.

It’s tempting to look at a stock’s (or the broader market’s) recent performance and conclude gains will persist in the near term, says Victor Ricciardi, a finance professor at Goucher College and co-editor of the books “Investor Behavior” and “Financial Behavior.” “People take a very small sample of data and draw a major conclusion, and that’s a pretty bad pitfall,” Ricciardi says.

How to overcome it: Don’t base investing decisions solely on what’s happened in the past; think about what will drive gains in the future. When investing for the long term, prioritize selecting companies with solid long-term potential.

Diversification that’s not diverse

You may interpret diversification to mean more is better. That’s only half the story; what’s important is owning a variety of assets (both stocks and bonds) with exposure to various industries, companies and geographies.

Sometimes investors exhibit “naive diversification” by owning too-similar assets, which does little to reduce risk, says Dan Egan, director of behavioral finance and investments at robo-advisor Betterment: “People will have three or four different S&P 500 funds and think they’re diversified but don’t look at how correlated they all are.”

Similarly, many investors invest only in companies they know, which results in over-concentration in certain industries, Ricciardi says. That may mean underexposure to “the unknown” — like international stocks — which they perceive to be risky, he adds.

How to overcome it: Invest in a wide range of assets. This can easily be accomplished with a simple portfolio constructed of just a few mutual funds or exchange-traded funds.

Making emotional decisions

When money’s on the line, it’s hard not to let emotions creep into your decisions.

Prior to the 2016 presidential election, many professional investors expressed concerns about a market slump if Donald Trump won. Betterment data suggested that investors who supported Hillary Clinton might let politics shape their investment strategy — and cash out following the election, Egan says. So after the election, the robo-advisor messaged investors with information about the importance of staying invested for the long haul, he says.

On a stock-specific basis, we often let emotions dictate when to sell — not wanting to admit we made a losing bet. “People tend to sell winners too quickly when they go up and, on the downside, they hold on to losing investments too long,” Ricciardi says.

How to overcome it: Think about individual investments in the context of your entire portfolio and craft a plan for when you’ll sell that’s not triggered by short-term factors (like emotions) alone.

Focusing on today

It can be difficult to see the value of saving money for tomorrow when there’s so much to spend it on today. That myopia can make investors either too active or too passive.

If you’re too passive, you may avoid regular check-ins on financial health and stick with a status quo that doesn’t properly prepare for the future, Ricciardi says. Meanwhile, being too active can drive up trading expenses, resulting in lower returns, he adds.

How to overcome it: Let the numbers do the talking. Sit down with a retirement calculator when charting your investing journey. Make sure you fully understand the tax implications and costs associated with selling investments.


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Author: Anna-Louise Jackson
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Are You Ready To Support Cryptocurrency? Here’s What You Need To Know

In July I talked about how easy it can be to add cryptocurrency to your business with the help of NASGO, a company helping businesses, sports influencers, musicians and many others to tokenize their businesses with features for point of sale, closer communication for customers, social media, tokenized loyalty programs, and as a means of supporting humanitarian causes.

As I write, the first musical performers, for example, including Jaafar Jackson (nephew of Michael Jackson), emerging vocalist Makela and Cali Tucker, who you may recall from The Voice, are tokenizing their musical releases. Other artists are moving this direction as well, which could turn the music recording industry on its head.

These decisions seem obvious and easy. But what’s less easy, as you get more deeply involved in tokenization, are the issues of cryptocurrency and taxation. Get this: the U.S. government’s investment in blockchain analysis companies has more than tripled since early 2018. So far, that investment totals $5.7 million, with the IRS leading the way.

So you can guess where the challenge is leading. If you are transacting in cryptocurrency there are tax ramifications that you need to know. Important in this is understanding, according to NASDAQ, the IRS’ definition of cryptocurrency. If you are tokenizing your business to provide marketing and branding benefits to your customers, you’re home free, as far as the IRS is concerned. But if you are using cryptocurrency as actual currency (investing, accepting tokens as payment and moving between wallets and types of coin) you need to report these transactions to the IRS and if you fail to do so, in the worst case could be convicted of tax evasion, charged a penalty of $250,000 and sentenced to jail.

However, a company I’ve become aware of recently, ProfitStance, is working to alleviate this concern with a SaaS-based platform built by crypto investors to answer the taxation concerns of investing—record keeping and accounting of every transaction to ensure full compliance and eliminate the work (and the potential mistakes) in tax calculations. The developers of this extensive platform have provided support for all exchanges and wallets to make it easy to track every transaction (including investment, a purchase using cryptocurrency, or moving cryptocurrency between exchanges).

Pricing for the program ranges from free, for portfolio viewing and preparation of a 1099, to basic or premier retail service for $70-$600 per year to $2,600 for an enterprise/financial services organization.

Finally, as you guide your company into crypto, here are several other tidbits you may find helpful as well. The first is The Pareto Network, a peer-to-peer financial content marketplace for the digital currency sector that connects providers of financial information in the sector with investors, giving foresight into market inefficiencies and opportunities. The Pareto token has a unique classification that can count as a tax-deductible expense. That means the cost for Pareto tokens you hold on your balance sheet as an asset can be partially recouped or sold as profit.

Finally, another good news item. If you invested in Bitcoin in 2017 and have been stung by losses this year: You can use those losses to offset other types of capital gains, with any amount over $3,000 being rolled forward to the following year. So if this deduction applies to you, be sure you remember to take it.


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Author: David K. Williams
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What cryptocurrency could mean for your business

Interest in cryptocurrency among consumers, businesses and everyday investors skyrocketed in 2017 as the price of Bitcoin rose from under $1,000 per coin to nearly $20,000 over the course of 12 months. Of course, today the price has leveled off to a degree, and a host of new blockchain-based currencieshave been launched and continue to be developed, some with very specific transactional and investment goals, including the promotion of social causes.

As cryptocurrencies evolve and their number expands, online retailers both large and small in the U.S. and globally are left to evaluate whether they should jump onboard this semi-regulated digital train, and if so, how.

At the same time, other kinds of organizations, from financial management businesses to non-profit fundraising groups, are examining the best way to integrate cryptocurrency use into their operational strategies. Individual investors, as well as businesses aiming to invest their assets, are also taking a closer look.

How can you determine if your company should embrace this new frontier? Perhaps the best way to start is by examining how cryptocurrency might impact your business’s bottom line. Here is a closer look at some key areas where digital currencies offer potential benefits and risks.

Reduced transaction fees

If your company is contemplating accepting cryptocurrencies (either one particular currency or multiple forms) in exchange for your products or services, one potential bottom line benefit is that there will generally be no direct processing fees. Unlike with credit card transactions, where banks serve as intermediaries and charge a fee, cryptocurrencies are decentralized, which means that transactions have no third-party involvement.

Coins and tokens are not developed or controlled by a single authority, like fiat money that is issued by a sovereign government, but instead work directly through blockchain technology. If you are a merchant selling online, you will, however, likely be charged a small flat fee for your merchant wallet account or accounts, like BitPay or CoinPayments, which allow you to accept certain cryptocurrencies.

Faster payment

Cryptocurrency transactions happen almost immediately, unlike credit card payments that may take days to clear. As a result, you will have access to the coin payments in minutes. Sales are also final, which means that charges cannot be negated after the fact. All of this translates into more financial security for your business.

Improved customer access

With more consumers and business customers showing interest in cryptocurrency, offering coin payment options may increase your audience of buyers. Certainly, because digital currency is non-governmental, it is by definition international, which means that your business could see an increase in global clientele, especially as use grows. Cryptocurrency of course has no exchange rates or fees across borders, and so is theoretically the perfect way to conduct global business.

Currently, fewer B2B organizations, including professional service companies, and more B2C businesses are accepting or paying with cryptocurrency, but this trend is likely to change as the marketplace evolves. Ultimately, by simply accepting cryptocurrency payments, you may boost your bottom line as you attract new customers.

Volatility in value

Cryptocurrencies are notoriously volatile, which makes them attractive to investors seeking high reward through elevated risk, but also potentially dangerous for businesses that accept them as payment. Imagine if a customer pays you in Bitcoin, and then after the transaction the value crashes – which it has been known to do across the hundreds of coins now used.

For many merchants, the volatility issue is muted by the fact that merchant wallet accounts offer immediate conversion to fiat money. Unless a crash occurs within the confines a few seconds between a payment being made and accepted, most companies are protected from volatility. For this reason, most do in fact choose to automatically convert payments to fiat. Companies that keep payments and revenue in the form of cryptocurrency are essentially taking the risk that comes with coin investment.

Lack of regulation

Cryptocurrency is still relatively new, and as a result, governments around the world have issued limited, and differing regulations. Some nations, especially the small country of Lichtenstein, have aggressively moved to embrace and promote cryptocurrency with financial incentives designed to build stability and regulatory assurance for those that use and invest in coin.

But overall, a general lack of regulations, including here in the U.S, can mean uncertainty for business that deal in cryptocurrency, including uncertainty about what kinds of taxes and investment limitations may be imposed in the future.

Taxation and accounting challenges

Companies that accept or invest in cryptocurrency will need to make the effort to understand the changing regulatory environment, and will also need to factor in the tax and accounting tasks that will be required of them.

In 2014, the IRS released IRS Notice 2014-21, which declared that for U.S. income tax purposes, a cryptocurrency is property and not a currency. Depending on the facts, that means the character of the cryptocurrency could be business property, investment property, or other property. Therefore, the general U.S. tax principles that apply to any property transaction should be applied to exchanges of cryptocurrencies.

Cryptocurrencies held for investment and sold for a gain are subject to short-term or long-term capital gains tax. Conversely, those investment-held cryptocurrencies sold for a loss are able to utilize a capital loss. The IRS notice does not, however, resolve all issues related to reporting requirements or taxation. Some of the unresolved issues include foreign account reporting, cryptocurrency as “like-kind” exchanges, and taxation of crypto-forks.

To keep track of the complex and evolving regulatory environment, and to understand the full range of financial implications of using, accepting or investing in cryptocurrency, you would be well-advised to start by talking to your financial and tax advisors today.


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Author: Tony Argiz and Erick Wendelken
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NAFTA deal close, Pence tells reporters

A deal on the North American Free Trade Agreement (NAFTA) could be reached within the next several weeks, Vice President Mike Pence told reporters while in Lima, Peru, for the Summit of the Americas.

Pence said he was “very hopeful” that Mexico, Canada and the U.S. were close to an agreement on the negotiated trade pact.

The decades-old trilateral trade agreement has been a frequent target of President Trump, who has criticized large trade deficits the U.S. has with Mexico and Canada, as well as the relocation of American jobs and companies.

U.S. goods and services trade with Mexico totaled an estimated $616.6 billion 2017, with a trade deficit of $64.1 billion.

Talks on how to revamp the 1994 treaty began almost immediately after Trump took office a year ago. He warned that if it could not be overhauled to better protect U.S. interests, Washington would pull out of the pact. Both Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto have argued against scrapping the $1.2 trillion deal.

U.S.-Mexican trade has grown rapidly since NAFTA, with the U.S. as Mexico’s leading partner in merchandise trade, and Mexico as the third-largest trade partner of the U.S. If Trump were to scrap the deal, experts say that it could cost Mexico more than 950,000 low-skilled jobs and lower its GDP growth by 0.9 percent.


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A Virginia retailer built a $33 million business on Amazon and pickleball

Little Alexandria-based Amify is the 21st-century version of the thousands of enterprises that thrived around the railroads 150 years ago. Meatpackers, farmers and mail-order retailer Montgomery Ward are just a few examples of businesses that reached customers through the railroads.

Instead of railroads, Amify has latched onto retail super tanker Amazon.com, which has redefined how people today buy just about everything.

Amazon.com (founded and chaired by Washington Post owner Jeff Bezos) just last month became the second-most-valuable company in the world, behind Apple.

Amify is one of about 3 million “third-party sellers” that use the Amazon.com platform to sell their products, paying a 15 percent commission to Amazon in return. Ethan McAfee, 41, Amify’s founder and sole owner, wants to capitalize on Amazon’s growing dominance and seize what he believes is a rare opportunity.

“We think there is a land rush going on,” McAfee said. “We have all these tail winds pushing us along. We are trying to grow this baby, hitting the accelerator and taking a long-term vision.”

Amify’s niche amounts to a tiny slice of the Amazon juggernaut. The Seattle-based giant sells an estimated $330 billion in merchandise each year — about two thirds of which is sold by renters such as Amify.

McAfee expects to generate revenue of $33 million this year on 600,000 orders for Asics shoes, high-end Fender guitars (they expect to sell 8,000 this year), and binoculars and telescopes made by Vortex Optics, to name a few of his 350 sources.

About 90 percent of Amify’s revenue comes from being a third-party seller. The rest comes from Amify’s “value add.” That means coaching clients on how to sell more through better-looking web pages, buying Amazon advertising and combating counterfeiters.

Amify’s secret sauce is knowing which products to make money on, McAfee said. “The higher-price points usually have a higher margin than low-price points. It’s harder selling a $15 item,” he said, “but with a $100 item, you can probably do it and make a profit. You can use technology to figure out which ones are the best bets.”

Amify’s biggest costs are the goods it buys and then resells on Amazon, and its labour force. The usual profit for a retailer is 3 percent to 5 percent of gross sales, which would put Amify’s profits in the neighbourhood of $1 million this year. McAfee said he is ploughing every cent of profit back into the business, adding to its sales team, opening up a second warehouse in Las Vegas to lower shipping costs, and hiring technology people to expand its consulting business.

“We tell brands to work with us, and we will help you sell more products, clean up your Amazon channel and maximize it,” McAfee said of the consulting business. “We help increase their selection and give good products at quality prices. They know they need an Amazon strategy.”

The company has been growing fast and is one of the largest in the third-party Amazon market. Most competitors are smaller mom-and-pops, so Amify uses its relative size to create its own technology, which it sells in its consulting practice.

Amify has a payroll of 42 people, 30 full-timers in the United States and 12 outsourced full-timers in the Philippines.

Amify has been profitable since McAfee started the business as Pickleball Direct in 2011 in a rented townhouse in Arlington. Pickleball is a game played with paddles, similar to tennis and badminton but requiring less running, which makes it popular among retired baby boomers.

McAfee graduated from Virginia Tech with a degree in accounting information systems. He was hired at Baltimore-based asset manager T. Rowe Price, where he helped pick stocks for the firm’s $5 billion science and technology fund starting in 1998, which was near the apex of the dot-com era.

“I was the low person on the totem pole,” he said. But he closely followed the start-ups that promoted themselves to T. Rowe as they were going to the public markets. He got a close look at many of the winners and losers from that era. He sat in on meetings with some of the biggest technology names, including former eBay founder Pierre Omidyar and its then-chief executive Meg Whitman, and Mark Cuban, who was promoting his start-up Broadcast.com.

“Meg was polished,” he said. “A lot of internet entrepreneurs, as they are today, were young people wearing hoodies. So a polished person really strikes you as impressive.”
His few years at T. Rowe Price in his early 20s helped him develop an eye for spotting the fake companies from the real thing.

“We were trying to pick what would be the real businesses that would survive the dot.com explosion that we knew was going to happen,” he said. “The good ones would probably go down 70 percent, but the bad ones would go down 100 percent.”
He left T. Rowe Price in 2001 and joined a hedge fund in northern Virginia headed by Russ Ramsey, one the founders of Friedman, Billings & Ramsey, an Arlington-based asset manager.

“It was my job to help figure out what we were going to invest in,” McAfee said. “This was 2001, after the internet bubble had burst, and the idea was that there were going to be a whole bunch of internet companies that you could buy for pennies on the dollar. We did pretty good.”

He stayed until 2009, earning enough money to take a year off. He got a master’s at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University and figured out his next move.

His eye for internet survivors steered him toward Amazon, which had survived the blow-up, and at a far cheaper price for its stock.

“I saw something, it seems obvious now,” he said. “Amazon was getting bigger and bigger.”

The more he thought about it, the more he realized Amazon was dramatically altering the retail landscape.

“Retailers only would sell things that are really profitable and that would sell a lot,” he said. “Retailers didn’t want to stock your niche products. The internet changed all that. You could now go to the internet and buy any product you wanted.”

So, as crazy as it sounds, around 2010 he started selling pickleball paddles.

“My parents played this down in Florida, and they said ‘We can never find the equipment,’” McAfee said. “At the same time, I was looking to start selling stuff online.” It was love at first pickleball sight.

McAfee chose pickleball paddles for his test run on selling niche products on the internet because he could buy them in small batches, instead of thousands at a time.
He ran Pickleball Direct out of a bedroom in his Arlington townhouse. For the next two years, Pickleball Direct expanded into tennis shoes, hockey skates, roller skates and sunglasses.

His homeowners association evicted him after seeing the pallets full of sporting goods dropped at the townhouse driveway. He moved to an Old Town Alexandria storefront in 2013 and began hiring people and turning his project into a real business. Revenue went from $300,000 to $1.2 million to $5 million, $10 million and, last year, $25 million. He made the Inc. 500 list twice.

Last year, McAfee changed the name to Amify, which is a combination of Amazon and amplify. He also moved Amify into larger offices. McAfee’s office is just a pickleball’s whack from the Potomac River.

Now that is not a 19th-century diversion.


 

Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author  Thomas Heath

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