How to Not Lose Your Crypto

In today's Masters Series, adapted from a two-part series in the June 6 and June 7 Digests, Corey explains why the U.S. Securities and Exchange Commission is cracking down on cryptos right now... details the potential outcomes of these lawsuits... and reveals how crypto investors can protect their assets as these cases unfold... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Master Series] Editor's note: Don't let the government's scare tactics ruin your portfolio... The cryptocurrency market has faced heightened tensions recently as the U.S. Securities and Exchange Commission's lawsuits against Binance and Coinbase play out. But these legal battles can't stop investors from shielding their portfolio holdings... That's why Stansberry Digest editor Corey McLaughlin says it's important for crypto investors to understand how to protect their assets in order to weather this chaotic market. In today's Masters Series, adapted from a two-part series in the June 6 and June 7 Digests, Corey explains why the U.S. Securities and Exchange Commission is cracking down on cryptos right now... details the potential outcomes of these lawsuits... and reveals how crypto investors can protect their assets as these cases unfold... --------------------------------------------------------------- How to Not Lose Your Crypto By Corey McLaughlin, editor, Stansberry Digest The U.S. Securities and Exchange Commission ("SEC") is taking on Coinbase (and a bit more)... The SEC recently filed a 101-page lawsuit against U.S. crypto exchange Coinbase (COIN). The SEC alleges that the company has been operating as an "unregistered broker" since at least 2019. This lawsuit is specific to Coinbase, the largest crypto platform in the U.S. But the outcome of this litigation will likely have a much wider and longer-lasting influence. This is large-scale stuff... and has been coming for a while. Longtime readers might remember our discussion in 2021 about what whiskey barrels in the 1970s, gift cards today, and crypto might have in common... Specifically, the SEC named 13 cryptocurrencies – not including bitcoin (BTC) or Ethereum (ETH), notably – that it says Coinbase offers and sells "as investment contracts, and thus as securities." That would put the company in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the suit therefore seeks to force the platform to stop offering these cryptos. In an interview earlier this month on CNBC, SEC Chair Gary Gensler suggested that he's thinking about all crypto exchanges when filing the suit... These trading platforms, they call themselves exchanges, are commingling a number of functions... We don't see the New York Stock Exchange operating a hedge fund. That last part could be taken as an obvious reference to FTX... That's the exchange once run by Sam Bankman-Fried, which had allegedly taken customer deposits to fund speculative investments and other nefarious things. But here's what Coinbase says in its defense... Coinbase has long contended that the U.S. needs clarity around crypto rules, a statement that its CEO Brian Armstrong made again on June 6. He said the company has actually tried to register as a broker and met with the SEC 30 times in 2022 to ask for policy guidance. Armstrong wrote on Twitter that day... Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it. Btw, in case it's not obvious, the Coinbase suit is very different from others out there – the complaint filed against us is exclusively focused on what is or is not a security. And we are confident in our facts and the law. Armstrong also said this is why Congress "is introducing new legislation to fix the situation, and the rest of the world is moving to put clear rules in place to support this technology." In fact, just a few weeks ago, a massive draft bill was introduced in the House of Representatives that aims to govern the so-called crypto "Wild West" right now. This includes creating official definitions of crypto terms, like the blockchain itself. First off, this news came a day after the SEC filed a separate suit against Binance, the world's largest crypto exchange, and its founder, Changpeng Zhao. (Ironically, he's the guy who started Bankman-Fried's fall from grace by calling him out on cozying up to U.S. regulators.) In the suit against Binance, which is a bit longer at 136 pages, the SEC similarly considered several crypto coins as securities. It was also more critical of Binance than Coinbase, alleging in the second sentence of the filing that Binance's leaders "enriched themselves by billions of U.S. dollars while placing investors' assets at significant risk." This lawsuit against Coinbase doesn't read as strong, but it's still significant. It seems to be more about the SEC taking its biggest step yet into the conversation about what it considers securities in the cryptocurrency world. According to this suit... This includes, but is not limited to, the units of each of the crypto asset securities... with trading symbols SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO... The SEC also raised concerns about Coinbase's "staking" offers. That's where owners of certain cryptocurrencies agree to lock up their cryptos on a blockchain network for a set period of time in exchange for a reward. The feds aren't happy with how Coinbase goes about it... For example, the company offers a "pro rata" return on staked coins and charges a 35% commission on staking rewards from crypto coins Cardano and Solana. The SEC says this means Coinbase's staking program is a "common enterprise" and users are entering an "investment contract" – making these coins a security. And, more broadly, the SEC says that Coinbase acts as a broker, exchange, and clearing agency all wrapped into one... Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets. All the while, Coinbase has earned billions of dollars in revenues by, among other things, collecting transaction fees from investors whom Coinbase has deprived of the disclosures and protections that registration entails and thus exposed to significant risk. So I checked in with Crypto Capital editor Eric Wade to get his initial thoughts on the news for all Digest readers. He told us the suit against Coinbase seems to be aiming in two directions: at coins that either pay a staking yield or can earn a yield by being lent out and, separately, the "unregistered securities." As Eric said... Both are somewhat low-hanging fruit because the SEC hasn't really defined the rules, other than saying that their existing rules are all that anyone needs to know. (The crypto industry mostly disagrees and wants to fight this fight.) But there's more to this one, and from our side (crypto industry) Gary Gensler looks like he's overreaching or trying to force the issue that he's in charge, when that is actually not entirely clear. What I mean by that is the SEC approved Coinbase's public listing not long ago! That is a great point that struck me too while reading the lawsuit. Coinbase is a publicly traded company under SEC approval... Yet apparently, this company has been acting as an unregistered broker for at least four years and has been making "ill-gotten gains," as the suit suggests. The suit will likely drag on for a while until its conclusion... and, based on similar situations we've seen between the SEC and crypto platforms over the past year or so, there will be consequences for crypto holders in the meantime. With this in mind, I want to share some more context and an urgent precaution that anyone who has ever bought a cryptocurrency should take. --------------------------------------------------------------- Recommended Link: [Get Ready for FedNow on July 1]( Beginning July 1, the U.S. dollar is officially "going crypto." If you get positioned BEFORE July 1, you could make 3,050% on the U.S. dollar's biggest innovation in 51 years. [Click here to learn more](. --------------------------------------------------------------- Coinbase is the biggest name in the U.S. crypto space, so the SEC taking it on is getting a lot of attention... But the regulatory agency has been essentially knocking off smaller crypto exchanges one by one over the past year or so. The SEC has previously moved against lesser-known operations like Kraken, Genesis, and Gemini Trust, charging them with offering unregistered securities and changing their businesses forever. In February, the Kraken exchange agreed to pay $30 million in penalties and shut down its "staking" business... Genesis, a crypto lending firm, filed for bankruptcy in January... And Gemini Trust, founded by the billionaire Winklevoss twins, has shifted its focus to trading outside the U.S. This isn't exactly new, though... Stansberry Research analyst Andrew McGuirk works closely with Eric. Andrew said that the whole situation with Coinbase reminded him of what happened recently to another crypto exchange, Bittrex... Essentially, Bittrex saw the writing on the wall with Gary Gensler's SEC regime and knew that regulation was coming – so the company tried to create a dialogue with the agency in an attempt to change its operations to fit the SEC's view of securities laws. Well, the SEC wasn't exactly ready for that dialogue, and instead of giving Bittrex an opportunity to comply with the laws, the agency came down with the regulation hammer and ordered [it] to pay a fine it couldn't afford – ultimately leading to the bankruptcy of its U.S. operations last month. Coinbase has similarly been trying to play things "by the book," Andrew says. But it's clear to him the SEC is not willing to engage in dialogue... Instead, it's quick to "regulate by enforcement." With this in mind, I want to share one big idea with all readers today: If the SEC is successful in its case, it's quite possible that Coinbase could go bankrupt, as other crypto platforms have over the past year or so. As Andrew notes... Increased regulation could lead to a huge drop in activity on the platform, which directly affects Coinbase's profitability. Given that the company has over $3 billion in debt and the company currently operates at a loss, this could lead to a heavy strain on Coinbase's liquidity in the short run and solvency in the long run. The "ill-gotten gains" that the SEC is charging Coinbase with making from 13 cryptocurrencies in question since 2019 could amount to more than $6 billion. Balance that with Coinbase's $5 billion in cash and more than $3 billion in debt, as of the first quarter of this year, and you have a bad situation for the company. It could require a cash infusion or a settlement with the SEC to remain in business. The flip side of this is unlike the other crypto exchanges that have come under attack, Coinbase is an SEC-approved publicly traded company and will likely put up a good defense in court... For how long it will fight, though, we don't know. Nor can we say what the platform will look like at the end of this litigation. No matter what happens, here's what I want to really emphasize today... If things go the bankruptcy route, or even if they don't, this situation could entangle crypto holders on Coinbase in a long legal process without access to their deposits. That's what users of BlockFi, Celsius, and other crypto platforms have dealt with for about a year – a problem that remains unresolved. So, here is a reminder... We've talked about the importance of "self custody" of cryptocurrency in the Digest before. But with more eyeballs on this story now, it's worth repeating... Platforms like Coinbase have made it easy to "buy" and exchange cryptocurrencies. And because it's easy and it makes intuitive sense to do so, many customers keep their crypto money right there in their Coinbase accounts. But if your crypto assets are on Coinbase, you don't really own them. They can easily get tangled up in a crypto exchange's legal or financial troubles. For example, on June 5, the SEC filed a court order requesting that Binance.US, the American division of Binance, freeze all its assets. That's why you should use a self-custodial wallet... This has been standing advice for subscribers to Eric's Crypto Capital and Crypto Cashflow publications as long as they have existed. As Andrew told us... If your money is on an exchange and the exchange goes under, often it's a long and arduous process to ever see even a portion of that money again. So the best way to protect yourself would be to use self-custodial wallets like Exodus, Ledger, MetaMask, or Trezor, among others. Fortunately, it's not that difficult to put this guidance into action. You can use one of the wallets mentioned and move your crypto holdings to it in a few minutes. This ease might remind you why cryptocurrency exists in the first place... to function outside the "system." This one move – opening a self-custodial wallet – could save you a lot of trouble and money, whatever you have sitting in an exchange today. All the best, Corey McLaughlin --------------------------------------------------------------- Editor's note: You can still find ways to make money while protecting your portfolio as well. This July could mark the "end of U.S. banking" as we know it due to the Federal Reserve launching FedNow – its new instant-money platform. And that's creating a huge moneymaking opportunity for investors who are paying attention... According to Eric, we haven't seen a currency-based opportunity of this scale in more than 50 years... so it's critical to get in on the ground floor of this investment in order to maximize gains. [Click here for the full details](... --------------------------------------------------------------- Recommended Link: [The FDA Could Approve the Most Important Drug of Our Lifetime on June 26]( As soon as June 26, an FDA announcement could enable ONE company to dominate an emerging health market set to grow 842% while treating more than 70 diseases. This is the kind of rare moneymaking situation we've seen turn a $10,000 stake into $75,800 in just four years. [The full story is exposed here](. --------------------------------------------------------------- You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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