Why Advisors MUST Offer Crypto to Clients

Who’d have thought the new spot bitcoin ETFs could fix this?

Ric Edelman: It's Wednesday, February 7th, I want to share with you a story, a rather horrifying one that was shared with me by a financial advisor who listens to this podcast. Several months ago, this advisor had a client who called the advisor on the phone and said, I'd like to buy some bitcoin. The advisor said, I'd love to help you, but I can't. My firm doesn't let me recommend bitcoin to my clients. There's no bitcoin investment available to me that I can provide to you.  

So the client said, okay, “Thank you very much. I'm going to go do it on my own.” The client went and did exactly that. The client surfed the web, found a brokerage firm on the internet based in London that offered to handle his desire to buy bitcoin. So the client sent $500,000 to this brokerage firm, and the brokerage firm several months later gave him really good news. Bitcoin has done really, really well in 2023, and in fact, our professional management of bitcoin made it even better. He said that of the $500,000 he invested back several months ago; this was earlier in 2023, they made 4X on his money. We all know bitcoin went up 1.6 x. Bitcoin rose 160% last year, but his account grew 400% thanks to the good skill of this brokerage firm. His account, where he started with $500,000, was now worth $2.7 million; a $2.2 million profit.  

And so they sent him an email, and the client got the email and he forwarded it to his financial advisor, you know, the one who earlier had said that they weren't able to help him.  

Here's what the email said, “Our analysis indicates that you realized capital gains from your investments last year, resulting in an unpaid amount of $2,211,779.45 into your account. The calculated tax liability stands at $442,355.89, constituting 20% of your total profits. Compliance with legal obligations is crucial to ensure the well-being of your account. We urgently request you to address this outstanding tax payment promptly, ensuring completion by January 20th, 2024 to avoid potential late fees and other legal consequences. Timely resolution will help maintain the integrity of your account and prevent further disruptions. You can pay your taxes via our online service or USDT, and your funds will reach your designated withdrawal account within 12 hours after completing your tax payment. You can call me anytime with this.” 

It was signed by Sam. I'm omitting his last name and his cell phone number, which I'm also omitting here. So the client said to his financial adviser, “I need you to send me $442,000 so I can send it to my brokerage firm in London so that I can pay the taxes that I owe on my Bitcoin profits.”  

It's at that point that the advisor contacted me and asked me if this sounded legit. It doesn't.  

So of course it's a scam. This outfit did not produce this guy profits of $2.2 million. And more fundamentally, there is no government in the world that demands advance payment of taxes on profits. If the profits are genuinely there, all you got to do is sell the asset. To collect the money you need to pay the taxes you owe. You deal with that all the time. You sell your shares of stocks, you sell your mutual funds or ETFs, you get your money, and then you use some of it to pay the taxes you owe. When you file your taxes in April, there is nowhere anywhere that requires that you pay taxes prior to liquidating the investment.  

Clearly this is a scam. They scammed this guy out of $500,000. The money he invested, and now they're trying to scam him out of another $442,000 by pretending that there's big fat profits with a big fat tax liability, it is all entirely a scam. Well, when I conveyed this to the financial advisor, they in turn conveyed it to their client. He's desperately trying to recover his money. Naturally, when he tries to liquidate the $2.7 million that is supposedly in this account in London they are unwilling to send it to him. They're claiming they can't send him the 2.7 million until after he sends them another $442,000.  

So the bad news is he's lost 500 grand. The good news is he didn't lose an additional 442 grand on top of it. This is why I'm very excited about the spot bitcoin ETFs. This financial advisor who wasn't able to help the client a year ago now can because this advisor’s firm is now allowing the advisor to offer the bitcoin ETFs to their clients.  

So the next time a client calls saying I'd like to invest in bitcoin, the advisor is able to say, sure, I can help you with that and provide them the spot bitcoin ETFs. This not only helps to get the client the investment they want. More importantly, it helps the clients avoid getting scammed because these ETFs are regulated securities under the auspices of the SEC. They're handled by legitimate brokerage firms and custodians here in the US by legitimate, honest financial advisory firms, everybody is able to operate much more safely, at least from a scam perspective. I'm not necessarily saying it's safe from investment risk, but at least it's safe from fraud.  

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We have to tell the story of Eli Regalado. He's a pastor who's been preaching over the internet. He's based in Denver, and securities regulators now say that Regalado told his internet congregation to invest in something called the INDX coin that he invented. He said they would get a 1,000% profit. And so these gullible congregation members sent him collectively over $3 million. Well, they never got that thousand percent profit, and they never even got their money back. According to the regulators, Regalado and his wife used the money on home improvements, a Range Rover, jewelry and luxury handbags. And when the regulators came calling, he posted a ten-minute video saying that stealing the money wasn't his decision. He did it because God told him to.  

So how'd this whole thing started? He said, “The Lord took us into this cryptocurrency. And I said, Lord, what do you want me to do? And the Lord said, I want you to build this the way that it should be done. And so the Lord says, give them a “10-x”. So if someone bought $1,000 worth of INDX coin, we were basically giving them the index amount of $10,000, so a 10 x on top of it. And so we were just always under the impression that God was going to provide that the source was never ending and that we had nothing to worry about. He said not to worry. The whole thing will get resolved because God is going to work a miracle.  

We've just been waiting on the Lord literally for a miracle. So I don't know how God's going to turn this around, but I do know that God is in the business of doing new things and breaking ceilings. And he did tell us to do this. And so I just wanted to just come right out with it, just so you can hear it directly from me. God is not done with this project. God is not done with INDX coin. Join us and just believe and receive everything that God has said about this project for all of his promises in Christ Jesus our Lord, yes and Amen.” 

Well, he's rethought some of this. He later posted a video saying he might have misheard God. You think?  

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