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The Good, The Bad, and The Ugly of Digital Currency - Part 9

Updated: Sep 21, 2022

Service


This series of articles are intended to shine a light on all the bullshit out there about digital currency investment in your self-directed IRA.


SERVICE


The word “service” is a loaded statement. Of course everyone will say they provide exceptional customer service, but test their statement and read the reviews, this will help you read between the lines. All the money in the world does not buy service. Illustrating that you are heavily capitalized through a superbowl commercial does not buy service, although it may get you some clients. As a custodian that offers digital currency we do our own secret shopping of other custodians that offer custody of this type of investment. We have not found another cold storage custodian, just for the record. Even if they say they do, they do not in 99% of the cases. We know this because they have all the digital currency dropping into one wallet when we process an in-kind transfer of digital currency, not in a segregated wallet. The one non-segregated wallet approach is a recipe for disaster as the custodian has no verifiable means to determine the digital currency that belongs to you or anyone else like a segregated wallet does, which is how Preferred Trust Company holds your digital currency.


Let’s get on the soapbox for a minute and talk about service as it relates to two custodians that are heavily marketing to consumers how easy it is open a SDIRA and buy and sell at the touch of a button. iTrust Capital came out of nowhere in the market and they are obviously very heavily capitalized, hence the super bowl commercial. They use the cover of being a custodian through an assumed ownership of M2 Trust Services with a DBA of iTrust Custodial Services. They of course only use this DBA when it suits them because M2 Trust Services has its own website and forms, which all appear to be very amateur in stature. Then there is the fact that the banking relationship is with Vectra Bank of Colorado. Not to knock the bank, as they are apart of a larger conglomerate with their association with Zion Bancorporation, but they are a small fish in a big sea.

iTrust Capital has changed their affiliations with their exchange platforms multiple times until they landed on Coinbase. Remember that is the group with limitation in insurance. And you cannot look past the fact that iTrust Capital resides in a WeWork building in Long Beach, CA which basically means they are 100% not a bricks and mortar operation, which might explain why when you call (866) 308-7878 the outgoing message states they’ve removed the ability for you to leave a message in order to provide better customer service and instead, they tell you to schedule a call on their portal. Then when you go to the portal, they tell you it could be a week or more before someone will be in touch with you. Finally, when you do get a call with them it is in 10 minute increments and at the end of the 10 minutes even if you have more questions they tell you that you will have to request another 10 minute call. Yet consumers continue to flock to them. This is your retirement account people! Next up, Equity Trust Company. Just look at the reviews and then ask yourself, “why would anyone ever use this custodian?” When you try and call them be prepared to set aside a minimum of 2 to 4 hours because that is how long you will be on hold. They are however claiming cold storage. The interesting part about their cold storage story is that they are also claiming the client will be able to buy and sell their digital currency through an app. That is interesting considering the client does not have access to the unique keys necessary to buy and sell the digital currency held in cold storage. It is our guess that this implies that they are enforcing the investment of digital currency through an IRA LLC and offering an exchange platform. The other crazy part about Equity Trust Company claiming cold storage is that when they request an in-kind transfer from another custodian they do not provide a unique wallet address for the digital currency to be sent. In fact, they do not provide a wallet address at all. They request the sending custodian to provide the wallet address the digital currency is coming from. You read that correctly. They are so backwards and should not be holding digital currency at all. Now, let’s talk about service and cold storage that is not smoke and mirrors. If you are a person seeking a custodian that will answer the phone and that does actually offer cold storage of digital currency then you need to check out Preferred Trust Company. We have exceptional reviews that do not come from paid actors or robot induced. Does cold storage require more work on your part? Yes. All good things take work. If everything was easy as everyone says then you should be questioning the protection of your hard-earned retirement funds. You know the saying, “if it’s too good to be true, then it is”. So, here is the process at Preferred Trust Company. You are going to have to open a SDIRA just like with any custodian, so I will leave that piece off the table. Once your account is open, you are going to have to give direction to the custodian to make the initial purchase. In this scenario, Preferred Trust Company requires that you are working with a digital currency dealer for the initial purchase. The reason why Preferred Trust Company and every SDIRA custodian should require this is because SDIRA custodians do not sell investments. The only way around utilizing a digital currency dealer is to open an IRA LLC to provide you the freedom of foregoing the digital currency dealer purchase fee, although it may be more time consuming, costly and burdensome in the long run.


Let’s get back to the labor involved on your part.




Open a SDIRA account with PTC (hopefully a Roth IRA).






Identify a digital currency dealer. And we suggest you do your due diligence and choose wisely as this is not a one size fits all. Digital currency dealers do have some clever tactics to drive the purchases of digital currency. Buyer beware, some digital currency dealers represent themselves as being a custodian, going as far as using IRA in the company name and representing that they offer a Bitcoin IRA. Some would say that the company name should not matter, but it does if the sale to follow is deceitful or misleading in nature. For the record, there is no such thing as a Bitcoin IRA. There are two types of IRAs as defined by the IRS, a Traditional IRA and Roth IRA. Yes, there are SEP and SIMPLE IRAs, but they are treated as a Traditional IRA, as a tax-deferred vehicle. Nowhere in the IRS publications are you going to find a Bitcoin IRA. The saying “your reputation is everything” is how Preferred Trust Company has been able to weed through the deceitful or misleading digital currency brokers in the industry. We do this by requiring an in-take call with all clients to ensure that clients are aware of the roles of the digital currency dealer and the self-directed custodian and to also delineate between the fees charged by the digital currency dealer and the fees associated with the custody of the IRA




Complete an Investment Authorization and Direction Form. The digital currency trading platform of where the digital currency is purchased and sold should be important to you if you do not like losing money. Preferred Trust Company strongly encourages clients to conduct their due diligence with every investment prior to the funding of the investment from their IRA. This statement also applies to the selection of the trading platform company that will be the conduit between the digital currency dealer buying the digital currency and the transmittal of IRA client funds to complete the purchase and sale transactions. The trading platform’s reliability and regulation is of the utmost importance as the IRA client’s funds will be sent to and from the trading platform to purchase and sell the digital currency. Not all custodians handle digital currency transactions with a digital currency dealer the same way.


Here is the process at Preferred Trust Company:

1. The digital currency dealer accesses the trading platform approved by Preferred Trust Company online when consummating the purchase of digital currency with the client.

2. The digital currency dealer sends the client a Preferred Trust Company Investment Authorization and Direction Form to be executed as required by the custodian, and then sends the executed form to the custodian.

3. The custodian verifies the purchase and wallet address of digital currency on the trading platform.

4. Preferred Trust sends the funds from the IRA to the Trading platform. Once the funds are received by the trading platform, the trading platform transfers the digital currency to the specified wallet address provided by the custodian.

5. Preferred Trust verifies the digital currency was received by the specified wallet, and then informs the client that the digital currency transaction has been completed.

Since there are hundreds of digital currency trading platform companies cropping up, it makes the selection process that much more important because it can determine whether you actually receive the digital currency your IRA purchased or you receive your cash back upon selling your digital currency. The goal of Preferred Trust Company is to work with a trading platform that has a lengthy history as an established financial institution and is governed by state and federal regulatory bodies in the United States. The second consideration in the selection process was the trading platforms approach to the allowable digital currency types offered and to lean on the trading platform’s expertise in what types of digital currency they offer based on their risk tolerance.

The final consideration was ease of use and information provided based on the technology from the backend to the user interface on the front-end. The below chart illustrates some of the criteria you should consider when evaluating the risk of who you work with when adding digital currency as an alternative investment in your self-directed IRA:


Congratulations you have digital currency in your retirement portfolio!

Now let’s say you want to see what the value of the digital currency is. This is where Preferred Trust Company does not see the value of the fancy app just for your digital currency. In this day and age, most websites are mobile friendly. ■ Go to the Preferred Trust Company client portal, which is mobile friendly and login to your account to see the daily value of your digital currency along with all other relevant information pertaining to your IRA. ■ Should you want to view your digital currency on the blockchain, Preferred Trust Company provides you with your unique wallet address upon the completion of your purchase. Put the wallet address into the blockchain for further verification of the amount held and the value.


Now let’s say you see the cryptocurrencies reaching an all-time high and you are wondering should I sell or hold. Well, we cannot answer that question for you, but Preferred Trust Company can sell your digital currency when you are ready to cash in on your tax sheltered investment.




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