M1 Digital LLC Cryptocurrency Risk Disclosure
1. How is Crypto Provided to you?
M1 Digital LLC: The company that provides you with the platform to access your Apex Crypto account for cryptocurrencies. M1 Digital LLC is a wholly owned subsidiary of M1 Holdings, Inc., and a wholly separate affiliate from M1 Finance LLC.
Apex Crypto LLC: Your cryptocurrency account is held at Apex Crypto, which is the entity that is involved with the purchase, sale, execution and custody of your cryptocurrencies. Apex Crypto LLC is a wholly separate entity from Apex Clearing Corporation.
Apex Clearing Corporation: The company that provides you access to equities (stocks, ETFs, etc.), and the company which you direct to fund your Apex Crypto account for the purposes of purchasing cryptocurrency. Apex Clearing Corporation is a wholly separate entity from Apex Crypto LLC, and is not involved with the purchase, sale, execution or custody of cryptocurrencies. Apex Clearing Corporation is not responsible for the assets held in your Apex Crypto account.
M1 Finance LLC: The introducing-broker for your M1 Invest accounts, providing access to equities (stocks, ETFs, etc.), but is not involved with the purchase, sale, execution or custody of cryptocurrencies. M1 Finance LLC is a wholly separate entity from M1 Digital LLC. M1 Finance LLC is not responsible for the assets held in your Apex Crypto account.
Apex Clearing Corporation and M1 Finance LLC provide access to equities (stocks, ETFs, etc) and are wholly separate from Apex Crypto LLC and M1 Digital LLC who provide access to cryptocurrencies. The cryptocurrency assets in your Apex Crypto account are not held at Apex Clearing Corporation.
WHEN YOU DIRECT APEX CLEARING CORPORATION TO TRANSMIT MONEY FOR PURPOSES OF PURCHASING CRYPTOCURRENCY, YOU ARE INSTRUCTING M1 FINANCE LLC AND APEX CLEARING CORPORATION TO SEND FUNDS OUT OF YOUR LINKED BROKERAGE ACCOUNT INTO YOUR APEX CRYPTO ACCOUNT, WHICH WILL SEND THE FUNDS OUTSIDE OF APEX CLEARING CORPORATION’S CONTROL.
Each of Apex Crypto and M1 Digital LLC intends to share personal information about youwith the other, and with Apex Clearing and M1 Finance LLC, in connection with providing cryptocurrency services to you.
You may visit Apex Crypto Legal Disclosures page to learn more.
2. What is Cryptocurrency
Cryptocurrency is a digital representation of value that is intended to function as a medium of exchange, a unit of account, or a store of value. Cryptocurrencies are based on or built on top of a cryptographic protocol of a computer network. Although cryptocurrencies can sometimes be exchanged for various fiat currencies (e.g., U.S. dollars), unlike fiat currencies, cryptocurrencies are generally not backed by any government or central bank and do not constitute legal tender.
Cryptocurrencies have no intrinsic value and there is no investment or asset underlying cryptocurrencies. Their values may be derived by market forces of supply and demand, and they are more volatile than traditional currencies.
3. What are the risks?
Based on your specific situation and financial condition, carefully consider whether investing in cryptocurrencies is suitable for you. As with any asset, the value of cryptocurrencies can increase or decrease and there can be a substantial risk that you lose money buying, selling, holding, or investing in cryptocurrency. Purchasing cryptocurrencies comes with significant risk, including but not limited to, loss of principal, volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. IN ADDITION, CRYPTOCURRENCY MARKETS AND EXCHANGES ARE NOT REGULATED WITH THE SAME CONTROLS OR CONSUMER PROTECTIONS AVAILABLE IN EQUITY, OPTION, FUTURES, OR FOREIGN EXCHANGE INVESTING.
Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. Below are some, but not all, of the most prominent risks that you should be familiar with:
a. Loss of Principal
The value of crypto assets can be extremely volatile and unpredictable, which can result in significant losses in a short time, including possibly a loss of total value. You should not invest funds in cryptocurrencies that you cannot afford to lose. Trading cryptocurrencies can lead to large and immediate financial losses. The value of cryptocurrencies may also be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrencies, which may result in the potential for permanent and total loss of value of cryptocurrencies should the market for those cryptocurrencies disappear.
b. Price Volatility
Cryptocurrencies derive their value from the markets in which they trade, and the markets for cryptocurrencies are global. The price of cryptocurrencies is based on the perceived value of the cryptocurrency and subject to changes in sentiment, which make these products highly volatile and unpredictable. It may be difficult to liquidate a position in cryptocurrencies at all or, if possible, such liquidation may occur at a significant loss. It is possible that the market for a given cryptocurrency can collapse altogether
Under certain market conditions, you may find it difficult or impossible to liquidate your cryptocurrency position quickly at a reasonable price. This can occur, for example, when the market for a particular cryptocurrency suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying software protocol. M1 does not own or control the underlying software protocols which govern the operation of Cryptocurrencies. Generally, the underlying protocols are open source, and anyone can use, copy, modify, and distribute them. We assume no responsibility for the operation of the underlying protocols and do not guarantee the functionality or security of network operations.
CRYPTOCURRENCIES ARE NOT SUBJECT TO PROTECTIONS OR INSURANCE PROVIDED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR THE SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).
Cryptocurrencies currently face an uncertain regulatory landscape in the United States and many foreign jurisdictions.
Different geographic locations have different rules, or oftentimes no rules, that apply to the trading of cryptocurrencies. One or more jurisdictions may, in the future, adopt laws, regulations or directives that affect cryptocurrency networks and their users. Changes in government regulation, such as the suspending or restricting of trading activity in a particular cryptocurrency or currencies, may adversely affect your ability to trade and exchange your cryptocurrencies and may decrease the value of any cryptocurrency in your account.
In the United States, cryptocurrency markets are not subject to federal regulatory oversight, but cryptocurrency exchanges are subject to federal anti-money laundering regulation and may be regulated by one or more state regulatory bodies. As compared to regulated markets, such as the United States securities markets, there are no uniform regulations governing trading or other mechanisms to prevent market manipulation or to normalize the cryptocurrency markets when they experience volatility issues. Unlike the laws, rules and regulations governing the United States securities markets, there are generally no laws, rules or regulations that require anyone to continue to support a cryptocurrency market, and there is no assurance that a person who accepts a virtual currency as payment today will continue to do so in the future.
f. Cryptocurrency Exchanges, Intermediaries and Custodians
Cryptocurrency exchanges, as well as other intermediaries, custodians and vendors used to facilitate cryptocurrency transactions, are relatively new and largely unregulated in both the United States and many foreign jurisdictions. In addition to a higher level of operational risk than regulated futures or securities exchanges, cryptocurrency exchanges can experience volatile market movements, flash crashes, fraud, various forms of market manipulation, theft, transaction processing delays and other cybersecurity risks. Trading in cryptocurrencies may be halted by the various trading venues due to unusual trading activity, outages or other problems with a cryptocurrency platform. If Apex Crypto experiences such technical difficulties, those difficulties could prevent you from accessing the cryptocurrency in your Apex Crypto account. Apex Crypto and M1 Digital LLC may not have sufficient financial coverage through bonds, insurance or other products to repay your losses.
g. Cybersecurity and Fraud
A cybersecurity event could result in a substantial, immediate and irreversible loss for market participants that trade cryptocurrencies. Cryptocurrency transactions may be irreversible, and, accordingly, losses due to a cybersecurity event may not be recoverable. Even a minor cybersecurity event in a cryptocurrency is likely to result in downward price pressure on that product and potentially other cryptocurrencies. Similarly, transactions may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable.
Furthermore, you are responsible for creating a strong password and maintaining security and control of any and all electronic devices, IDs, passwords, hints, or any other codes that you use to access the M1 platform. We assume no responsibility for any loss that you may sustain due to compromise of account login credentials due to no fault of M1.
Changes in the technology of a given cryptocurrency platform or changes resulting from cybersecurity attacks include but are not limited to a “fork,” which can have a negative impact on the value of a particular cryptocurrency and can result in the loss or cancellation of a cryptocurrency position or a sudden loss of value. The ability to participate in forks could also have implications for investors. For example, a market participant holding a cryptocurrency position through a cryptocurrency exchange may be adversely impacted if the exchange does not allow its customers to participate in a fork that creates a new product.
4. Market Data Accuracy
The market price for cryptocurrencies may be different on different marketplaces. The market data that we provide to you is from various external sources that we believe to be reliable. However, we do not control the external sources or the data they provide. The market data may not always be entirely accurate, complete or current and may also include technical inaccuracies or typographical errors. Accordingly, you should verify all information before relying on it.
5. No Investment Advice
M1 does not provide investment, tax, or legal advice, and you are solely responsible for determining whether any investment, investment strategy or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. M1 may provide educational information to assist users in learning more about Cryptocurrencies. Information may include, but is not limited to, blog posts, articles, links to third-party content, news feeds, tutorials, and videos. The information provided on the M1 App, M1 website (m1.com) or any such third-party sites does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the content as such.
6. Crypto Access for New York State Residents
Services and supported assets may vary by jurisdiction. New York state residents may not have access to all coins on their Apex Crypto accounts due to New York state regulations of cryptocurrencies. Visit New York State – Virtual Currency Businesses to learn more about the regulation and see which coins are approved for New York state residents.
7. Guidance Documents from Federal Agencies
Several federal agencies have also published advisory documents surrounding the risks of virtual currency. For more information, see the CFPB’s Consumer Advisory, the CFTC’s Customer Advisory, the SEC’s Investor Alert, and FINRA’s Investor Alert.
M1 Digital LLC is a wholly separate affiliate of M1 Finance LLC, and neither are involved with the execution or custody of cryptocurrencies. Cryptocurrencies are not FDIC or SIPC insured.