Statement on Flourish
Crypto security

 

Note: This article discusses ongoing events. Last updated March 2, 2023. 
By: Max Lane, CEO

Yesterday, one of Paxos Trust Company's banking partners, Silvergate Bank, announced that it would delay the filing of its annual report.1 Paxos, the custodian for Flourish Crypto,2 currently has no material exposure to Silvergate and is actively moving key banking operations to other bank partners. There is no impact on Flourish Crypto holdings. 

We want to reiterate that Flourish Crypto operations are unaffected by this news and that client assets are safe. As always, Flourish Cash3 funds are held separately from Flourish Crypto. The Flourish Crypto business has no impact on the Flourish Cash business. 

We remain in close contact with Paxos and are actively monitoring events. The security of your assets remains our top priority.

Please reach out to your Flourish representative or email  to if you would like to discuss this further. 


February 14, 2023

In light of the recent news that the custodian for Flourish Crypto, Paxos Trust Company, has been the subject of regulatory activity by the New York Department of Financial Services4 and the SEC,5 we want to update our Flourish Crypto advisors who may be concerned about the status of their client accounts with Flourish Crypto. 

As described in the security statement below, we would like to reaffirm that: 

  • Flourish Crypto operations are unaffected by these notices and client assets are safe.
  • Paxos holds all client assets bankruptcy-remote.
  • Paxos does not rehypothecate client assets.
  • Both NYDFS and the SEC have focused exclusively on Paxos’ BUSD stablecoin product, which does not impact Flourish Crypto’s business.
  • Clients can access their Flourish Crypto accounts and purchase, sell, and hold bitcoin and Ethereum. 
  • The Flourish Crypto business has no impact on the Flourish Cash business
  • Funds in Flourish Cash are held separately from Flourish Crypto. Flourish Cash client funds are held exclusively in FDIC-insured accounts at Program Banks6 through Flourish Financial LLC, an SEC and FINRA-regulated broker-dealer.
As a result of the broader challenges that came to a head in 2022, there are numerous regulatory actions underway across the crypto industry. The actions taken by NYDFS and the SEC are focused on Paxos' BUSD stablecoin offering and do not affect the execution and custody services that support Flourish Crypto accounts.

 


December 9, 2022

In response to recent turmoil in crypto markets, we wanted to provide an update to our Flourish Crypto customers. 

Flourish Crypto’s Custodian Has Not Been Impacted

All custody and execution services for Flourish Crypto are provided by Paxos Trust Company, LLC (“Paxos”), a New York Department of Financial Services Trust Company. While events are still unfolding, we can assure our customers that Paxos — and, by extension, Flourish Crypto — has not been impacted by the events of the past few weeks.

The collapse of FTX and Alameda is a stark reminder to all of us in the wealth management industry of the importance of custody when it comes to safeguarding clients’ hard-earned assets. These events reinforce our position that regulation and oversight matter, and Paxos’ commitment to the highest standards is what fueled our partnership with them as a custodian for Flourish Crypto. We’ve been in close contact with Paxos over the past few weeks to ensure the security and compliance of their system and safety of your assets.

Paxos’ Regulatory Status Protects Customer Assets

Paxos released a full statement, which you can read here. To highlight a few key points:
  • Paxos is one of the most highly-regulated companies in the space. Paxos Trust Company, the entity that provides custody and execution for Flourish Crypto, was the first company to secure a New York Department of Financial Services trust charter back in 2015. 
  • Paxos Trust Company is legally required to fully segregate customer assets in bankruptcy remote accounts. Funds are liquid and always available upon request, fully backed by customer deposits. This legal protection is a foundational aspect of the offering, different from almost all others in the marketplace operating through money transmission licenses or no oversight at all. Paxos’ regulators ensure this through prudential regulations and regular exams.
  • In the unlikely event that a Paxos regulated entity becomes insolvent, New York law clearly dictates how customers’ assets will be promptly returned to them. This is a critical distinction of Paxos.
  • Paxos does not engage in any leveraged activity, lend off-platform, engage in market-making business, or speculate.
  • Paxos is cash flow positive and has a strong balance sheet with many years of runway to navigate any market turmoil.

Our Principles

At Flourish, our mission is to provide innovative access to financial products to help RIAs secure their clients’ financial lives. We aim to arm our RIA partners with better tools in order to serve as fiduciaries on clients’ entire range of assets — not just their stocks and bonds. To fulfill that vision, we set out to build products that are secure, compliant, and “just work.”

Secure
We obsess over every detail of our products and maintain robust risk management practices to ensure that your clients’ data and assets are safe and secure.

Compliant
Flourish maintains a strong culture of compliance. Like the independent RIAs we serve, Flourish is a heavily-regulated company that understands the importance of regulatory compliance when it comes to safeguarding client assets.

“Just Works” Ethos
We believe that delightful product experiences are part of the foundation of trust. We aim to build products that are beautiful, easy-to-use, integrated, and provide true value for our clients. While building these products is complex and arduous, we want our clients to feel like Flourish products “just work.”

Conclusion

We understand the years of work it took your clients to build their wealth, which is why safeguarding their assets will always be our top priority. Building secure, compliant products that “just work” is how we achieve this aim.

In the face of record inflation and the collapse of FTX and Alameda, we believe that it is an important moment for advisors to speak with clients about all their financial holdings, understand where all of their assets are held, and decide if a change is warranted. We at Flourish will continue to do our part to build new innovative products and improve our existing ones to help advisors secure their clients’ entire financial lives. 

Please reach out to your Flourish representative or email support@flourish.com to discuss any questions. 

 

About Flourish

Flourish builds technology that empowers financial advisors, improves financial lives and retirement outcomes, and delivers new and innovative investment options to advisors. Today, the Flourish platform is used by more than 440 wealth management firms representing more than $1.4 trillion in assets under management. Flourish is wholly-owned by MassMutual. For more information, visit www.flourish.com.

 

Interested in learning more about Flourish Crypto?


Flourish is an online platform through which investors can access financial services and products. The services and products offered through Flourish are provided by different entities and are subject to different terms, investor protections and risks. Flourish Cash is offered by Flourish Financial LLC, a registered broker-dealer and FINRA member. Flourish Financial LLC is not a bank. Check the background of Flourish Financial LLC and its personnel on FINRA's BrokerCheck. Flourish Crypto is offered by Paxos Trust Company, LLC, a New York limited purpose trust company regulated by the New York Department of Financial Services that provides cryptocurrency custody and execution services for the Flourish Crypto accounts, and Flourish Digital Assets LLC, which is registered in New York as a commodity broker-dealer and provides website and other technology services and support for Flourish Crypto accounts. Flourish Financial LLC and Flourish Digital Assets LLC are affiliates, but are not affiliates of Paxos. Please review the Legal section of our website, and the disclosures provided with each Flourish service or product, for further information regarding each service and product. If you were introduced or invited to Flourish by a third-party investment adviser or other third party, whose name or logo may be shown above, please be aware that, unless otherwise disclosed to you, they are not affiliated with any Flourish entity. The role of the investment adviser or other firm that invited you to Flourish may vary between different Flourish services and products, as further described in the terms for each service or product. © 2023 Flourish. All rights reserved.

1 United States Securities and Exchange Commission. Form 12b-25. March 1, 2023. https://www.sec.gov/Archives/edgar/data/1312109/000110465923027353/tm238251d1_nt10k.htm

2 Flourish Crypto is a cryptocurrency investment account through which investors can trade cryptocurrencies and maintain custody of cryptocurrencies and U.S. dollars. Custody of Flourish Crypto accounts, including all assets in the accounts, and cryptocurrency trading services are provided by Paxos Trust Company, LLC (Paxos) in accordance with the Paxos Terms. Paxos is a New York limited purpose trust company regulated by the New York Department of Financial Services. Website and other technology services and support for Flourish Crypto accounts are provided by Flourish Digital Assets LLC (Flourish Digital Assets) in accordance with the Flourish Crypto Terms. Flourish Digital Assets is registered in New York as a commodity broker-dealer. Cryptocurrencies held in Flourish Crypto accounts are not currently eligible for in-kind transfer to other custodians or cryptocurrency wallets. Investing in cryptocurrencies involves a high degree of risk, as further described in the risk disclosures section of the Paxos Terms and the Flourish Crypto Terms. Flourish Crypto accounts are separate from Flourish Cash accounts and assets in Flourish Crypto accounts are not eligible for protection by the Securities Investor Protection Corporation (SIPC). 

3 A Flourish Cash account is a brokerage account offered by Flourish Financial LLC. Flourish Financial LLC is not a bank. The cash balance in a Flourish Cash account will be swept from the brokerage account to deposit account(s) at one or more third-party banks that have agreed to accept deposits from customers of Flourish Financial LLC (Program Banks). The accounts at Program Banks will pay a variable rate of interest. If you were introduced or invited to Flourish Cash by a third-party investment adviser or other third party, whose name or logo may be shown above, please be aware that, unless otherwise disclosed to you, they are not affiliated with Flourish Financial LLC and will not provide any advisory or brokerage services for your Flourish Cash account or have the authority to provide instructions on your account. 

4 New York State Department of Financial Services. Notice Regarding Paxos-Issued BUSD. https://www.dfs.ny.gov/consumers/alerts/Paxos_and_Binance.

5 Paxos. Press release. February 13, 2023. https://paxos.com/2023/02/13/paxos-issues-statement/

6 The cash balance in a Flourish Cash account that is swept to one or more Program Banks is eligible for FDIC insurance, subject to FDIC rules, including FDIC aggregate insurance coverage limits. FDIC insurance will not be provided until the funds arrive at the Program Bank. There are currently at least 4 Program Banks available to accept deposits for institutional Flourish Cash accounts (accounts for corporations, partnerships and other legal entities) and at least 5 Program Banks available to accept deposits for personal Flourish Cash accounts (individual, joint and revocable trust accounts), and we are not obligated to allocate customer funds across more than this number of Program Banks if there is a greater number of banks in the program. Customers are generally eligible for FDIC insurance coverage of $250,000 per customer, per Program Bank, for each account ownership category. Thus, institutional customers are eligible for up to $1,000,000 of FDIC insurance and personal customers are eligible for (i) up to $1,250,000 of FDIC insurance for either (A) an individual account or (B) an account for a revocable living trust in which one person is the only grantor, trustee and beneficiary of the trust ("Individual Revocable Trust Account") and (ii) up to $2,500,000 of FDIC insurance for either (A) a joint account with two owners or (B) an account for a revocable living trust in which the same two persons are each the only grantors, trustees and beneficiaries of the trust ("Joint Revocable Trust Account"). The total FDIC coverage for a two-person household is calculated assuming that each household member has an individual account and that both household members share a joint account. If the number of Program Banks decreases for a customer (either because a Program Bank is no longer participating in Flourish Cash, because a customer's cash is not eligible to be swept to a Program Bank based on criteria set by the Program Bank (which will be disclosed at account opening), or because a customer opts out of having their cash swept to a particular Program Bank), the amount of FDIC insurance for which the customer would be eligible through Flourish Cash would be lower. Typically, all of a customer's deposits at a Program Bank in the same ownership category (including deposits held outside Flourish Cash or held through multiple Flourish Cash accounts with the same ownership category) count toward the FDIC insurance limit for deposits at that Program Bank. Customers are responsible for monitoring whether they maintain deposits at a Program Bank outside of Flourish Cash and should consider opting out of having their cash swept to any such Program Bank to avoid exceeding FDIC insurance limits. Although Flourish Cash is offered through a brokerage account and cash held in brokerage accounts often has the benefit of SIPC protection, until such time as we offer securities products, customers likely will not have the benefit of SIPC protection for cash held in their Flourish Cash account. Further, SIPC protection is not available for any cash held at the Program Banks. Our current Program Banks can be found here. For additional information regarding FDIC coverage, visit https://fdic.gov/.