iFlip Financial Services - Crypto Disclosures

Supplement to Client Agreement in Connection with Trading Digital Assets with Paxos Trust Company Through Velox Crypto LLC and Velox Clearing

 

1. General:

This supplement ("Supplement") to the Velox Crypto LLC and Velox Clearing LLC Client Agreement (as amended from time to time, the "Client Agreement") is made between Client and Velox Crypto LLC and Velox Clearing LLC ("VC") and sets forth the terms under which VC agrees (i) to allow Client to access digital asset trading and custody services (the "Crypto Services") in an account in Client's name (the "Paxos Account") at Paxos Trust Company ("Paxos") through VC's electronic trading platform and (ii) to provide certain cashiering services in connection with the settlement of transactions undertaken by Client using the Crypto Services.

Client agrees to be legally bound by the terms and conditions set forth in this Supplement. Client understands and agrees that Client continues to remain bound by the terms and conditions of the Client Agreement which governs Client's securities brokerage account at Velox Clearing LLC ("Brokerage Account"), of which this Supplement forms a part (such Client Agreement, together with this Supplement and any other supplements, annexes, schedules or exhibits, the "Agreement"), and that all terms and conditions in the Client Agreement, including, without limitation, the "Mandatory Arbitration" provision thereof, shall also govern the relationship between VC and Client with regard to any services contemplated by this Supplement.

2. Cryptocurrency / Digital Asset Brokerage and Custody Services Provided Solely by Paxos Trust Company; No Recourse to VC for Losses in Paxos Account:

The Client understands and agrees that the Crypto Services are provided solely by Paxos and not by VC. Paxos provides the Crypto Services pursuant to Paxos' Exchange Terms and Conditions between Client and Paxos, to which Client has separately agreed. No order to trade a digital asset is accepted until it is accepted by Paxos.

Client acknowledges and agrees that VC is not responsible for any trading or other losses (including, without limitation, losses due to theft, fraud, cybersecurity breach, loss of control of private keys, or any other loss arising from trading or holding digital assets with Paxos) resulting directly or indirectly from or in connection with Client's relationship with Paxos and/or Client's trading or holding of digital assets, including activity or holdings in the Paxos Account.

3. Client Cannot Place Orders to Purchase Digital Assets for Amounts Greater than the Amount of Funds Available to Be Withdrawn From Client's Brokerage Account:

Client shall not use the VC platform to enter orders to purchase digital assets for an amount (including commissions) greater than to the cash withdrawal limit (subject to any limitations on cash withdrawals under Regulation T and/or VC house initial margin requirements) in Client's Brokerage Account as of the time of the order (the "Cash Withdrawal Limit"). Any order for trade value (including commissions) exceeding Client's Cash Withdrawal Limit is subject to rejection by VC's platform prior to submission to Paxos. Notwithstanding the above, if Client places an order with Paxos to purchase digital assets for trade value (including commissions) in excess of Client's Cash Withdrawal Limit, and VC's platform does not reject such order, Client acknowledges and agrees that Client is fully liable for the full amount of such order.

4. Authority to Transfer Funds Between Brokerage Account and Paxos Account in Connection with Client Trading in the Paxos Account:

Client hereby authorizes and instructs VC to make payment (the "Transfer Instructions") to Paxos on Client's behalf for any executed purchase of digital assets (including both the cost of the digital assets and the commission charged by Paxos) arising from any order Client has placed with Paxos through the VC platform. Such payment will be treated as a withdrawal of funds from Client's Brokerage Account and corresponding deposit of funds to Client's Paxos Account.

Client hereby authorizes and instructs VC to sweep to Client's Brokerage Account any proceeds (net of commission) in Client's Paxos Account resulting from the sale of digital assets. Such sweep will be treated as a withdrawal of funds from Client's Paxos Account and corresponding deposit of funds in Client's Brokerage Account.

5. No Margin Value; No Lien:

Digital assets in Client's Paxos Account will not be assigned any margin value for purposes of determining Client's Brokerage Accounts' compliance with either securities or commodities margin requirements. Client must ensure that the equity in Client's Brokerage Accounts is sufficient at all times to meet any margin requirements on Client's Brokerage Accounts without regard to any assets in Client's Paxos Account.

Notwithstanding any other provision of the Agreement, VC shall have no lien or security interest over the digital assets held in Client's Paxos Account.

6. Assets in Custody of Paxos Not Subject to Customer Protection Rule or SIPC Protection:

Client understands that once VC transfers the specified funds from Client's Brokerage Account to the Paxos Account pursuant to the Transfer Instructions, the funds are subject to the control of Paxos and in the custody of Paxos and not of VC.

Client further understands that Client's assets held in the Paxos Account, including any digital assets or any fiat currency funds, will not benefit from the protections of the Customer Protection Rule (Rule 15c3-3) under the U.S. Securities Exchange Act of 1934 or the insurance protections of the Securities Investor Protection Act (SIPA) which apply to Client's Brokerage Account.

7. Limited Trading Hours

Client understands and acknowledges that digital assets generally trade 24/7, and their prices may change dramatically over the weekend, but that VC's platform does not provide 24/7 access to trading at Paxos, and that this may expose Client to additional risk of loss on Client's digital asset positions, or to loss of trading opportunities that might have been profitable, as a result of VC platform downtime, scheduled or otherwise. In addition to the waivers in Section 2 above, Client agrees to waive any claim against VC for compensation as a result of either losses in value of Client's position or loss of trading opportunities in digital assets resulting from VC platform downtime and/or the inability to place orders with Paxos at certain times, or in the event that a Client Conditional Order (as defined in Section 8 below) is submitted to Paxos substantially after the occurrence of the triggering condition for that Conditional Order or not at all.

Please see the Risk Disclosure for Trading Digital Assets with Paxos Trust Company Through VC's Platform for more information.

8. Conditional Orders

In certain instances, VC permits clients to create orders in digital assets which are to be submitted only upon the occurrence of some future event ("Conditional Orders"), which event may or may not occur. Examples of such orders include, without limitation, "Good After Time" orders and orders that are only to be submitted upon a certain index value or asset price threshold being crossed.

Client hereby acknowledges and agrees that when Client enters a Conditional Order, it is requesting that VC, acting as a platform provider to Paxos, submit an order to Paxos with the specified terms only upon the occurrence of the specified event, and that such order is not accepted until submitted to Paxos by VC and accepted by Paxos.

Client acknowledges that, as set forth in Section 7, VC's platform does not operate 24/7, and that the triggering event Client has specified for any Conditional Order may occur during VC platform downtime, and that accordingly, Client's Conditional Order may not be submitted until substantially after the occurrence of the triggering condition, or may not be submitted at all.

9. Fees

Velox Crypto LLC charges a fee or fees for your access and use of the Exchange and/or Custody. Any fees due and payable to Velox Crypto LLC may either (i) be included in the total price of any transaction to buy or sell crypto assets or any Custody fees charged by your Financial Institution or (i) be collected by or paid by your Financial Institution. Your Financial Institution will disclose to you any fees that are due and payable to Velox Crypto LLC.

THE CLIENT AGREEMENT, WHICH THIS SUPPLEMENT FORMS A PART OF, CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE IN PARAGRAPH 54. BY SIGNING THIS SUPPLEMENT, CUSTOMER ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE AND THAT CUSTOMER HAS RECEIVED, READ AND UNDERSTOOD THE TERMS THEREOF.

Risk Disclosure for Trading Digital Assets with Paxos Trust Company Through VC's Platform

 

Important Information Regarding Trading Digital Assets with Paxos

 

Velox Crypto LLC and Velox Clearing LLC ("VC") offers clients the ability to access digital asset trading and custody services (the "Paxos Services") in an account in client's name (the "Paxos Account") at Paxos Trust Company ("Paxos") through VC's electronic trading software. The digital assets in your Paxos Account are carried at Paxos while all other assets, including securities, commodities and fiat currency, are carried in your VC account. You should carefully consider the risks below before making a decision to utilize the Paxos Services.

1. Trading Of Digital Assets is Risky. Digital asset prices are highly volatile and can rise or fall dramatically and quickly. If you hold a position in digital assets and the value of the asset falls, you can lose money. You should carefully consider your financial circumstances and your risk tolerance before trading digital assets with Paxos and you should not trade digital assets unless you have the financial capability to sustain losses if they occur. You should be aware that you may sustain a total loss of the assets in your Paxos Account.

1. No Investment Advice, Recommendations, Or Tax Advice. VC does not provide investment, tax, or trading advice or recommendations. By making digital assets available to you, neither VC nor Paxos makes any assessment, representation, or warranty concerning the appropriateness or suitability of digital assets for your financial circumstances. The Paxos Services are "execution only." VC and Paxos will not advise you on any transaction. Neither VC nor Paxos will assess whether your transactions are suitable for you or help you avoid losses. You should obtain your own financial, legal, taxation, and other professional advice as to whether digital assets are appropriate investments for you.

1. Digital Asset Holdings Are Not Covered By FDIC or SIPC. In general, US broker-dealers cannot custody non-securities digital assets. Therefore, US brokers seeking to offer their clients the ability to trade digital assets must work with another entity (a "Crypto Broker/Custodian") which is suitably licensed, and at which clients trading digital assets have separate accounts in their own name. These Crypto Broker/Custodians are not broker-dealers, and digital assets are not securities, and so SIPC coverage does not apply to accounts at Crypto Broker/Custodians. Likewise, most Crypto Broker/Custodians are not insured banks, and digital assets are not cash, so FDIC coverage does not apply to accounts at Crypto Broker/Custodians.
   
   VC has selected Paxos as the Crypto Broker/Custodian with which to work. By requesting trading permissions for digital assets through VC's platform, you are opening an account in your name at Paxos (the previously mentioned Paxos Account). All trading you do in digital assets through VC's platform will be executed in your Paxos Account (and not an account at VC), and Paxos will be your custodian and counterparty for those trades, which means that Paxos holds your digital assets for you and represents your ownership of them on their internal ledger. As explained above, the holdings in your Paxos Account are not protected by FDIC or SIPC insurance in the event of Paxos' or VC's insolvency.
   
   
2. Trading Hours May Be Limited; Paxos Web Interface; Stop Loss Orders. Digital assets generally trade 24/7, and their prices may change dramatically over the weekend. But your ability to access your Paxos Account through VC's platform, including purchasing or selling digital assets over the weekend, may be limited.
   
   Paxos may offer stop and/or stop-limit orders (generally, "stop-loss orders") that you may choose to use to manage your risk, with respect to sudden decreases in the value of digital assets in your Paxos Account.
   
   A stop order is an order to buy or sell a digital asset once the price of the digital asset reaches a specified price (the "stop price"). When the stop price is reached, a stop order becomes a market order and can execute at any price (not necessarily at the stop price). A sell stop order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or to protect a profit on a digital asset that they own.
   
   A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, a stop-limit order becomes a limit order that will be executed (if possible) at a specified price (or better). Like a regular limit order, stop-limit orders will only execute if there is liquidity at your limit price or a better price.
   
   In a quickly falling market, including in situations where many customers submit stop orders with a similar stop price, or when there is a lack of liquidity in the market, a stop order may execute a significant amount away from the specified stop price and a stop-limit order may not execute at all.
   
   Stop and stoplimit orders, while outstanding, are eligible to execute even outside of the times when VC's platform is available for trading.
   
   Using stop orders carries its own risks, including that your order may execute at an unfavorable price, and that the price of the digital asset may subsequently rise sharply above the level of the stop price, and you could lose money if you then reestablish your position at a price above the price at which you exited it as a result of your stop-loss order executing.

1. The Digital Asset Market Is Highly Speculative And Extremely Volatile. The market for digital assets can be extremely volatile. The price of digital assets may be influenced by, among other things, the performance of the economy as a whole; new or amended government regulation; the changing supply and demand relationships for digital assets; governmental, commercial and trade programs and policies; interest rates; technological developments; inflation; national and international political and economic events; statements by internet celebrities; social media sentiment; and the prevailing psychological characteristics of the relevant marketplace.

1. Digital Assets Custodied with Paxos Will Have No Margin Value In Your Brokerage Account. The digital assets custodied in your Paxos Account will not be assigned any margin value. Such digital assets will not be considered in determining your VC account's compliance with either securities or commodities margin requirements. If you have insufficient equity in your VC account to meet your margin requirements, the assets in your VC account may be liquidated.

1. Digital Assets Carry Liquidity Risk. Paxos is not obligated to provide quotes for digital assets at any time, and neither Paxos (nor VC) guarantee the continuous availability of quotations or trading for digital assets on Paxos' or any other digital asset exchanges. Paxos may in its sole discretion cease quoting digital assets and/or cease entering new digital asset transactions at any time.

1. You Will Pay Commissions For Trading Digital Assets. Paxos will charge commissions on your digital asset trades. For more details on the commissions, please see https://www.interactivebrokers.com/en/index.php?f=1590.

1. Your Agreement with Paxos Governs Your Paxos Account. Your Paxos Account is governed by the Paxos Exchange Terms & Conditions ("Paxos T&Cs"). You should read the Paxos T&Cs carefully and understand the terms of your relationship with Paxos.

1. You Are Not Permitted To Short Digital Assets. Short sales of digital assets are prohibited. The inability to open short digital asset positions may negatively impact your ability to protect against trading losses.

1. The Digital Assets Available to You Are Limited and Subject to Change. The digital assets available for trading in your Paxos Account are limited. Paxos or VC may further limit the available digital assets to be traded on the VC platform at their own discretion and without prior notice to you. A complete list of available digital assets that may be purchased in your Paxos Account through VC's platform is available at https://www.interactivebrokers.com/en/index.php?f=46390.

1. Risk Of Disruption Or Interruption Of Access To Paxos Account. Both VC and Paxos rely on computer software, hardware and telecommunications infrastructure and networking to provide their respective services to you, and without these systems neither can provide you with access to your respective accounts. These computer-based systems and services such as those used by Paxos are inherently vulnerable to disruption, delay or failure, which may cause you to lose access to the VC trading platform and thereby your Paxos account or may cause VC or Paxos not to be able to provide digital asset quotations or trading, or may negatively affect any or all aspects of Paxos' services. Under the VC Client Agreement, you accept the VC systems and services "As-ls" and VC's liability to you is limited.

1. Other Important Information Covered by Paxos T&Cs. If at any time you wish to transfer some or all of your digital asset holdings in your VC-linked Paxos account out of your VC-linked Paxos account and into an independent Paxos account (from which you can then continue to freely trade such assets or transfer them to other addresses on the blockchain), please see the Paxos T&Cs for instructions on how you may do so. In the event that VC ceases operations, Paxos will contact you to transfer the holdings in your VC-linked account to an independent account, in accordance with the Paxos T&Cs.