Finance

Elon Musk, CEO of Tesla, speaks with CNBC on May 16th, 2023.
David A. Grogan | CNBC

Check out the companies making headlines in midday trading.
Tesla — Shares rose 4.4% following the company’s annual shareholder meeting the previous day. CEO Elon Musk announced the company would deliver its first Cybertrucks later this year. Musk said that although he expects an economic downturn for the next 12 months, Tesla is well-positioned for the long run.

related investing news

4 hours ago

Western Alliance — Western Alliance popped 10.2% after the regional bank said deposit growth so far this quarter surpassed $2 billion as of May 12. Other regional bank stocks moved higher, with Zions Bancorporation last up 12.1%. The SPDR S&P Regional Banking ETF added 7.4%.
Target — Shares of the big-box retailer rose 2.6% after the company topped Wall Street’s earnings expectations for its fiscal first quarter. Target’s revenue, however, barely grew year over year, and its shoppers bought more necessities. Target also said it expects sales to remain sluggish in the current quarter, and it anticipates a low-single-digit decrease in comparable sales.
TJX Companies — Shares rose 0.9% on Wednesday. The retailer reported an earnings beat before the market open, with earnings per share coming in at 76 cents, versus the 71 cents expected from analysts polled by Refinitiv. It also topped expectations for first-quarter comparable sales, per StreetAccount, but its revenue missed estimates.
Wynn Resorts — The hotel and casino operator rose 5.7% after Barclays upgraded the stock. The firm said Wynn has more to gain from its Macao properties’ post-pandemic recovery and that its business in Las Vegas can continue to do well despite worsening macro conditions.
EVGo — The EV charging station supplier fell 18.7% on news of a public offering of $125 million Class A stock. Earlier on Tuesday, Stifel initiated coverage of EVGo with a buy rating.

Kyndryl Holdings — Shares of the IBM spinoff dropped 12.9% on light guidance. Kyndryl also shared a loss of $3.24 per share for its fiscal fourth quarter. That’s wider than the $1.02 per share loss suffered in the year-earlier period.
Keysight Technologies — Shares popped more than 7.7% after Keysight Technologies topped earnings expectations for the fiscal second quarter. The company also issued earnings guidance for the current period that beat estimates.
Doximity — The medical software company lost 5.7% after offering weak guidance for the current quarter. The company said to expect between $106.5 million and $107.5 million in revenue and between $39 million and $40 million in adjusted EBITDA for the first fiscal quarter. Both of those estimates were below expectations, with analysts polled by StreetAccount forecasting revenue at $11.8 million and adjusted EBITDA at $45.4 million. That overshadowed the company’s fourth-quarter earnings, which were better than expected.
— CNBC’s Yun Li, Tanaya Macheel, Hakyung Kim, Alex Harring, Michelle Fox and Brian Evans contributed reporting More

FA Playbook

The share of Americans who think gold is the best long-term investment almost doubled in 2023, to 26%, according to a recent Gallup poll.
The share who prefer stocks declined to 18%.
However, stocks are the better wealth generator over long time horizons, according to financial advisors.
Gold is typically viewed as a safe haven during times of fear.
The U.S. is currently absorbing the fallout from higher interest rates and recent banking turmoil, while eyeing the possibility of recession and a high-stakes debt-ceiling standoff.

Carla Gottgens | Bloomberg | Getty Images

Americans are upbeat on gold and have soured on stocks — perhaps to their detriment.
Twenty-six percent of Americans ranked gold as the best long-term investment in 2023, almost double the 15% who thought so in 2022, according to a recent Gallup poll.

The share surpassed that of stocks: 18% of Americans ranked stocks as the top long-term holding, down from 24% last year, according to the survey.
It was the first time since 2013 that their perception of stocks was below that of gold. Both ranked behind real estate.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

While Americans were asked to gauge sentiment about the long term, public perception is guided more by short-term swings in investment performance, said Gallup, which polled a random sample of 1,013 adults between April 3 and 25.
And that recency bias can be dangerous for investors saving for a goal like retirement, which may be decades away.
“As a long-term investment, [gold] is a very poor solution,” said Charlie Fitzgerald, a certified financial planner and principal of Moisand Fitzgerald Tamayo in Orlando, Florida.

“It’s more like a speculation,” he added.

Stocks beat gold over the long term

Stocks generally serve as the long-term growth engine of an investment portfolio, financial advisors said.
The S&P 500 Index of stocks had a 10.43% average annual total return between 1970 and 2022, according to an analysis by Securian Asset Management. Gold had a 7.7% return over the same period. (After the U.S. gold standard ended in 1971, the price of gold was no longer fixed, making the early 1970s a good starting point for a price comparison.) 
The price of gold, which is often viewed as a safe haven, typically jumps during times of fear and economic malaise. For example, gold prices surged to multiyear highs in the early days of the Covid-19 pandemic, and spiked following Russia’s invasion of Ukraine.
The SPDR Gold Shares ETF (GLD) — an exchange-traded fund that tracks gold prices — is up 8.6% so far in 2023. The S&P 500 is up 7.6%.
Investors’ enthusiasm for gold comes amid recent turmoil in the banking sector and as the Federal Reserve has raised interest rates aggressively since early last year, to put a lid on high inflation. The Fed, the U.S. central bank, expects the country to tip into a mild recession later this year.
Meanwhile, 2022 was Wall Street’s worst showing since 2008, as the S&P 500 fell by more than 19%. U.S. bonds had their worst year in history.
A debt-ceiling standoff means the U.S. is also staring down the possibility of not being able to pay its bills within weeks — which would be a first in the nation’s history and likely to trigger economic chaos.
“Gold is doing well now because of the current economic condition,” said Ivory Johnson, a CFP and founder of Delancey Wealth Management, based in Washington.

Johnson, a member of CNBC’s Advisor Council, has been recommending more gold to clients over the past year or so.
However, it’s more of a short-term holding — a hedge for investors when gross domestic product (a measure of U.S. economic output) and inflation are both decelerating, as they are right now, Johnson said. If GDP starts to rebound, he’d generally recommend dumping gold and instead buying growth stocks.
“Gold is not a long-term investment,” Johnson said. “It’s not something you just put in the portfolio and keep it there.” More

It has been a torrid 18 months for investors who bet on tech. Softbank, a Japanese investment firm that epitomised the 2010s boom in venture-capital funding for companies with rapid-growth ambitions, is still smarting from the shift to a world of higher interest rates and lower corporate valuations. But there is one area in which the firm, run by Son Masayoshi, its charismatic founder, wants to peek above the parapet: investments in artificial intelligence (ai).The advances of generative-ai platforms, such as Chatgpt, have left just about every investor discussing what to make of the incipient industry, and which firms it might upturn. Mr Son sees parallels with the early period of the internet. Generative ai could provide a new pipeline of initial public offerings—and the foundation for the next generation of mega-cap tech firms. Investors face two questions. The first is which frontier technologies will make market leaders a fortune. That is difficult enough. The second, establishing whether the value will accrue to upstarts backed by venture capital or existing technology giants, is at least as tricky. Nobody knows yet if it is better to have the best chatbot or plenty of customers; having a head start in a whizzy new tech is not the same as being able to make money from it. Indeed, lots of the value of revolutionary innovation is often captured by existing giants. Alphabet, Amazon and Meta are three of the seven largest listed companies in America, worth a combined $3.3trn. They were founded between 1994 and 2004, emerging at a time when internet technology was new and people were spending an increasing amount of time online. Alibaba, a Chinese e-commerce giant, is another similar example (Softbank’s early $20m stake in the company helped cement Mr Son’s reputation as an investor). Spotting tech trends, and developing the best platforms, generated a gargantuan amount of value for early and even not-so-early investors. Legacy firms struggled to jump on the bandwagon. Will the story be the same this time around? The insights of Clayton Christensen, a management guru who pioneered a theory of innovation just as the internet giants were bursting onto the scene in the 1990s, can provide a useful guide. Christensen noted that smaller firms often gain traction in low-end markets and entirely new ones, which the largest incumbents eschew. The incumbents focus on deploying new technology for their existing customers and lines of business. They are not incompetent or ignorant of technological progress, but they follow the seemingly correct path from a profit-maximising perspective—until it is too late and they are fatally undermined. Investors like Mr Son, excited about the future of startups that focus on ai, are implicitly presuming that a period of disruptive innovation is under way. But most of the recent excitement about generative-ai platforms has focused on their potential as a new technology to be deployed, not as companies which could open up brand new markets. And in the case of other recent technological innovations, incumbents have won the day. Elad Gil, a venture capitalist, has noted that the value of previous advances in machine learning, the broader category of which generative ai is a part, have accrued almost entirely to incumbents. The early internet startups have benefited, as have Microsoft and chip firms like Nvidia and Micron. The earlier stages of machine learning produced no listed firms that might be considered the Amazon or Google of their niche. Christensen’s insights make clear that revolutionary innovation does not always end up being revolutionary in mere business terms. Yet existing tech companies are now spending enormous sums on ai, suggesting they should be well-placed if the tech does turn out to be revolutionary. It is possible that an investment in a broad index fund tracking existing listed tech firms will end up outperfoming the equivalent investment in private, strictly ai-focused startups. Theories about why innovation is sometimes disruptive and sometimes not are more often discussed by students of business and management than stockpickers. But the difference between the two possibilities is crucial in assessing whether the next generation of listed tech companies with market capitalisations in the hundreds of billions of dollars is to be found among private ai firms. As things stand, it looks more likely that the market value of the technology will end up as a new string to the bow of already giant tech firms. More

The IRS had flagged more than 1 million tax returns by early March as being filed by potential identity thieves, the U.S. Department of the Treasury said.
Identity theft has been a growing problem, and the IRS has stepped up its security measures.
Taxpayers can take preventative measures, such as requesting an Identity Protection Personal Identification Number ahead of tax season.

Pgiam | Istock | Getty Images

The IRS flagged more than 1 million tax returns for potential identity theft during the 2023 tax season, according to the U.S. Department of the Treasury, signaling that such fraud continues to be a pervasive problem for taxpayers.
Tax-related identity theft occurs when criminals use a taxpayer’s personal information to file a return in their name to claim their federal tax refund.

The IRS identified nearly 1.1 million tax returns as potentially fraudulent as of March 2, according to a Treasury report issued to the public Tuesday that analyzed data partway through the filing season. The associated refunds were worth about $6.3 billion.
The IRS had confirmed 12,617 of the tax returns were fraudulent as of the same date in March, Treasury reported. That figure is up from 9,626 tax returns at the same time in 2022.
More from Personal Finance:Black taxpayers more likely to face audits, IRS confirmsSocial Security, federal salaries at risk in debt ceiling standoffTurboTax payments for $141 million settlement set to begin
Tax-related identity theft has been a problem since about 2004-05, and it “only got worse” since then, said Nina Olson, executive director and founder of the Center for Taxpayer Rights.
“It went from being a one-off [thief] ripping off someone’s Social Security number to a whole scheme and organized crime,” Olson said.

Identity theft was the most prevalent type of fraud that consumers reported to the Federal Trade Commission in 2022. A separate report issued last year by the Identity Theft Resource Center suggested that identity crime jumped to an all-time high in 2021.
The IRS increased the number of filters it uses to identify potentially fraudulent tax returns since the 2022 tax season. The agency used 236 filters during the recent tax season, compared with 168 filters last year, Treasury said.

Tax returns identified as fraudulent by these IRS filters are held during processing until the IRS can verify the taxpayer’s identity.
“They’re trying to crack down … to make sure you’re [the one] actually filing,” said Dan Herron, a certified public accountant and certified financial planner based in San Luis Obispo, California.
Sometimes, the system inadvertently catches returns that aren’t fraudulent, though.
One of Herron’s new clients had been filing a paper tax return every year with a different accountant but filed an electronic return in 2023. The client received an IRS notice in the mail saying that the return had been flagged for fraud. The client had to contact the agency to verify their identity — delaying the issuance of a tax refund by several weeks, Herron said.
“It’s not a perfect system, but it’s going in the right direction,” Herron, founder of Elemental Wealth Advisors, said of the IRS systems.

How to protect yourself from tax-related identity theft

Imelenchon | Istock | Getty Images

Taxpayers may not know they’re the victim of tax-related identity theft until they try to file a return online and learn that a return was already filed using their Social Security number. The IRS may also send a letter saying it identified a suspicious return using your SSN, for example, among other telltale signs.
Taxpayers can still claim a refund if this happens. But they’ll have to take additional steps to prove their identity to the IRS, and their refund will likely be delayed as a result.
Perhaps the best way for taxpayers to prevent identity theft is to request an Identity Protection Personal Identification Number (IP PIN) directly from the IRS, Olson said.  
The IP PIN is a six-digit number assigned to eligible taxpayers at the start of each filing season. It’s known only to the taxpayer and, once issued, is needed when filing a tax return as an authentication measure.

A tax return filed by a scammer without the associated IP PIN would not be processed, Olson said. She recommends taxpayers who want an IP PIN request one in the latter part of the calendar year, ahead of the tax season, and that they keep it handy.
The IRS issued 802,449 total IP PINs to taxpayers as of March 4, according to the Treasury’s report.
Taxpayers can also reduce their risk by trying to file a return early in the tax season, experts said. The IRS also recommends several online security measures tied to computers and mobile phones, digital passwords, multifactor authentication and avoiding suspicious e-mail links or attachments.
The IRS also never initiates contact with taxpayers by e-mail, text or social media to request personal or financial information, and never calls to threaten lawsuits or arrest, the agency said.

What to do if you’re a victim of tax ID theft

The IRS recommends victims of tax-related identity theft take a few important steps:

Complete IRS Form 14039, Identity Theft Affidavit, if your e-file return is rejected because of a duplicate filing using your Social Security number. Continue to pay your taxes and file your tax return, even if it must be by paper. Attach the identity theft form to your paper return.
Respond immediately to any IRS notice.
File a complaint with the FTC at identitytheft.gov.
Contact one of the three major credit bureaus (Equifax, Experian or TransUnion) to place a fraud alert on your credit records.
Close any financial or credit accounts opened by thieves. More

Tether said it would invest 15% of its net profit into bitcoin to “diversify” the reserves that back its USDT token, which aims to stick to a 1-to-1 peg to the U.S. dollar.
That would amount to roughly $222 million, based on the company’s last attestation report, which provides a breakdown of the assets that make up its USDT reserves.
USDT is the largest stablecoin in the market, with a circulating supply of more than $82.8 billion, according to CoinGecko data.

Paolo Ardoino, Tether’s chief technology officer, said the company estimates that the excess reserve will increase by $700 million in the current quarter, which is not yet over.
Justin Tallis | Afp | Getty Images

Cryptocurrency giant Tether on Wednesday said that it’s going to purchase hundreds of millions of dollars’ worth of bitcoin to back the world’s largest stablecoin.
The company said it would invest 15% of its net profit into bitcoin to “diversify” the reserves that back its USDT token, which aims to stick to a 1-to-1 peg to the U.S. dollar.

related investing news

21 hours ago

That would amount to roughly $222 million, based on the company’s last attestation report, which provides a breakdown of the assets that make up its USDT reserves.
Tether began revealing it was making gains from its USDT operation in February, declaring a net profit of $1.48 billion in March and taking its total excess USDT reserves to $2.44 billion.
USDT is the largest stablecoin in the market, with a circulating supply of more than $82.8 billion, according to CoinGecko data. It competes with Circle’s USD Coin and Binance’s BUSD.
Stablecoins are used by traders to move in and out of different cryptocurrencies without converting money back into fiat currencies.
“The decision to invest in Bitcoin, the world’s first and largest cryptocurrency, is underpinned by its strength and potential as an investment asset,” Tether CTO Paolo Ardoino said in a statement.

“Bitcoin has continually proven its resilience and has emerged as a long-term store of value with substantial growth potential. Its limited supply, decentralized nature, and widespread adoption have positioned Bitcoin as a favored choice among institutional and retail investors alike.”
The move would make Tether a major bitcoin holder, following moves from multiple notable investors like Paul Tudor Jones and MicroStrategy boss Michael Saylor to accumulate huge stockpiles, in the belief that the token is immune to the effects of currency depreciation and inflation.
Analysts and investors have previously told CNBC that bitcoin could get a boost this year due to the influence of so-called “whales” — market players with significant financial firepower, which enables them to buy up huge sums of tokens.
Tether’s methods to maintain a $1 value for its token have drawn controversy in the past because of concerns over the quality of its reserve assets. Previously, the company held a great deal of its reserves in commercial paper — a form of short-term, unsecured debt issued by companies. This is seen as less safer than other forms of debt, such as U.S. Treasury bills.
Tether sought to allay investor fears by rotating out of commercial paper and replacing these fund holdings with only U.S. government debt securities.
In February, the company said it had whittled down its commercial paper holdings to zero.
USDT and its issuer remain a source of contention in the crypto market. The U.S. Department of Justice is reportedly investigating executives at Tether over possible bank fraud.
Stablecoins were already a hot-button issue for regulators, who have been scrambling to figure out how to keep the industry in check after the demise of several notable firms in the space. More

Unbacked tokens like bitcoin and ether aren’t underpinned by underlying assets and have “no intrinsic value,” while trading in them should be regulated like gambling, U.K. lawmakers said in a report.
A U.K. Parliament committee said it was concerned by government proposals to regulate consumer trading of crypto as a financial service.
In February, the government laid out plans to regulate crypto assets, which could pave the path for trading platforms and other firms to get licenses to operate in the country.

Bitcoin, the world’s largest cryptocurrency, has been stealthily rising in 2023.
Chris Ratcliffe | Bloomberg | Getty Images

Trading in cryptocurrencies is akin to gambling and should be treated as such, British lawmakers said.
Unbacked tokens like bitcoin and ether aren’t underpinned by underlying assets and have “no intrinsic value,” lawmakers on the U.K. Treasury Select Committee said in a report published Tuesday.

With a combined market capitalization of $737.7 billion, bitcoin and ether alone account for two thirds of all cryptocurrencies.
The events of the past year in the crypto industry — from the downfall of crypto exchange FTX to the decline of stablecoin experiment Terra — have drawn heightened scrutiny from regulators, who are concerned by negative effects on consumers.
In its Tuesday report, the Treasury Select Committee said the heightened volatility and potential to lose huge sums of money mean that cryptocurrencies pose significant risks to consumers, the committee said.
“Given retail trading in unbacked crypto more closely resembles gambling than a financial service, the MPs call on the Government to regulate it as such,” the lawmakers said.
“The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west,” Harriett Baldwin, chair of the Treasury Select Committee, said Tuesday. “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry,’ she added.

“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such. By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”
Around 10% of U.K. adults hold or have held cryptocurrencies, according to British tax agency HM Revenue & Customs.
The Treasury committee said it was concerned by government proposals to regulate consumer crypto trading as a financial service. This, lawmakers said, would create a “halo” effect that leads people to believe crypto trading is safe and protected, when this is not the case.
In February, the government laid out plans to regulate crypto assets and opened its suggestions up for a consultation whose window closed on Apr. 30.
Such a regulatory framework would potentially allow crypto firms to apply for bespoke licenses to operate in the U.K — historically, a major point of contention for U.K. firms. The Financial Conduct Authority, which is the de facto regulator for crypto firms under the country’s money laundering regime, has set a high bar for approval of crypto licenses.
Blair Halliday, U.K. managing director for top U.S. crypto exchange Kraken, said: “We fundamentally disagree with the Treasury Select Committee’s conclusion that cryptoassets have no intrinsic value. It’s regrettable the committee does not support the opportunity the UK has to be a true global leader in our rapidly developing industry.”
“We strongly believe the U.K. Government and FCA are on the right path to developing proportionate regulations which support innovation whilst establishing necessary guardrails and customer protections,” Halliday added. “Kraken will continue to collaborate with legislators to help achieve these goals.”
In April, a top U.K. government official told CNBC that he expected to see specific regulation for crypto in the U.K. in the next 12 months.
WATCH: Three decades after inventing the web, Tim Berners-Lee has some ideas on how to fix it More

Signage outside Western Alliance Bank headquarters in Phoenix, Arizona on March 13, 2023.
Caitlin O’Hara | Bloomberg | Getty Images

Check out the companies making the biggest moves in premarket trading:
Western Alliance — Shares popped 12% premarket after Western Alliance said its deposit growth for the current quarter exceeded $2 billion as of May 12, up from the $1.8 billion in deposit growth for the quarter through May 9.

related investing news

an hour ago

TJX Companies — Shares fell about 1% after the retailer reported a revenue miss before the market open. First-quarter revenue came in at $11.78 billion, less than the $11.82 billion expected from analysts polled by Refinitiv. TJX also guided for second-quarter earnings per share of 72 cents to 75 cents, versus the 79 cents anticipated by analysts. Full-year guidance also fell short of estimates, even as first-quarter EPS topped estimates.
Target — The big-box retailer’s stock was down less than 1% in volatile trading as the company surpassed earnings expectations in the fiscal first quarter, even as sales barely grew year-over-year. Target also said it expects sales to remain sluggish in the current quarter, marked by a single digit decrease in comparable sales. The retailer stuck with its previous full-year guidance.
Zions Bancorporation — The Salt Lake City-based bank added 4.7% as regional banks moved higher in premarket trading, led by Western Alliance. The SPDR S&P Regional Banking ETF was up 1.7%.
Keysight Technologies — Shares soared 7.8% following an earnings beat after the bell Tuesday. The tech company reported adjusted earnings per share of $2.12 for its fiscal second quarter, topping the $1.95 expected by analysts, per StreetAccount. It guided for between $2.00 and $2.06 EPS for the current quarter, above analysts’ forecast of $1.96.
Tesla — Shares rose 1.5% Wednesday premarket. The company held its annual shareholder meeting Tuesday, during which CEO Elon Musk announced the company would deliver its first Cybertrucks later this year and would start to advertise.

Wynn Resorts — The casino operator added 2.7% after an upgrade to overweight from equal weight at Barclays. The Wall Street firm cited the continuing recovery in Wynn’s Macao properties and boosted its price target to $135 from $120, suggesting 31% upside from Tuesday’s close.
EVgo — Shares sank nearly 9% premarket following the EV charging network operator’s announcement late Tuesday of a $125 million offering of its common stock. JPMorgan, Evercore and Goldman Sachs are underwriting the offering.
Doximity — The medical software stock dropped nearly 10% premarket, one day after the company issued weak guidance for the current quarter. Doximity said it expects between $106.5 million and $107.5 million in revenue for the fiscal first quarter, less than the $111.8 million anticipated by analysts polled by FactSet. It guided for $40 million in adjusted EBITDA, below the $45.4 million expected.
— CNBC’s Yun Li and Hakyung Kim contributed reporting. More

Blockchain firm Ripple has acquired Metaco, a Swiss crypto custody services firm, the company announced Wednesday.
The deal is expected to bolster Ripple’s product suite and give it access to an attractive roster of clients that includes Citi and BNP Paribas.
It will also help the company increase its presence overseas at a time when it is fighting a lawsuit from the Securities and Exchange Commission.

Ripple CEO Brad Garlinghouse speaks during the Milken Institute Global Conference in Beverly Hills, California, on Oct. 19, 2021.
Kyle Grillot | Bloomberg | Getty Images

Blockchain firm Ripple said Wednesday it has acquired Metaco, a Swiss firm that holds digital assets securely on behalf of clients, in a bid to expand its international footprint and broaden its range of services.
News of the deal, one of the largest acquisitions in the crypto industry in the past year or so, comes as the San Francisco-based startup continues to contest a lawsuit from the United States Securities and Exchange Commission.

related investing news

18 hours ago

It also comes as the crypto industry as a whole is facing a host of challenges, from higher interest rates and tighter funding conditions to mass layoffs and dwindling company valuations.
“This is the largest deal we’ve seen in the last year,” Brad Garlinghouse, CEO of Ripple, told CNBC on a call Tuesday.
Ripple invested $250 million of cash off its own balance sheet to fund the acquisition, Garlinghouse said.
“At a time when others are closing their doors or facing layoffs, I think it’s a real important signal for the industry, it’s also a signal that ripple’s in a strong position — we’re going to play offense,” he added.
Ripple’s boss said the deal was a sign that it was still possible to make sizable deals even with the pressures the broader market is facing.

From crypto winter to crypto spring?

Garlinghouse said the deal would help the company increase its presence overseas at a time when the Securities and Exchange Commission is taking tough actions against major industry players — Ripple included.
The crypto titan, valued at $15 billion in its most recent private round of financing, has been faced with a great deal of regulatory uncertainty after the SEC sued the company and two of its executives accusing them of unregistered securities.
The regulator’s main assertion is that XRP, a cryptocurrency Ripple is closely associated with, is akin to a security which should have been registered with the agency before being issued and sold to investors.
Ripple, for its part, denies XRP should be treated as a security.
Founded in 2015 in Switzerland, Metaco offers a range of services aimed at helping financial institutions store, trade, issue and manage digital currencies in a secure manner.
“We’ve been partnering with that segment — banks, payment providers, in our whole history,” Garlinghouse said, adding Metaco is “a good fit in terms of the strategic opportunity.”
“There’s a lot of deals people have tried to do during this crypto winter — I think this will really be a mark of a crypto spring.”
Secure custody of crypto in segregated accounts has become a heightened priority for financial institutions seeking to make a play in the industry in the wake of the collapse of FTX and numerous other notable crypto platforms.
Metaco counts several major financial firms as clients including Citi, BNP Paribas, BBVA and Societe Generale.

SEC lawsuit outcome expected in ‘months’

Crypto companies have been playing a game of poker with the U.S. SEC, making bold threats to leave the country following tough enforcement actions from the agency.
Major players are hoping the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.
Garlinghouse said last week that the firm will have spent $200 million in total defending itself against the SEC lawsuit.
The company’s legal battle with the U.S. agency is expected to draw to a close sometime later this year.
In an interview with CNBC Tuesday ahead of the news, Garlinghouse said he expects the firm will get an outcome in the legal fight in a matter of months.
“I think the most likely scenario is that we’ll hear [a decision] sometime either two to four or five months from now,” Garlinghouse said.
Gary Gensler, chair of the SEC, has made clear the regulator has no intention of backing down from its aggressive enforcement actions in the crypto space. Gensler has insisted that existing securities laws are already a good fit for crypto.
Some industry executives, however, believe the regulator’s actions are misguided. Numerous crypto industry insiders have been calling for a clear regulatory framework from the U.S. Congress to help give companies clarity over how they can operate in a way that’s legally sound.
Ripple is now Metaco’s sole shareholder, the company said. Metaco will continue to remain independent and its CEO Adrien Treccani will stay on as CEO.
“This deal will enable Metaco to leverage Ripple’s scale and market strength to reach our goals and deliver value to our clients at a faster pace,” Treccani said in a statement Wednesday.
“We look forward to continuing to serve unprecedented levels of institutional demand with the utmost excellence in delivery, as our clients have come to expect.”
WATCH: Ripple will have spent $200 million fighting SEC lawsuit, CEO says More