RISKS & IMPORTANT DISCLOSURES
Last changed: March 17, 2019
Volatility of Cryptoassets
Digital currencies and blockchain assets represent a speculative investment and involve a high degree of risk. As relatively new products and technologies, digital currencies and blockchain assets have not been widely adopted as a means of payment for goods and services by major retail and commercial outlets. Conversely, a significant portion of the demand for digital currencies and blockchain assets is generated by speculators and investors seeking to profit from the short or long-term holding of digital currencies and blockchain assets. The relative lack of acceptance of digital currencies and blockchain assets in the retail and commercial marketplace limits the ability of end-users to pay for goods and services with digital currencies and blockchain assets. A lack of expansion by digital currencies and blockchain assets into retail and commercial markets, or a contraction of such use, may result in increased volatility.
The Managing Member have substantial discretion in determining the value of the Fund’s assets and liabilities, whether or not a public market exists for Digital Assets of the same class or type. While some marketable Digital Assets are valued based on prices reported in the public markets, other investments may be more thinly-traded or subject to irregular trading activity. Determinations on the value of certain investments, and how to value assets and liabilities as to which limited prices or quotations are available, are based on the Managing Member’s recommendations or instructions to the Administrator. If the Managing Member’s valuation of any such Digital Assets is inaccurate, the Managing Member might receive an Performance Allocation that is greater than the allocation to which they would otherwise be entitled. The Managing Member may not be able to effectively manage the Fund’s investment portfolio, diversification and other internal guidelines and risks if the Fund’s portfolio is inaccurately valued. Any such inaccuracy could affect the Members adversely. Additionally, any reduction in the value of any assets or increase in the value of any liabilities held by the Fund would reduce the amount of Performance Allocation to which the Managing Member is entitled.
Lack of Diversification
Although the Fund will structure its portfolio so that investments (both individually and in the aggregate) have desirable risk/reward characteristics and so that the Fund may be able to satisfy Members’ requests for withdrawals, the Fund is not subject to any restrictions with respect to investments in any particular issuer, industry, geography or type of investment. The Fund may have a non-diversified portfolio and may have large amounts of Fund assets invested in a small number of investments. Such lack of diversification substantially increases market risks and the risk of loss associated with an investment in the Fund.
Note: All Fund risks are not noted here and can be found in length in the Offering Documentation
Custody of Fund Assets
The Managing Member maintains custody of several of the Fund’s digital currencies on or within the currency exchanges and cold-storage wallets utilized by the Fund. Several of the Fund’s exchanges may be unable to provide for “cold wallet” storage. Such exchanges and wallets have developed security systems to maintain confidential access to the private keys that have been generated and which control movement of the currencies. The Managing Member may not be able to obtain control of the private keys generated by the exchanges utilized by the Fund, because each exchange may use different methodologies and security systems. However, the Managing Member may utilize offline “cold wallet” storage when, in its sole discretion, such storage is possible and practicable. The Managing Member employs a comprehensive due diligence process to select exchanges and wallets that it determines have developed sophisticated security systems and will continue to reevaluate the due diligence process and the security systems of the various exchanges and wallets. However, the systems and methodologies of the exchanges and wallets utilized by the Fund may be subject to exposure from hacking, malware and general security threats. The Managing Member is not liable to the Fund or to Members for the failure or penetration of the security system absent gross negligence, fraud or criminal behavior.
Digital currencies and Digital Assets can be illiquid. Exchanging cryptocurrencies and blockchain assets for a specific fiat currency may be impossible at any given moment.
Illiquidity may be caused:
- Government regulation;
- Pre-ICO restrictions;
- Lockup periods; or
- Limited market for the exchange for cryptocurrencies.
It may be illegal, now or in the future, to own, hold, sell or use digital currencies or blockchain in one or more countries, including the United States. Although currently digital currencies and blockchain assets are lightly regulated in most countries, including the United States, one or more countries may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use digital currencies or blockchain assets or to exchange blockchain assets or digital currencies for fiat currency. Such an action may restrict the Fund’s ability to hold or trade digital currencies and blockchain assets and could result in termination and liquidation of the Fund at a time that is disadvantageous to Members or may adversely affect an investment in the Fund.
2019, INTEP CAPITAL, LLC