Crypto Asset Risk Disclosure
Introduction
Trading in Crypto Assets entails significant risk of financial loss. You should not commit funds to trading in Crypto Assets that you are not prepared to lose entirely. Market prices for Crypto Assets can be volatile and highly unpredictable. Whether the future market price for a Crypto Asset will move up or down is speculative and unknowable. Moreover, some Digital Securities may be priced under five dollars per share and may be considered low-priced securities or penny stocks.
You should not trade in Crypto Assets unless you understand the associated risks. This Risk Disclosure discusses some of the principal risks of trading in Crypto Assets, but it does not and cannot describe every risk or consideration involved in holding, trading, or engaging in transactions in Crypto Assets and low-priced Digital Securities.
For the purposes of this disclosure, a “Crypto Asset” is as defined under the joint interpretive release issued by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), titled Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets(hereafter “the Interpretation”): Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets, SEC Release Nos. 33-11412 and 34-105020 (effective March 23, 2026). https://www.sec.gov/files/rules/interp/2026/33-11412.pdf
The Interpretation defines a Crypto Asset as any digital representation of value that is recorded on a cryptographically secured distributed ledger. The Interpretation establishes a five-category taxonomy for classifying crypto assets—digital commodities, digital collectibles, digital tools, stablecoins, and digital securities—of which only digital securities are treated as securities under the federal securities laws.
For the purposes of this disclosure, a “Security Crypto Asset” or “Digital Security”is a digital representation of value that may function as a medium of exchange or as an investment vehicle and meets the definition of a security. It is recorded on, and can be electronically transferred and stored using, distributed ledger technology. To qualify as a "security" under this definition, the asset must meet the definition of a “security” under the Security Act of 1933.
Risks of trading digital securities include, but are not limited to, the following:
- Market Risk
Market Prices for Crypto Assets and Digital Securities can be volatile and highly unpredictable. Volatility in the price of Crypto assets and Digital Securities may increase your exposure and your risk of experiencing significant losses. These risks and exposure may be significantly greater than those you would face in trading traditional assets. Whether the future market price for a Crypto Asset or Digital Security will move up or down or even sustain a market value is speculation and unknowable. We make no representations or warranties about whether a Crypto Asset or Digital Security will always continue to trade in the secondary trading market. - Price Risk
There is not currently a proven valuation methodology for reliably and accurately analyzing the valuation of a Crypto Asset, Digital Security, or its related blockchain network. While traditional valuation methodologies are often applied to Crypto Assets and Digital Securities, these assets have some key distinctions in relation to traditional assets. For example, many Crypto Assets and Digital Securities their related networks derive value from network effects, whereby once a critical mass of users or asset holders is reached, the value of an additional user or holder joining the network may have an outsized impact on the value of the network as a whole. This, along with other unique characteristics of Crypto Assets as a class, makes it difficult to accurately assess the valuation of any Crypto Asset, Digital Security or its related network. Crypto asset and Digital Security prices may be extremely volatile. A customer’s decision to buy, sell or hold a particular Crypto Asset or Digital Security for a short period of time may result in a significant or complete loss. Many Crypto Assets or Digital Securities are subject to great amounts of investor speculation and therefore, frequent and, at times, large price fluctuations. Additionally, because the volume of asset units in circulation may be small, one trade or a group of trades may have a significant impact on the price of a Crypto Asset or Digital Security. This could result in a large holder of a particular Crypto Asset or Digital Security having an outsized influence over its price, which may give such a holder the ability to manipulate the price of that Crypto Asset or Digital Security. - Liquidity Risk
Markets for Crypto Assets or Digital Securities can at times become “illiquid,” which means there can be a scarcity of persons who are willing to trade at any one time, regardless of price. Thinly traded or illiquid markets have potential increased risk of loss because they can experience high volatility of prices and in such markets market participants may find it impossible to liquidate market positions except at very unfavorable prices. There is no guarantee that the markets for any Crypto Assets or Digital Securities will be active and liquid or permit you to establish or liquidate positions in the Crypto Assets or Digital Securities when desired or at favorable prices. If an investor holds a certain Crypto Asset or Digital Security and there is not sufficient demand for that Crypto Asset or Digital Security, an investor may not be able to sell such Crypto asset or Digital Security and have liquidity over his, her or its Crypto asset or Digital Security. - Legal Risk
The legality of Crypto Assets or Digital Securities and their trading may not be clear and may vary under the laws of different jurisdictions throughout the world. This can mean that the legality of holding or trading Crypto Assets or Digital Securities is not always clear. Whether and on what basis a Crypto Asset or Digital Security may constitute property, an asset, or a right of any kind might vary from one jurisdiction to another. You are responsible for knowing and understanding how the laws applicable to you or your property, your rights, your assets, or to lending address, limit, regulate, and/or tax the Crypto Assets or Digital Securities you trade or hold. - Crypto Asset Technology Risks
The technology on which we rely on to execute and settle trades of crypto assets or digital securities, including communications between our systems and the blockchains or distributed ledgers underlying these crypto assets or digital securities, may not function properly. This may be because of problems internal to our systems, including a failure relating to API integrations, or problems outside of our control, responsibility and ability to guard against or remedy, including a failure of ProCap to properly safeguard “private keys'' providing control over such crypto assets or digital securities, cyber-attacks or external security breaches, or malicious attacks against the relevant blockchain. Any such malfunction may adversely affect the ability of our customers to execute trades of crypto assets or digital securities on our ATS or access their crypto assets or digital securities held at ProCap. Moreover, over-the-counter marketplaces, execution venue(s) or order matching system(s) may not function properly in cases of increased trading volume. Furthermore, ProCap’s security systems and custodial procedures may have undetected defects that could make them vulnerable to malicious attacks, hacking and the potential theft of crypto assets or digital securities held at ProCap, and we will have no control or responsibility over such failure or any ability to remedy or guard against such attacks. If the technology used by us does not work as anticipated, trading of crypto assets or digital securities on our system could be limited or even suspended, and it is possible that your crypto assets or digital securities may be stolen or become inaccessible. - Crypto Asset or Digital Securitiy Vulnerabilities Risks
Your Crypto Assets or Digital Securities are held at ProCap, and any failures in maintaining the security of those digital assets are outside of our control and we will not be able to remedy them. Furthermore, we do not maintain and are not responsible for the safety and security of the blockchain networks on which ownership of and transactions in your Crypto Assets or Digital Securities will be recorded, and the protection of these blockchains against attack and theft, and are therefore unable to mitigate these risks on your behalf. Specifically, these blockchain networks are vulnerable to hackers and cyber-attacks, and may themselves be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Crypto Assets or digital securities or the decline in value of Crypto Assets or digital securities. Transactions in Crypto Assets or Digital Securities on these blockchains may also be irreversible, including mistaken transactions or theft. The blockchain technologies on which Crypto Assets or Digital Securities are ultimately recorded are also susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, selfish-mining attacks and race condition attacks. Any successful attacks present a risk to these blockchains’ expected proper execution and sequencing of Crypto Assets or Digital Securities transactions and expected proper execution and sequencing of contract computations, which could have an adverse effect on the value of the underlying Crypto Assets or Digital Securities. Although there are ways to limit such risks, including through the use of certain consensus mechanisms that could reduce the risk of mining attacks, there can be no assurance that such measures, if implemented, will successfully defend against known or novel mining attacks, and in any event, we are unable to take such measures ourselves and therefore cannot control, mitigate, and do not take responsibility for any of the foregoing risks. - Crypto Asset or Digital Security Wallet Risks
Moving and storing Crypto Assets or Digital Securities in your Wallet exposes your Crypto Assets or Digital Securities to risks of total loss from, among others things, security breaches from cyber-attacks that hack and steal Crypto Assets or digital securities, electronic or technological failures that impede or prevent market access and market performance, recordkeeping errors and any insolvency, bankruptcy or material financial losses of ProCap. - Risk of Crypto Asset or Digital Security Account Freeze
Correspondent BD, any marketplace, trading venue(s) or order matching platform(s) may inform ProCap of a problem who may freeze your Crypto Asset or Digital Security Account in the event that you are believed to be engaged in suspicious activity or if you are in breach of acceptable trading practices. If your Crypto Asset or Digital Security Account is frozen by ProCap, you will not be able to trade or to make transfers to or from your Crypto Asset or Digital Security Account. This will also result in the cancellation of your open orders. - Market Default Risk
Procap has no financial responsibility or liability for any failure of market participants to honor their financial obligations; there is always a risk that one or more market participants will renege, default, or otherwise fail to honor their financial obligations or will be unwilling or unable to abide by the terms of their agreements. In the event that risk materializes, market participants can and likely will incur financial losses or reductions in gains from their own open positions in Crypto assets or Digital Securities. - Conflicts of Interest
We may charge fees for trading and therefore will benefit from trading activity (sometimes called volume) regardless of whether the trading is profitable to you. We and our personnel have certain actual or potential conflicts of interest related to the decision to support or not support a Crypto Asset or Digital Security or increase or decrease the scope of the services made available for such. [Correspondent BD] nor ProCap trade for their own accounts. However, our personnel may place preapproved trades where you may be a counterparty to that trade without your knowledge. ProCap may receive payments for order flow from third party recipients. - Risk of Lack of Public Information
Both Crypto Assets and Digital Securities may not have available public information. Most large, publicly-traded companies file periodic reports with the U.S. Securities and Exchange Commission (SEC) that provide information relating to the company’s assets, liabilities and performance over time. In contrast, information about Crypto Assets or digital securities can be extremely difficult to find, making them more likely to be the subject of an investment fraud scheme and making it less likely that quoted prices in the market will be based on full and complete information about the company. Reliable information regarding issuers of Crypto Assets or Digital Securities, their prospects, or the risks associated with investing in such securities may not be available. Certain issuers of Crypto Assets or Digital Securities have no obligation to provide information to investors. Some issuers register securities with the SEC and may provide regular reports to investors. Others however may not be required to maintain such registration or provide such reports. Crypto assets or Digital Securities may continue to be traded if issuers are delinquent in their reporting obligation to the SEC or other federal or state regulatory agencies.
