Q. What is DeFi Strategies?
A. DeFi Strategies, LLC (“DeFi Strategies'') provides access and exposure to the digital currency asset class and decentralized financial markets in the form of a traditional security without the challenges of buying, storing, and safekeeping digital
currencies directly. With a proven track record, DeFi Strategies’ products operate within the existing regulatory framework, creating exposure for investors in a secure and compliant manner.
DeFi Strategies’ sponsored and managed products include DeFi Value Fund, DeFi Growth Fund, and DeFi Consulting services. The funds and the services are collectively referred to herein as the “Products”. Any Product currently offering share creations is
referred to herein as an “Offered Product”.
*As of June 6, 2021
Q. What are DeFi Strategies’ Investment Products?
A. Shares of the Products are offered to institutional and individual accredited investors in private placement transactions exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Rule 506(c) thereunder. DeFi
Strategies’ diversified Product, DeFi Growth Fund, provides exposure to the top liquid digital assets and currently holds BTC, ETH, BCH, XMR, ADA, DOT, UNI, LINK, MATIC, XLM, VET, FIL, AAVE. This list is not comprehensive.
Each Product’s investment objective is for the value of its shares (based on digital assets per share) to reflect the price performance of such Product’s underlying digital asset(s), less fees and expenses. Modeled after popular commodity
investment products, each Product was created for investors seeking exposure to digital assets through a traditional investment vehicle.
Because each Product does not currently operate a redemption program, their can be no assurance that the value of such Product’s shares will reflect the value of the assets held by such Product, less such Product’s expenses and other liabilities,
and the shares of such Product, if traded on any secondary market, may trade at a substantial premium over, or a substantial discount to, the value of the assets held by such Product, less such Product’s expenses and other liabilities, and such Product may be unable to
meet its investment objective.
Q. Why should I own shares of the Products over purchasing the digital assets outright?
A. DeFi Strategies’ Products provide access and exposure to the digital currency asset class in the form of a security without the challenges of buying, storing, and safekeeping digital currencies directly. The Products are designed to provide
investors with a cost-effective and convenient way to gain investment exposure to digital assets.
A substantial direct investment in digital assets may require expensive and time-consuming arrangements in connection with the acquisition, transfer, security and safekeeping of digital assets. Handling digital assets on one’s own can be risky, as the private keys
that ensure access to an investor’s assets can be susceptible to loss or theft. This potentially exposes one’s digital asset position to partial or total loss, often with limited or no recourse. A substantial direct investment in digital assets may also involve
the payment of substantial fees to digital asset exchanges.
In contrast, each Offered Product’s authorized participant executes large purchase and sale orders through exchanges and over-the-counter transactions to create shares for investors at a blended daily average price based on the respective digital asset’s Coindesk
Price Index or Reference Rate. For more information on the Coindesk Index Provider, please visit their site.
The Products enable investors to avoid the challenges of acquiring, transferring, securing and safekeeping digital assets on their own. In addition to the risks of loss described above, individuals and institutions seeking to directly purchase or sell digital assets may often
transact via unfamiliar intermediaries that in some cases may be unregulated and/or insecure. This often requires investors to transmit funds to jurisdictions where they might not be comfortable. Instead, an investment in the Shares enables investors to pass these tasks onto
DeFi Strategies and its service providers. In addition, unlike many direct investments in digital assets, an investment in the Shares entitles an investor to periodic and current reporting, audited financial statements, tax reporting and institutional-grade custody from
reputable service providers that include the Trust’s sponsor, auditor, counsel and custodian. Collectively, these characteristics make an investment in the Shares convenient for investors and familiar to both them and advisors they may consult in connection with their
investments, such as financial and tax advisors.
Certain of the Products are the only publicly traded investment products in the U.S. that allow investors to gain investment exposure to the Product’s underlying assets in the form of a security that can be held in a brokerage account alongside their other investments
in stocks, bonds and other financial instruments.
Q. What are the Product fees?
A. Each Product charges an annual management fee, which includes the costs associated with administration and safekeeping. The fee is charged based on the total amount of tokens underlying the trust, and accrues daily. The ratio of digital asset(s) to
shares will decay by this management fee over the course of a year. We expect this fee to be the only ordinary recurring expense for each Product.
For further details on each Product’s fees, please review each Offered
Product’s Private Placement Memorandum or each Product’s annual and quarterly reports, as applicable.
|DeFi Value Fund
|DeFi Growth Fund
Q. How are the digital assets underlying each Product’s shares safeguarded?
A. Each Product’s assets are stored in offline storage, or “cold” storage. Funds offered by DeFi Strategies offer investors access to the secure, institutional-grade offline storage solution used by DeFi Strategies and its executives. While we offer a custody solution designed from the ground up for the unique challenges of storing crypto assets, we operate very similarly to traditional custodial services.
Q. What are the tax consequences of owning shares in the Products?
A. Each Product intends to take the position that it is a limited partnership for U.S. federal income tax purposes. Assuming that such Product is a limited partnership, shareholders generally will be treated as if they directly owned their pro rata shares
of the underlying assets held in such Product. Shareholders also will be treated as if they directly received their respective pro rata shares of such Product’s income, and directly incurred their pro rata shares of such Product’s expenses. Most state and local
tax authorities follow U.S. income tax rules in this regard. Prospective investors in such Product should discuss the tax consequences of an investment in such Product with their tax advisors.
Q. Can I purchase shares in the Products with digital assets I already own?
A. Yes. Existing and prospective investors may contribute coins in- kind for shares of DeFi Strategies’ Products. Assuming that each Product is treated as a limited partnership for U.S. federal income tax purposes, such contributions should be a
non-taxable event. All investors should discuss the tax consequences of an investment in DeFi Strategies’s family of Products with their tax advisors and review the section entitled “Certain U.S. Federal Income Tax Consequences” in each Offered Product’s Private Placement Memorandum or each Product’s annual and quarterly reports, as applicable, before investing in a DeFi Strategies Product or considering an in-kind contribution of coins to a Product.
Q. What are the risks of investing in a Product?
A. Investments in the Products involve high degrees of risk, including loss of invested funds. DeFi Strategies Products are not suitable for any investor that cannot afford loss of the entire investment. Carefully consider each Product’s investment
objectives, risk factors, fees and expenses before investing. This and other information can be found in each Product’s private placement memorandum, which may be obtained from DeFi Strategies. Read these documents carefully before investing.
Q. What is an accredited investor?
A. Only accredited investors are eligible to invest in the Offered Products. An accredited investor includes:
- Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level in the current year; or
- Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000 (excluding the value of the person’s primary residence and certain
indebtedness secured by such person’s primary residence).
- Individual investors who hold, in good standing, certain professional certifications and designations and other credentials designated by the Commission as qualifying for accredited investor status.
The Commission designated three certifications and designations administered by the Financial Industry Regulatory Authority, Inc. as qualifying for accredited investor status:
- Licensed General Securities Representative (Series 7);
- Licensed Investment Adviser Representative (Series 65); and
- Licensed Private Securities Offerings Representative (Series 82)
In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors. Of the entities that would be considered accredited investors and depending on your circumstances, the following may be relevant to you:
- Any trust, with total assets in excess of $5 million, not formed for the specific purpose of acquiring shares of an Offered Product, whose purchase is directed by a sophisticated person; or
- Any entity in which all of the equity owners are accredited investors.
For this purpose, a sophisticated person means a person who has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment.
Q. What are my options if I’m not an accredited investor?
A. You can look at our DeFi Consulting family of products here
Q. What are the benefits of adding digital assets to my portfolio?
A. Digital currencies possess many unique qualities. Because digital currencies are borderless, fungible, and accessible, they may be a great way to diversify your portfolio. Additionally, because of these unique qualities, digital currencies have historically been uncorrelated with other more traditional asset classes, such as stocks and bonds. In a market environment with geopolitical uncertainty and volatility, investors may benefit from a non-correlated asset class.
Q. What is the lockup / liquidity of the fund?
A. We have commitment periods and early withdrawl fees in place to protect the fund so that investments the funds is counting on for a long period of time don't suddenly become short-term investments -- and to compensate the fund if they do. For a buy and hold strategy to be fully realized, the underlying assets must remain dormant.
||Early Withdrawal Fee
|DeFi Value Fund
|DeFi Growth Fund
Q. What happens if the fund dissolves?
A. The trustee will liquidate all cryptocurrencies and return the funds back to the investors in proportion to their respective investment accounts (described in more detail in the Fund Agreement).
Q. How can I see the performance of my investment?
A. Investors in the fund have access to an Investor Portal where they can view their capital account and investment returns.
Q. How do I make an additional investment, after I’ve already made an initial one?
A. You need to fill and sign an Additional Subscription Agreement. This document can be requested from the Investor Portal.
Q. Where can I find more information?
A. For more information or follow-up questions, please contact us directly at email@example.com.