GalaxyOne Prime LLC (“G1”) offers customers the ability to access trading, financing and custody services (“Services”) in Digital Assets through an account using technology owned, operated or made available by G1 or an affiliate of G1[1]. “Digital Assets” include convertible virtual currency, cryptocurrencies and stablecoins. A current list of Digital Assets supported by the G1 Platform is available and G1 may, within its sole discretion, expand or limit the list of Digital Assets available to you.
This G1 Risk Disclosure Statement provides you with information about some of the risks associated with trading or transacting in Digital Assets. Digital Assets are digital representations of value utilizing blockchain technology that are intended to function as a medium of exchange, a unit of account, or a store of value.
The risk of loss in trading Digital Assets may be substantial and losses may occur over a short period of time, as the price and liquidity of Digital Assets has been subject to large fluctuations in the past, and may be subject to large fluctuations in the future.
Digital Asset transactions are irreversible, and, accordingly, losses that may occur from such transactions may not be recoverable, including the potential for accidental, fraudulent or illicit transactions. Moreover, Digital Assets are not legal tender backed by any government, and Digital Asset transactions contain significant risk of legal and regulatory changes as well as financial risk. Therefore, you must evaluate your particular financial circumstances to determine whether or not engaging in Digital Assets transactions is appropriate for the needs of you or your institution. You should not invest funds in Digital Assets that you cannot afford to lose. We have detailed the following risks in transacting in Digital Assets. You should note that the risks described below are not intended to be exhaustive and are not intended to be presented in any assumed order of significance or priority.
The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a Digital Asset, or any security, future, financial instrument, investment fund, or other investment product, or to provide investment or financial advice of any kind.
THE RISK OF LOSS IN TRANSACTING IN DIGITAL ASSETS CAN BE SUBSTANTIAL AND YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRANSACTIONS ARE APPROPRIATE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES.
Volatility and Liquidity Risks
Digital Assets are often exchanged for U.S. dollars or other fiat currencies around the world, but they are not legal tender and are not backed by the U.S. government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections. Digital Assets derive their value from the perceived value and market sentiment, including the continued willingness of market participants to exchange U.S. dollars or other fiat currencies for Digital Assets, which may result in the potential for permanent and total loss of value of a particular Digital Asset should the market for that Digital Asset disappear. Certain Digital Assets have experienced daily price volatility of more than 20%, and Digital Assets may suffer even greater price volatility and up to a total and permanent loss of value. Digital Assets may not be readily tradable, and different Digital Assets may have different liquidities. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. It may be difficult to liquidate a position in Digital Assets at all, or if possible, such liquidation may occur at a significant loss. Digital Assets can be bought or sold through Digital Asset exchanges and other intermediaries, each with its own pricing mechanisms and order books, or directly peer-to-peer between two or more market participants in a privately negotiated transaction. Moreover, the volatility and unpredictability of the price of Digital Assets relative to fiat currency may result in significant loss of a short period of time. Generally accepted auditing methods for Digital Assets do not exist and Digital Asset platforms do not have consistent methods for auditing their holdings, or do not have audits at all. The lack of generally accepted auditing methods and centralized pricing sources creates difficulty in the valuation and liquidity of Digital Assets markets. In addition, the dispersed liquidity may pose challenges for market participants trying to exit a position, particularly during periods of stress.
Legal and Regulatory Risks
Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of Digital Assets. One or more jurisdictions may, in the future, adopt laws, regulations or directives that affect Digital Asset networks and their users. Changes in governmental regulation, such as the suspending or restricting of activity in certain Digital Assets, may adversely affect your ability to trade and exchange your Digital Assets and may decrease the value of any Digital Asset in your account. In the United States, Digital Asset businesses are subject to federal anti-money laundering laws and regulations and may also be regulated by one or more state or federal regulatory agencies. There are no uniform regulations governing trading or other mechanisms across Digital Assets platforms to prevent market manipulation or to normalize the Digital Asset markets when they experience volatility issues. There are generally no laws, rules or regulations that require any person to continue to support a Digital Asset market, exchange or platform, and there is no assurance that a person who accepts a Digital Asset as payment today will continue to do so in the future.
Notwithstanding the foregoing, certain Digital Asset derivatives are subject to regulation by the Commodity Futures Trading Commission (“CFTC”). In addition, the Securities and Exchange Commission (“SEC”) has cautioned that many Digital Asset initial coin or “token” offerings are likely to fall within the definition of a security and would be subject to U.S. securities laws and has taken the position that certain existing Digital Assets may be securities. As a result, Digital Assets currently face an uncertain legal and regulatory landscape in the United States and many foreign jurisdictions, which may adversely affect their use, transfer, exchange, and value.
Digital Asset Custodians, Exchanges, and Intermediaries Risks
Digital Asset exchanges, as well as other intermediaries, custodians and vendors used to facilitate digital assets transactions, are relatively new and largely unregulated or subject to limited regulation in the United States and many foreign jurisdictions. There are no standard capital requirements for Digital Asset platforms nor are there any financial guarantees in the event a Digital Asset exchange fails. The uncertain regulatory landscape and other factors create a risk that a Digital Asset exchange may not hold sufficient Digital Assets or other funds to satisfy its obligations and that such deficiency may not be easily identified or discovered. Such circumstances also create the risk of potential market manipulation in Digital Asset transactions, which may result in significant losses. Any bond or trust account maintained by G1 for the benefit of its customers may not be sufficient to cover losses incurred by customers.
Some Digital Asset transactions shall be deemed to be made when recorded on a public blockchain, which is not necessarily the date or time that the customer initiates the transaction. Before you engage in any Digital Assets transaction, you must become familiar with the platform on which the relevant Digital Asset trades. Generally, there is limited information about the various Digital Assets platforms and because these platforms are complex and technically difficult to understand, substantial effort should be expended to obtain the information necessary to understand applicable risks. As described above, some platforms are subject to a variety of serious attacks and risks, which may result in the unrecoverable loss of your Digital Assets.
G1 charges fees for its Services and therefore benefits from trading activity (or volume) regardless of whether the trading is profitable to you. G1 and/or its affiliates may have certain actual or potential conflicts of interest related to the decision to support or not support a Digital Asset or to increase or decrease the scope of the Services made available for such Digital Assets. G1 and/or its affiliates may trade or operate businesses that trade in the peer-to-peer market and use other Galaxy services on a proprietary basis or on behalf of others. These offers and trades are not distinguishable from other offers and trades in the peer-to-peer market, and a Galaxy affiliate may be a counterparty to any trade executed by you.
Cybersecurity Risks
The nature of Digital Assets may lead to an increased risk of fraud or cyber-attack. Malicious individuals, groups or organizations may attempt to interfere with the G1 Platform in a variety of ways, including, but not limited to, malware attacks, denial of service attacks, coordinated attacks, account takeovers and submitting fake transactions (including spoofing) which could negatively affect the operation of the G1 Platform, the availability of the Services and the value of Digital Assets traded on the G1 Platform. With the increased use of technologies and the dependence on computer systems to perform necessary business functions, Digital Assets and the Services are susceptible to operational and information security risks. Technological difficulties experienced by G1 may prevent access or use of your Digital Assets.
In general, cyber incidents can result from deliberate attacks or unintentional events. Cyberattacks include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial of service attacks on infrastructure. Cybersecurity failures or breaches of third-party service providers (including, but not limited to, software providers, cloud services providers, index providers, the administrator and transfer agent) could have a negative impact on Digital Assets and the Services. G1 undertakes reasonable cybersecurity measures to prevent, monitor, detect and respond to potential cybersecurity events. However, cyber criminals have demonstrated the ability to conduct cyberattacks even with strong security precautions, and G1 cannot and does not guarantee nor indemnify any losses resulting from third party cyberattacks.
It is your responsibility to ensure (i) that your access credentials are kept secure and confidential, including your email, username, and password, as well as access to or use of any multi-factor authentication hardware or software and (ii) the security and integrity of any systems (both hardware and software) or services that you use to access the G1 Platform.
The cybersecurity risks of Digital Assets and related “wallets” or spot exchanges include hacking vulnerabilities, cybersecurity attacks and a risk that public blockchains may not be immutable. A cybersecurity event could result in a substantial, immediate, and irreversible loss for market participants that trade Digital Assets. Digital Asset transactions may be irreversible, and, accordingly, losses due to a cybersecurity event may not be recoverable. Even a minor cybersecurity event in a Digital Asset is likely to result in downward price pressure on that product and potentially other Digital Assets. In addition, the trading of Digital Assets may be adversely affected by network connectivity issues and dissemination of inaccurate data, including prevention of access or use of your Digital Assets.
You acknowledge that there are risks associated with utilizing an Internet-based trading system including, but not limited to, the failure of hardware, software, and Internet connections, the risk of malicious software introduction, the risk that third parties may obtain unauthorized access to information and/or assets (including your Digital Assets) stored on your behalf, cyber-attack, Digital Asset network failure (such as a blockchain), computer viruses, communication failures, disruptions, errors, distortions or delays you may experience when trading via the Services, however caused, spyware, scareware, Trojan horses, worms or other malware that may affect your computer or other equipment, or any phishing, spoofing or other attack. You should also be aware that SMS, WhatsApp, Telegram, and other messaging and email services are vulnerable to spoofing and phishing attacks and should use care in reviewing messages purporting to originate from G1.
Digital Asset Technology Risks
The technology underlying Digital Assets introduces unique risks to investors. Transactions in Digital Assets are irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable. Changes in the technology of a given Digital Asset platform or changes resulting from cybersecurity attacks include but are not limited to a “fork,” a “rollback,” an “airdrop,” or a “bootstrap,” which can have a negative impact on the value of a particular Digital Asset. For example, a fork can result in the loss or cancellation of a Digital Asset position and may include a sudden loss of value. A market participant holding a Digital Asset position through an exchange or other intermediary may be adversely impacted if the exchange does not allow its customers to participate in a fork that creates a new Digital Asset.
Many Digital Assets allow market participants to offer miners (i.e., parties that process transactions and record them on a blockchain) the ability to earn a fee. While not mandatory, a fee is generally necessary to ensure that a transaction is promptly recorded on a blockchain. The amounts of these fees are subject to market forces, and it is possible that the fees could increase substantially during a period of stress. In addition, Digital Asset exchanges, wallet providers and other custodians may charge relatively high fees as compared to custodians in many other financial markets.
Given the technology of Digital Assets, you should have appropriate knowledge and experience before engaging in Digital Asset trading. You should conduct extensive research into each individual Digital Asset, including its underlying protocol, before investing. The features, functions, characteristics, operation, use and other properties of the specific Digital Asset may be different from those of another Digital Asset. These features may be complex, technical, or difficult to understand or evaluate. Further, Digital Assets may be vulnerable to attacks on the security, integrity, or operation of the specific Digital Asset’s blockchain, including attacks using computing power sufficient to overwhelm the normal operation of the Digital Asset’s blockchain or other underlying technology.
The software protocols that underlie various Digital Assets are typically open source. As a result, (i) the development and control of such Digital Assets are outside of G1’s control and (ii) such software protocols are subject to sudden and dramatic changes (including forks) that might have a significant impact on the availability, usability or value of a given Digital Asset. G1 makes no representation or warranty of any kind, express or implied, statutory or otherwise, regarding the blockchain functionality nor for any breach of security in the blockchain. Your ability to purchase Digital Assets through the G1 Platform is contingent on G1’s ability to source such Digital Assets from third party providers. Therefore, G1 makes no promises regarding the timing or ability to purchase Digital Assets. G1 may be forced to suspend or discontinue the ability to purchase or sell Digital Assets without notice.
Additional Financial Risks
Digital Assets are not legal tender and are not backed by the United States government. Accounts holding Digital Assets are not protected by the Securities Investor Protection Corporation (“SIPC”). Digital Assets are not insured by the Federal Deposit Insurance Corporation (“FDIC”). G1 is not a bank, and its customer funds are not protected by FDIC insurance.
Some federal agencies and the Financial Industry Regulatory Authority (“FINRA”) have published advisory documents concerning the risks of trading or transacting in Digital Assets. For additional information on such risks, please visit the following links:
SEC Investor Alert here and information regarding crypto assets here;
CFTC Customer Advisory available here; and
Consumer Financial Protection Bureau Consumer Advisory available here
Consumer Information
G1 is the branded offering of GalaxyOne Prime LLC, FinCEN MSB Registration Number: 31000235793433. Money transmission or related activity is conducted by GalaxyOne, and all client accounts exist on the books of G1 and its sub-custodians.
If you wish to place a complaint with G1, please send an email to [email protected] and include the following information:
Your first and last name and account information
Your phone number
Whether your complaint involves an individual, a firm, or market activity generally
The date and time of the incident
The contract(s) or product(s) involved in the incident
Any other information you can provide.
The information obtained from a complaint is confidential and will generally not be shared outside of the Customer Service and Compliance departments. Subject to state and federal regulations, information related to the complaint may be shared with Federal or state regulatory agencies.
[1] G1’s custody offering is provided by sub-custodians and can provide these services via an agreement between G1 and the sub-custodian.