> ## Documentation Index
> Fetch the complete documentation index at: https://docs.aarc.xyz/llms.txt
> Use this file to discover all available pages before exploring further.
# Key Risks
> Summary of principal risks associated with investing in iBTCY
**AN INVESTMENT IN iBTCY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT.**
The following is a summary of key risks. Full risk factors are provided in the Subscription Agreement.
## Risk Summary
| Risk | Description |
| ----------------------------- | ------------------------------------------------------------------------ |
| **Total Loss** | You may lose your entire investment |
| **No Guaranteed Returns** | Target returns (4-6%) are NOT guaranteed; actual returns may be negative |
| **Unsecured Creditor Status** | You are an unsecured creditor; in insolvency, you may recover nothing |
| **No Proprietary Rights** | You have no ownership of underlying assets |
| **Liquidity Risk** | Redemptions may take many months or be suspended indefinitely |
| **No Secondary Market** | Limited liquidity until DEX integration |
| **Single Strategy Risk** | Heavy concentration in SSBAF; underperformance directly impacts returns |
| **Smart Contract Risk** | Technical vulnerabilities could result in loss |
| **Counterparty Risk** | Failure of custodian or service providers could result in loss |
| **Regulatory Risk** | Changes in law could adversely affect the Notes |
## 1. Total Loss Risk
The issuer does not guarantee the return of any capital. The Notes may become worthless. Investors should only invest funds that they can afford to lose in their entirety.
## 2. No Guarantee of Target Returns
The target return of 4-6% net annualized (BTC-denominated) is **not a guarantee, forecast, projection, or promise of future performance**.
Actual returns may be:
* Significantly lower than the target
* Zero
* Negative, resulting in loss of capital
## 3. Unsecured Creditor Status
Holders of iBTCY are **unsecured creditors** of the issuer. The Notes:
* Are not secured by any collateral
* Do not represent equity interests in the issuer
* Do not represent ownership of underlying assets
* Do not benefit from any third-party guarantee
* Are not insured by any government agency
In the event of issuer insolvency, holders rank behind secured creditors and may recover less than their investment or nothing at all.
## 4. Liquidity Risk
### Buffer-Based Liquidity
* Instant redemptions available only up to buffer capacity (32% target)
* Buffer has a 10% hard floor policy
### Redemption Delays
Indicative timelines vary by scenario. Full settlement **may take significantly longer than ninety (90) days**, and **in extreme circumstances may take one hundred eighty (180) days or longer**. Redemptions **may also be suspended indefinitely**.
| Scenario | Timeline (indicative only) |
| -------------------------------- | ------------------------------------ |
| Normal (buffer available) | T+0 to T+2 |
| Buffer depleted | 30-45 days |
| SSBAF gate triggered (80%) | 60-90 days typical when gate applies |
| Extreme / stressed circumstances | 90+ days; may exceed 180 days |
| Suspension | Indefinite; no maximum |
### SSBAF Fund-Level Gate
The underlying fund imposes an 80% fund-level gate per dealing window. If triggered, all redemptions may be processed pro-rata across multiple months.
## 5. Single Strategy Concentration
iBTCY allocates the yield-generating portion of NAV to a single yield source (Starboard Sygnum BTC Alpha Fund), alongside a liquidity buffer that earns no yield. There is no diversification across yield strategies. If SSBAF underperforms, closes, or becomes unavailable, the product’s value proposition is directly impacted.
## 6. Limited Track Record
SSBAF as a fund vehicle launched in October 2025. References to strategy experience prior to that date relate to the manager’s operation of substantially similar approaches in other structures and are **not** a representation of SSBAF or iBTCY performance statistics. Past performance is not indicative of future results.
## 7. Smart Contract Risk
iBTCY and BTCY are implemented as smart contracts on Ethereum. Risks include:
* Code vulnerabilities or bugs
* Exploits or attacks
* Unexpected behavior in certain conditions
Smart contracts have been audited by Cyfrin. Audits reduce but do not eliminate risk.
## 8. Counterparty Risk
The product depends on multiple third parties. **Archax Ltd** is the primary custody and settlement provider for **both** buffer BTC and SSBAF fund shares, creating **custodian concentration risk**: failure at Archax could impair liquidity and yield-related positions simultaneously.
| Party | Role | Risk Level |
| --------------------------------- | --------------------------------------------------------------------------- | ---------- |
| Sygnum Bank AG | SSBAF banking infrastructure and primary custody | Critical |
| Archax Ltd | Buffer BTC custody, SSBAF fund share custody, OTC conversion | High |
| Ceffu | Deposit and settlement custodian for inbound investor BTC | High |
| Oracles (Accountable + Chainlink) | NAV methodology, daily NAV feed; PoR via dashboard until on-chain feed live | Medium |
Failure of any counterparty could disrupt operations or result in loss.
The issuer targets no single investor holding more than approximately 25% of total supply; this is a policy goal, **not** a binding cap. Large concentrated positions could stress the liquidity buffer.
## 9. Regulatory Risk
The regulatory status of iBTCY varies by jurisdiction. Regulatory changes could:
* Require structural changes
* Restrict operations
* Force wind-down
## 10. BTC Price Volatility
iBTCY is denominated in BTC. While the product aims to grow BTC holdings, the USD value fluctuates with BTC price. A 50% BTC decline means a 50% USD value decline, regardless of iBTCY yield.
## 11. No Insurance
**The product does not carry insurance against smart contract exploits, custodian failures, operational losses, or other risks.**
There is no deposit insurance, investor compensation scheme, or guarantee fund covering iBTCY.
## 12. Contractual Limitations on Holder Remedies
Under the Deed Poll constituting the Notes, holders acknowledge meaningful limitations including: **limited recourse** (claims only against the issuer and only to available assets); **shortfall extinguishment** if assets are insufficient; **non-petition** undertakings against certain insolvency proceedings; and **no personal liability** for directors, officers, or shareholders. Full text is in the Transaction Documents.
## 13. Issuer Compliance and Wallet Powers
The issuer retains powers to freeze or compulsorily redeem Notes / restrict wallet services where required by law, sanctions, AML, breaches of representations, transfer restrictions, or where the issuer determines in good faith that action is necessary for compliance, legal, or risk-management reasons (subject to the Transaction Documents). Immediate action may apply for sanctions scenarios. These powers attach to **iBTCY** layer services (KYC-gated onboarding, unwrap, redemption). **BTCY** at the ERC-4626 layer is designed for permissionless transfer under normal operations; an emergency pause mechanism may still apply at the vault contract level for critical security events.
Full risk factors are provided in the Subscription Agreement (Schedule 2). Prospective investors should read the entire document and consult their own legal, tax, and financial advisors.
## Important Notices
* iBTCY is NOT a stablecoin
* iBTCY is NOT a deposit or bank account
* iBTCY is NOT a fund unit or equity interest
* iBTCY is NOT insured or guaranteed
Read full legal disclaimers
***
Available only to eligible professional/qualified investors on an invite-only basis, subject to onboarding and compliance approval. For informational purposes only and not investment advice. Not an offer to the public or a solicitation where unlawful. No retail distribution. Not available to US Persons.
[Disclaimers](/legal/disclaimers) · [Platform and issuer](/legal/platform-legal)