This Risk Disclosure Statement (“Statement”) provides the user (“User”, “you”, “your”, and collectively, “Users”, “them”) with information about the risks associated with trading in crypto assets and services provided by NDAX Canada Inc. (“NDAX”, “our”, “we”, “us”).
NDAX offers its crypto asset trading services to Canadians under FINTRAC registration as a Money Service Business [MSB registration number: M18632135] and Revenue Quebec registration as a Money-services business [License Number: 11885].
NDAX is not registered in any capacity with any securities regulatory authority in Canada and does not represent to be, nor is it regulated as, a bank, trust company or other depository institution. User accounts are not insured by the Canada Deposit Insurance Corporation nor the Canadian Investor Protection Fund and do not qualify as any form of government insured, investment brokerage or deposit accounts.
The Statement is provided to you when you open your account with NDAX. You cannot open an account with NDAX without acknowledging that you have read, and understand, this entire Statement and agree to its terms. The Statement is available for review and retrieval at https://ndax.io (“Website”).
This Statement is not intended to disclose, cover or discuss all of the risks associated with crypto asset trading, holding or other significant aspects of transactions entered into through the NDAX trading platform, but only outlines the general nature of risks. Users should carefully consider whether crypto asset trading is appropriate for them in light of their experiences, objectives, financial resources and other relevant circumstances. Crypto asset trading is not suitable for all people. You may incur significant losses in a short period of time. Further, crypto asset trading may not be advisable if you are trading using borrowed funds or drawing from emergency or retirement assets.
You should not execute trades on the NDAX trading platform unless you fully understand the various risks associated with crypto asset trading, and the nature of the contractual relationship with NDAX that you are entering into by opening an account with us. Please see your account user agreement, located at https://www.ndax.io/user-agreement for details on the nature of your contractual relationship with us.
In summary, your contractual relationship with NDAX is a contract to buy and sell crypto assets. The contractual right to the crypto assets that you may buy, hold and sell may itself constitute a security or derivative. This contractual relationship provides benefits to Users, but may also expose Users to certain risks arising from NDAX acting as custodian.
By opening an account with NDAX, the User agrees that they have fully evaluated and confirmed that they understand and accept the risks involved.
NDAX’s services are provided on an execution only basis. We do not provide investment advice in relation to buying and selling crypto assets listed on https://ndax.io. The Website acts as the principal platform for trade execution with NDAX.
Trading in crypto assets has certain risks and this Statement does not disclose all of the risks associated with such trading. Users of NDAX’s services should consider the following non-exhaustive risks, in no particular order, prior to engaging in crypto asset trading. These risks include, but are not limited to:
Trade Risks: Crypto assets are complex digital representations of value, and are risky investments based on their highly speculative natures and the uncertainty of the market. They are not legal tender, nor are they supported by a government or central bank. The value of crypto assets is entirely derived by international market forces, such as global supply and demand, and as such the value is volatile. As a result, investors of crypto assets are subject to substantial risk that they could lose money buying, selling, holding, or otherwise investing in crypto assets. While NDAX employs numerous safeguards to ensure platform trading stability, it cannot control market fluctuations in crypto assets, and Users may be exposed to significant market volatility beyond the control of NDAX. If consumers and investors stop transacting in a crypto asset, then its value will be materially impacted. Also, certain addresses on the Bitcoin, Ethereum and other networks may hold significant positions in these crypto assets, and transactions from these addresses could materially affect both the price and volatility of these crypto assets. Historically, crypto assets have been more volatile than government issued fiat currency and have also been impacted by a variety of external factors including volume and liquidity, operational events, media coverage speculation, and changes in investor confidence.
Also, crypto assets vary in their structure and associated rights and governance. NDAX researches each crypto asset that is listed on its trading platform based on criteria that includes, but is not limited to, the market cap, global trading volumes, community support, customer demand and liquidity. NDAX only trades well-established crypto assets, that are not themselves securities, and that meet the above criteria.
Crypto asset trading comes with a high risk of losing all of your invested capital. There is also a risk that domestic or international governments will restrict or prohibit the trading of crypto assets altogether. Users should not invest funds to trade in crypto assets that they are not prepared to lose entirely. This type of trading may not be appropriate for someone with limited resources and limited investment or trading experience and low risk tolerance.
It is very important that Users monitor their positions closely and failure to do so entails a degree of risk. It is the sole responsibility of the User to monitor their positions.
New Investment Risk: Crypto assets are a new investment asset class that has only recently been introduced to speculative markets. Compared to the market for traditional investment products like equity and debt, the market for crypto assets is relatively untested. The technological underpinning is open source and subject to development. The relatively short period that an investment product of this nature has been available is subject to the question of whether value will endure over a comparatively longer period.
Crypto assets are heavily reliant upon a supporting community’s participation. While the participation for the crypto assets listed on NDAX have enjoyed consistent support of their respective development communities, there is no guarantee that this will continue. These communities regularly propose and implement alterations and improvements to the blockchains that support these crypto assets. There is no guarantee that these community-led changes will continue.
Listing Risks: Crypto asset values and markets are highly volatile and widely fluctuate. The liquidity, trading dynamics and market depth of any listed crypto asset can change rapidly and without notice. NDAX does not guarantee liquidity, price minimums, or that a continuous two-side market will be guaranteed or provided for any listed crypto asset. Under certain trading circumstances it may be difficult or impossible to liquidate a position, and this can lead to substantial investor loss. Any crypto asset can be listed or delisted at any time and without notice or consent. Crypto asset markets are very unpredictable and can move up or down as a whole and/or any particular crypto asset can move independently and can lose all or a substantial value of the funds originally invested. NDAX is not responsible for the availability, transferability or liquidity of any crypto asset, and does not guarantee liquidity or market-making on its platform.
There are risks related with holding long crypto asset positions. Being long means that you are buying crypto assets on the market by speculating that the market price of the underlying asset will rise between the time of purchase and the time of sale. As the owner of a long position there are risks that you may suffer a loss if the underlying asset decreases in value.
NDAX reserves the right to unilaterally cancel a User’s trade that deviates from predetermined price spreads or collars from a crypto asset’s fair market value (as determined at the sole discretion of NDAX). Any trades by Users outside of established price collars may be rejected and not executed. NDAX also reserves the right to establish limitations on the maximum number of decimals for any listed crypto asset including volume and price of trade orders. Maximum decimals may be uniquely established for each respective crypto asset at NDAX’s sole discretion. A User attempting to place a trade in contravention of the maximum decimal will have their trade truncated (rounded down) to the maximum decimal allowed. Attempted trades in contravention of the maximum decimal amount will result in an error and the order will not be created or executed.
Regulatory Risks: Crypto assets are an evolving market segment. Regulations are developing, and in many cases unsettled, subject to change, or unclear in many jurisdictions, and any changes in laws, rules and regulations may materially impact the crypto asset market and the value of a User’s crypto assets. Regulators also may be limited in their ability to enforce Canadian laws in foreign territories. There can also be significant discrepancy in the international regulatory frameworks applicable to crypto assets and trading platforms. Foreign legal discrepancies can also affect banking, wire transfer and processing, or other international financial transaction rules. Users are responsible for knowing how crypto assets are regulated and controlled under the applicable laws in their own jurisdiction.
Platform Risks: Crypto assets trading on the NDAX trading platform are entirely digital, and as such face cybersecurity and system failure risks, including hardware, software, network, power or communication failures, and cyber attacks. Crypto assets may be subject to external or cyber attack, and such attempts on the NDAX trading platform could result in a loss of crypto assets, private information, and operational capacity; as well as the potential for data corruption. This could also lead to corrective, compliance, regulatory and reputational costs for NDAX. To protect against such risks, NDAX has established a world-class risk management system, including the use of reputable third-party security solutions, and the development of risk-mitigating and contingency systems for operational or other disruptive events.
Operational Risks: NDAX takes material steps to secure both the NDAX trading platform, and User crypto assets, including but not limited to secure storage mechanisms and independent ledgers of all transactions. Users should be aware that failure, malfunctions or disruptions of any transmission, power, routing, network or communication system, computer facility or trading software may occur, this may result in an order being delayed or failure to complete an order. If such occurs you may not be able to execute a trade, or sell a position, at your desired price (or at all). Trading online does not reduce the risks associated with crypto asset trading. You acknowledge that NDAX is not liable for any loses resulting therefrom.
Custody Risks: NDAX utilizes state of the art security systems for custody solutions, numerous internal controls, systems, and safeguards to ensure User’s crypto assets are securely custodied, safely stored, and protected against cybersecurity, fraud, or custody security risk. Such measures include, but are not limited to risk management technology and tools, order management systems, internal controls and systems, extensive background checks, hiring and screening processes and procedures, limiting access to information to only key individuals, segregated bank accounts held in trust at regulated banking institutions for User fiat balances, third party technology solution providers for wallet infrastructure and custody services, including cold, hot and warm storage solutions, geographically separated secure deposit of private keys, tamper-proof private key management systems, multi-party computation, and multi-signature technology, safeguards against single point of failure risk, and the use of external legal counsel for holding keys and codes under trust conditions. While NDAX works diligently, and extensively, to ensure all custody related risks are mitigated, it cannot guarantee a disruption free trading platform. Disruptions to platform operations could result in investor loss or delays in executing transactions or withdrawing crypto assets.
Currency Risks: Some transactions may be executed in a currency that may be different from the currency the User deposited to their account, and accordingly the User should be aware of the relevant currency fluctuation and any risks related to it. In respect of any foreign exchange transaction, a movement in an exchange rate may have a favourable or an unfavourable effect on the gain or loss achieved on such transaction.
Default/Counterparty Risk: NDAX administers and operates the trading platform for crypto assets. NDAX is not a counterparty to the trade or transaction of crypto assets traded on the Website and is not responsible for a third-party buyer or seller failing to honor their financial obligations. We are not responsible for losses you may suffer as a result of any defaults, or insolvency of other Users.
Lack of Investor Protection Insurance: Cryptocurrencies purchased and held in an account with NDAX including any staking crypto assets, are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.
Underlying Technology Risk: The crypto assets that trade on the NDAX trading platform use open source blockchain technology, and this industry will continue to evolve over time. There is risk that technological evolution will affect the economic and functional aspects of the crypto assets that NDAX currently lists, or will list in the future. The integrity, scalability, security, and subsequent development of existing open source blockchain networks to meet network and scaling needs is not guaranteed, and the timing of such developments is unknown. Further, there may be unforeseen technology risks in the future that could impact the value of crypto assets traded on the NDAX platform.
As open-source software, crypto assets are susceptible to modifications or “forks” (splits) of the underlying blockchain – causing two independent and parallel blockchains to be created, each governed by different software. Forks have previously occurred in both the Bitcoin and Ethereum blockchain networks. A future fork could affect the value (and integrity) of a crypto asset that is traded on the NDAX trading platform. There may also be structural problems, or vulnerabilities, in the underlying source code of a crypto asset that could expose you to loss and/or cyberattack.
Further, if any party (or consortium of parties) gains control over a certain threshold of the computing power used by a given blockchain network they could use this control to materially affect the price of the respective crypto asset.
Cryptographic and Contract Code Risk: As stated, crypto assets are reliant on open source code. For certain crypto assets, this underlying code has proven to be flawed and has led to detrimental consequences for the investor. While NDAX aims to list crypto assets with an infrastructure that have proven resilient from such flaws, there is no guarantee that flaws will not arise in the future. Mathematical and computing resource improvements could result in previously unknown flaws becoming exposed. This could negatively affect the value of the crypto assets traded with NDAX or render them unusable entirely.
No Advice Risk: NDAX provides no advice to Users, including any over-the-counter (OTC) Users eligible for NDAX Wealth Services. All executed trades made by account executives on the NDAX OTC Wealth platform are under the express instructions of Users acting in their sole discretion and providing NDAX account executives with trading instructions through secure communicate channels.
Staking Risk: NDAX provides Users with the option to opt-in to staking services. In addition to the risks set out above, staking is subject to other risks. Staking services are subject to all of the terms and conditions of the User agreement between NDAX and User, which terms are subject to change. You have no right to rewards associated with staking services unless and until such rewards are received by NDAX pursuant to a successful validation transaction, at which time the rewards will be transferred to your account balances. NDAX cannot guarantee that you will receive any specific staking reward. Any estimate of a rewards percentage provided by NDAX is an estimate only and may change at any time in NDAX’s sole discretion. Staking services provided by NDAX are opt-in accessible services only and NDAX bears no liability for losses incurred because of such staking services, including those resulting from on-chain contract security breaches. A determination by a crypto-asset’s network, which is outside of the control of NDAX, may result in staking services being operated erroneously. This may result in a “slashing penalty” and/or the non-payment of expected staking rewards. NDAX has no obligation to compensate you for any slashing penalty or any non-payment of staking rewards.
Applicable laws, rules and interpretations and judicial and similar decisions may affect NDAX’s ability to offer staking services and may adversely affect the value, use and transfer of your crypto assets and the operations of the NDAX staking service. The tax treatment of certain crypto-asset transactions is uncertain and it is your responsibility to determine what taxes, if any, arise from all transactions with your crypto-assets, including staking. You are solely responsible for reporting and paying all taxes arising from or related to your crypto-assets, including from staking. NDAX does not provide any investment, legal, tax or other advice to you in connection with staking services or otherwise. You should conduct your own due diligence and consult your own advisors before making any decision to participate in staking services.
When trading in crypto assets and similar products, Users must ensure they fully understand any risks involved and seek independent advice from a reliable source if necessary, taking into consideration investment objectives, levels of experience and risk tolerance. NDAX does not provide investment, tax, legal or other advice to Users. Users should not risk more than they are fully prepared to lose.
Information provided on the Website is for informational purposes only and is not, nor intended to be, investment advice or trading recommendations. Such information is not and should not be considered as an offer to buy or sell, or solicitation of an offer to buy or sell, any crypto assets. A User’s decision as to whether such transaction is appropriate for them is the User’s independent decision. NDAX is not acting as an advisor or serving as a fiduciary to the User. Users are responsible for managing their own legal, financial and tax affairs and seeking independent professional advice.
Should a price quoting error occur, NDAX is not liable for any resulting errors in account balances and reserves the right to make necessary corrections or adjustments to the relevant account. Any dispute arising from such price quoting errors will be resolved based on the fair market value, as determined by NDAX in its sole discretion and acting in good faith, of the relevant market at the time such an error occurred. In cases where the prevailing market represents prices different from the prices we have posted on our platform, NDAX will attempt, on a best efforts basis, to execute orders on or close to the prevailing market prices. This may or may not adversely affect the User’s realized and unrealized gains and losses.
NDAX does not make any representations or warranties regarding any crypto asset traded on the Website. The risks associated with crypto asset and trading crypto assets apply notwithstanding the NDAX trading platform, and the risks associated with the use and trading crypto assets are the Users and the Users alone.
This Risk Disclosure Statement was last updated on January 24, 2023.