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Nov 2022

CEO Letter: Recent developments regarding Genesis Global Capital

by Marcelo Sampaio, Chief Executive Officer
2 min read
Nov 16, 2022

CEO Letter: Recent developments regarding Genesis Global Capital

There has been a lot of developing news in the crypto markets this week and we want to share an update for our investors. 

This morning, Genesis Global Capital announced it is temporarily suspending redemptions. Digital Currency Group, the parent company for Genesis and the asset manager Grayscale, said in a Tweet that this decision “was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion.”

First, Hashdex has no relationship with Genesis Global Capital. We have used Genesis Trading for over-the-counter (OTC) trading, but currently have no counterparty risk exposure to Genesis. With the looming uncertainty swirling around crypto markets right now, we also want to use this opportunity to describe our relationship to exchanges and custodians. 

Hashdex funds do not engage in unregulated borrowing, lending, leverage, or derivatives1 trading of crypto assets. Our risk management policy does not allow us to custody assets on exchanges or with trading counterparties such as OTCs and Market Makers

Hashdex products make use of a large set of custodians to mitigate risks. The current approved list of custodians includes Fidelity Digital Assets, Coinbase Custody (segregated from its exchange), BitGo Trust, and Anchorage Digital Bank. Each is a regulated entity with a clear legal structure for client asset segregation from company balances. 

Hashdex has very stringent rules for selecting custodians. This includes requirements such as (i) being licensed by a reputable US regulator; (ii) having an insurance policy that covers at least part of the assets under custody for third-party theft of private keys, insider theft from internal employees, and loss of keys; and (iii) client assets must be technologically and legally segregated so they are protected in case of bankruptcy or insolvency of the custodian. We use a proprietary risk management framework to distribute assets between custodians to mitigate credit and liquidity risks.

Since our inception, we have been focused on providing secure and regulated access to the crypto ecosystem. We do this through institutional-quality products, processes, and service providers. Our robust due diligence processes and obsession over operational controls help to prevent events like FTX from materially impacting our shareholders.

Regardless of this fluid short-term situation, we do not believe recent events have any impact on the long-term investment case for crypto as an asset class. As the effects of the FTX fallout unfold, we anticipate continued volatility and will closely monitor the impact to our service providers.

 

[1] Only exception is the US-listed Hashdex Bitcoin Futures ETF, which invests in Bitcoin Futures contracts listed on the CME.

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This material expresses Hashdex Asset Management Ltd. and its subsidiaries and affiliates (“Hashdex”)'s opinion for informational purposes only and does not consider the investment objectives, financial situation or individual needs of one or a particular group of investors. We recommend consulting specialized professionals for investment decisions. Investors are advised to carefully read the prospectus or regulations before investing their funds. The information and conclusions contained in this material may be changed at any time, without prior notice. Nothing contained herein constitutes an offer, solicitation or recommendation regarding any investment management product or service.

The information contained herein (“Information”) may not be reproduced or redistributed in whole or in part, in any format, without the express written approval of Hashdex Asset Management Ltd. (“Hashdex”) and its affiliates and subsidiaries (“Hashdex Group”). By accepting this document, you acknowledge and agree that all of the Information contained in this document is proprietary to Hashdex Group. While not explicitly referenced within this piece, Hashdex Group manages the Hashdex Nasdaq Crypto Index ETF, Hashdex Nasdaq Ethereum ETF, Hashdex Nasdaq Bitcoin ETF, Hashdex DeFi Index Fund, Hashdex Smart Contract Platforms Index ETF and other investment vehicles focused on digital assets (collectively the “Fund” and each a “Fund”) which invests in digital tokens. The Information is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, interests in the Funds or any advisory services or any other security or to participate in any advisory services or trading strategy. If any offer and sale of securities is made, it will be pursuant to the confidential offering memorandum of the Fund (the Offering Memorandum). Any decision to make an investment in the Fund should be made after reviewing such Offering Memorandum, conducting such investigations as the investor deems necessary and consulting the investor’s own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.

Each Fund seeks to track a relevant index. The performance of each Fund will vary from the performance of the relevant index that it seeks to track. The Information is being provided to you solely for discussion purposes and may not be used or relied on for any purpose (including, without limitation, as legal, tax or investment advice) without the express written approval of Hashdex Group. Certain statements reflect Hashdex Group’s views, estimates, opinions or predictions (which may be based on proprietary models and assumptions, including, in particular, Hashdex Group’s views on the current and future market for digital assets), and there is no guarantee that these views, estimates, opinions or predictions are currently accurate or that they will be ultimately realized. To the extent these assumptions or models are not correct or circumstances change, the actual performance of Hashdex Group and the Funds may vary substantially from, and be less than, the estimated performance. None of Hashdex Group, the Funds nor any of their respective affiliates, shareholders, partners, members, directors, officers, management, employees or representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the Information or any other information (whether communicated in written or oral form) transmitted or made available to you. 

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About Author
Marcelo Sampaio,
Chief Executive Officer
Mr. Sampaio is the CEO and a Director of Hashdex. A seasoned entrepreneur, Marcelo has been an active investor in digital assets since 2012, given many talks on the subject.
© 2022 Hashdex Asset Management Ltd.
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