Risk
Disclosure
Last Updated: October 1, 2025
NOT A PUBLIC OFFERING; NO GUARANTEE OF PROFIT ABILITY: This Risk Disclosure Statement is provided to inform prospective investors about significant risks of investing in Phichain Capital LLC. This statement is not intended to be complete and is qualified in its entirety by the Fund's Private Placement Memorandum, which discusses risks, conflicts of interest and other important information. The undersigned's receipt of this Risk Disclosure Statement is an acknowledgement and agreement by the undersigned that the undersigned is an accredited investor and that the undersigned is aware that this investment is speculative in nature. This is not an offering to invest. Neither this Risk Disclosure Statement nor any other information provided to the undersigned may be relied upon in making an investment decision. An offer to invest will be made only by the definitive offering materials and subscription documents. The Fund will be made available for investment only in accordance with such materials and documents and any investment in the Fund will be subject to important risks, including the risk of loss of all of the capital invested. No general solicitation or advertisement is being made in connection with the Fund's offering. In making this offering, the Fund is relying on Rule 506(b). Prospective investors should conduct their own due diligence and should consult with their own advisers before making any investment decision. All investments involve risk. An investment in the Fund is appropriate only for investors who are financially able to assume such risk.
Confidential Offering - Not an Offer to Sell or Solicitation to Buy Securities: This document is provided on a confidential basis for informational purposes to accredited investors only and does not constitute an offer to sell, or a solicitation of an offer to buy, any securities. The offer or sale of any interest in Phichain Capital LLC (the “Fund”) will be made only in accordance with applicable federal and state securities laws and only in reliance on one or more definitive offering documents (including a Private Placement Memorandum) delivered to and accepted by qualified investors. The Fund’s offering is being made as a private placement under Rule 506(b) of Regulation D of the U.S. Securities Act of 1933, as amended. In reliance on Rule 506(b), no general solicitation or advertising is or will be used to market the Fund. This document is not intended for public distribution and is intended solely for the person to whom it is delivered.
Accredited Investors Only: Investment in the Fund is restricted to persons who are “accredited investors” as defined in Regulation D. Interests in the Fund have not been registered under the Securities Act or any state securities laws and will be offered in reliance on available exemptions for private offerings. Investors will be required to represent that they meet the applicable investor qualification requirements and that they are acquiring any securities for investment purposes and not with a view to distribution. Interests in the Fund are subject to restrictions on transfer and resale; investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time.
Risk of Loss: Investing in the Fund is speculative and high-risk and should only be made by persons who can afford to lose their entire investment. All investments involve risk of loss of principal, and digital asset investments in particular have a high risk that investors will lose all of their investment. The risk factors described below are not an exhaustive list of potential investment risks; investors should carefully consider all of the risk factors described in the Fund’s Private Placement Memorandum and consult with their own financial, legal and tax advisors before making any investment decisions. Past performance (if any) is not necessarily indicative of future results, and no representation is made that the Fund will meet its investment objectives or avoid losses.
Thin Markets and Low Liquidity: Many digital assets – especially smaller capitalization cryptocurrencies or tokens received in private sales – are traded in shallow markets with low liquidity. Even larger cryptocurrencies such as Bitcoin and Ethereum, while typically more liquid, can experience periods where their order books are thin relative to the size of trades that must be executed. The Fund may find that there are few active buyers or sellers for a less liquid token at any given time. This can mean that the Fund will be unable to liquidate a position at an advantageous price or within a short period of time. In fact, attempts to sell a large position in a thinly traded token or asset could drive down the market price by a large amount. Illiquid assets cannot be sold quickly without a substantial loss of value. In periods of market stress or if the Fund were to receive a large number of redemption requests, liquidity could dry up completely – the Fund may be forced to suspend or delay investor redemptions or sell assets at fire-sale prices, incurring losses.
Restrictions on Transfer and Lock-Up Periods: Many of the Fund’s venture-style investments may be made in the form of restricted tokens or equity that are subject to contractual lock-up periods and/or legal restrictions on resale. For example, if the Fund invests in a private token sale (SAFT or similar agreement) the tokens received may be untradeable until the project is launched and certain regulatory milestones are achieved – if the project is ever launched. Similarly, equity or convertible instruments in seed or early-stage companies are highly illiquid – there is typically no public market for such holdings and any exit may be dependent on a future acquisition or IPO that may or may not happen. Even after any contractual lock-up periods have expired, the market for a token or asset may remain very limited. During the restricted period, the Fund has no ability to sell or hedge the position. There is a risk that by the time the position is able to be sold, the value of the investment may be substantially lower (or worthless). Investors should be prepared to assume that any investment in illiquid digital assets or private companies could be completely locked up for a long period of time and that the Fund may not be able to readily convert such positions to cash without incurring a substantial discount.
Redemption Limitations: As a private fund, the Fund may place restrictions on investor redemptions (e.g., lock-up periods for investors, advance notice requirements, gates or caps on quarterly redemptions, etc.) to help manage liquidity. Nonetheless, there is a risk that the Fund may be unable to meet redemption requests in a timely manner if liquidity issues arise in the underlying portfolio. In extreme circumstances, the Fund could be forced to suspend redemptions or distributions until liquidity conditions improve or assets can be sold. Investors should not expect to be able to readily redeem their capital at short notice from a fund pursuing these strategies. Liquidity risk is an inherent feature of venture and digital asset investing – investors may be required to hold their interests for an indefinite period of time and may not be able to exit the Fund at the time they desire.
Cryptocurrency Regulatory Risk (U.S. and International): The laws and regulations applicable to digital assets and cryptocurrencies continue to develop at a rapid pace, and there is considerable uncertainty regarding the legal status of many digital assets. In the U.S., various regulatory agencies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), Internal Revenue Service (IRS), Federal Trade Commission (FTC), Office of Foreign Asset Control (OFAC), and others have not yet provided definitive guidance on the status or allowable activities of numerous digital assets. Furthermore, certain cryptocurrencies may be subject to U.S. law only to the extent they are used for certain “illegal activities.” In general, many cryptocurrencies exist in a kind of “uncharted regulatory waters.” Even the manner in which governments and regulators around the world treat and regulate cryptocurrencies, and how these assets may or may not be used for investment, payments or other functions, is yet to be determined. For example, the SEC has in some recent actions treated certain crypto tokens as “securities” and brought enforcement actions against various market participants based on this view (see, e.g., recent SEC charges against major crypto exchanges). Sudden changes in applicable regulation or enforcement actions could occur. New laws or regulations could be adopted that significantly restrict the Fund’s ability to invest in certain assets or strategies, or make it illegal or impractical for the Fund to continue to pursue certain of its investment strategies. Actions by regulators could also adversely affect market liquidity and valuation levels (such as announcements of bans or restrictions in key markets have previously led to precipitous price declines in some cryptocurrencies).
Foreign, Cross-Border and International Risk: The Fund may invest in various projects or tokens that are domiciled or that operate in multiple jurisdictions around the world and may be subject to the laws and regulations of such jurisdictions. Certain countries have, or could impose, restrictions or outright bans on the trading, mining, or use of cryptocurrencies (and in some cases these countries may extend their restrictions to include ownership or custody of certain cryptocurrencies). The laws and regulations of foreign countries may change, including enforcement of sanctions or other policy shifts that may cause an asset to become non-transferable or cause the Fund to be unable to participate in certain investments. In addition, to the extent that certain countries, especially those outside the U.S., have a less developed or different approach to regulation (or lack of regulatory clarity) in the cryptocurrency space, there are also legal risks associated with holding digital assets or operating a fund, including the possibility that the Fund could inadvertently violate the law of another country or encounter adverse legal actions when the Fund attempts to realize or repatriate gains. Legislative, regulatory or other legal risks in the digital asset space are significant. Adverse legal or policy developments or governmental actions could have a material adverse effect on the Fund’s investments and operations.
Compliance and Tax Risk: The risk that existing or new regulations or compliance requirements could have an adverse effect on the business and economics of the Fund or its ability to pursue its investment strategies. New or additional registration, licensing or compliance obligations may be imposed on fund managers or on digital assets themselves by regulatory agencies. Even if the Fund does not have any direct investment restrictions, the Fund’s managers may be deemed to be subject to new regulations such as investment company registration, broker-dealer registration, or other regulations (or similar regulations in other jurisdictions), which could increase expenses and limitations. Additionally, tax issues are an area of considerable uncertainty in the cryptocurrency industry. Investors should note that the tax treatment of various cryptocurrency transactions is unsettled in many jurisdictions. New laws or regulations or unfavorable determinations by tax authorities could impact the Fund and its investors (for example, by subjecting certain transactions to new taxes or otherwise reducing after-tax returns). In addition to regulatory changes that could impact the legal status of certain digital assets or the operations of the Fund, regulatory changes, and the costs of compliance, could also have an adverse impact on the net performance of the Fund and on the realizable value of its investments.
Volatile and Unpredictable Markets: Digital asset and cryptocurrency markets are highly volatile and subject to wild price swings over short periods of time. Crypto assets have historically demonstrated much higher levels of volatility than traditional asset classes and can change in price erratically in a very short period of time, often driven by rapid shifts in market sentiment, changes in technological factors or perception, regulatory events or other macroeconomic or market factors. It is not uncommon for a token or cryptocurrency to increase or decrease by double digit percentages over the course of a single day or week. A sharp market correction can occur without warning and there are no guarantees that any given digital asset held by the Fund will retain its value or not decline to a very low level; there is a risk of complete loss of investment in any given digital asset held by the Fund. Market declines may occur rapidly with little to no liquidity at all times, and it may not be possible to liquidate positions at any time before significant losses occur.
Lack of Leverage; No Derivative Hedging: The Fund does not use leverage or derivative instruments as part of its investment strategy. The absence of leverage means the Fund will not be exposed to margin calls or the counterparty risk associated with derivative contracts and leveraged trading, but the use of leverage does not eliminate risk. The Fund is fully exposed to the price volatility of the underlying digital asset investments. In addition, due to the decision not to use derivatives, the Fund will not have the ability to hedge the Fund’s portfolio against adverse market moves. The strategy of the Fund means the performance of the Fund will track (neglecting fees and expenses) the unhedged, long-only performance of its venture and digital asset positions; in the event of a severe market dislocation or systemic market disruption, the Fund’s portfolio could suffer significant losses. All investors should understand that while the Fund has no leverage, there is still market risk and investors should only invest money they can afford to lose.
Market Manipulation and Trading Risks: Cryptocurrency markets are less mature than traditional financial markets and may be more susceptible to manipulation or unusual trading activity. “Pump-and-dump” schemes, spoofing, flash crashes and other forms of market manipulation have been observed in illiquid tokens The Fund could be impacted by a sudden price move or illiquidity resulting from large holders or coordinated group of traders seeking to move the market. Crypto trading venues have no circuit breakers or regulated market makers, operate 24/7 and may be vulnerable to extreme volatility and flash crashes. A flash crash in one or more of the Fund’s digital assets may cause the value of the Fund to decrease rapidly before the Fund has the opportunity to react. Risk of market manipulation is inherent in the digital asset market and substantial, even in the face of carefully designed risk management strategies.
Custody and Safekeeping of Digital Assets. The custody and safekeeping of digital assets involve operational challenges and risks not present with traditional securities held with a brokerage. Cryptocurrencies are generally held in a digital wallet secured by a cryptographic private key. Loss, theft or compromise of such a private key may lead to the irretrievable loss of any associated assets. The Fund and its custodians may use various security measures (multi-signature wallets, cold storage, etc. ), but these measures can never be completely failsafe. The loss of private keys or assets could be catastrophic, due to hacking, cyber-attack, theft or even accidental deletion or misplacement of keys. There have been many high-profile incidents in the digital asset industry that show that even the most sophisticated firms and their systems are not immune to cyber theft or human operational errors resulting in the loss of assets. Insurance for such custody is still in its infancy and may not cover all losses. In many cases where assets are stolen or lost due to third party failure, misappropriation or error, the Fund may be unable to recover them, resulting in a loss of value to the Fund.
Reliance on Third-Party Service Providers. The Fund will depend on the continued services of various third parties for critical operations, including exchanges or trading platforms for execution of trades, custodians for safekeeping of assets, brokers or OTC dealers for access to liquidity and price information, as well as data providers for pricing, monitoring and reporting. The Fund may also use the services of additional vendors or service providers, such as software developers, if deemed appropriate. If one or more key service providers fail to perform their obligations or experience a cybersecurity event or insolvency, the Fund could experience losses or disruption of its operations. For instance, the bankruptcy or failure of a major crypto exchange where the Fund stores assets or executes trades could lead to the freezing or loss of those assets (as has happened in the past when some exchanges failed). There is counterparty risk, that is, a risk that a trading counterparty or, if the Fund engages in any asset lending or staking, a lending counterparty, may default on its obligations, causing losses to the Fund. In addition, while traditional financial institutions have significant operating histories and are typically subject to financial regulations and regular financial reporting, many service providers in the digital asset space are relatively new, lightly regulated (if at all), and may not have the same degree of financial strength and regulatory oversight. The Fund’s operations will depend on the careful selection and ongoing oversight of third parties, but cannot assure you that third-party service provider failures will not occur.
Technology and Infrastructure Failures. The Fund’s operations depend on technology systems and infrastructure, including the blockchain networks (on which our assets are held) and smart contract platforms, as well as the Fund’s own hardware, software and connectivity systems. Technical failures, glitches or bugs can have significant repercussions. For example, a coding error in a smart contract (in the case of a DeFi investment) could be exploited and result in the loss of funds; network congestion or outages on a blockchain network could prevent the Fund from making timely transactions; hardware or software malfunctions could cause incorrect trades to be executed or prevent the Fund from accessing its assets. The Fund’s operations could also be affected by disruptions in power, facilities, or other events that impact the operations and functionality of its information technology systems. The Fund will have various operational resiliency measures in place, including backup systems, disaster recovery plans, etc., but these may not be effective in preventing all such occurrences. Any significant disruption to the Fund’s technology and information systems, or the blockchain networks on which the Fund’s operations and underlying assets depend could disrupt the Fund’s operations and result in financial losses.
Valuation of Illiquid or Unlisted Assets: The “fair value” of the Fund’s assets at any point in time may be difficult to determine, particularly for assets with little or no public market liquidity. Most of the Fund’s venture investments are expected to be Level 3 assets (for accounting purposes), which are valued based on significant unobservable inputs. In the absence of an active market for a security or asset class, all valuations are subjective to some degree. The Fund will use recent transaction prices (e.g. price of a funding round, token sale, etc. ), model estimates or a combination of the two to value its holdings, but these may not reflect the prices the Fund could realize in an expedited sale, especially in distressed market conditions. There is often a wide gap between “mark-to-model” valuations and real market prices obtainable for illiquid assets. Investors should know that the Fund’s reported NAV is an estimate and may be overly optimistic or otherwise inaccurate. A valuation determined to be too high (e.g. if a portfolio company fails to perform as expected or a token launch is unsuccessful) could later be adjusted or written down, which would hurt the Fund’s returns.
Market Volatility and Price Feeds: Valuations of even publicly traded digital assets can be highly volatile and, at times, the pricing data may be unreliable. Prices may vary across exchanges for the same asset, and thinly traded tokens are more susceptible to price manipulation and other factors that make it hard to value them accurately. The Fund may use third-party pricing services or use a weighted average of exchange prices to value liquid assets, but these sources may be delayed or unavailable during volatile market conditions. The Fund may also have difficulty determining how events such as forks, airdrops, protocol changes, exchange listing or delisting or other events affect the value of a particular asset (e.g. if a token is split into two, how does one value the new asset?). There is also the risk of human or system errors in the valuation process, for example, a typo in a valuation formula or using outdated information. Valuation of digital assets is a complex task that in itself could be a source of operational risk for the Fund. The Fund will have valuation policies in place and independent auditors will audit the Fund’s financial statements, but investors should expect that valuations of illiquid crypto assets will be somewhat uncertain and NAV may not always accurately reflect realizable value.
Investor Reporting: These valuation uncertainties have a knock-on effect on the Fund’s performance metrics reported to investors, including NAV, IRR, etc., which also involve estimation. Investors should take care in reading into interim performance numbers. For example, paper gains in the early days could be wiped out by subsequent valuation adjustments or unrealized losses. On the other hand, some portfolio successes may be underappreciated until there is an actual liquidity event that proves the investment thesis. The Fund does not plan to “window dress” portfolio value or aggressively mark assets, but there is always the risk of human error or unintentional bias in valuations despite best efforts. All valuations are performed in accordance with the Fund’s governing documents and applicable accounting principles (e.g. ASC 820 in the U.S. for fair value measurement), and in most cases they are reviewed by an independent auditor, but valuation is not an exact science in these markets. Investors should be comfortable with the lack of transparency in pricing and the possibility of NAV volatility unrelated to actual sales of assets. In summary, the lack of transparent market pricing for many of the Fund’s holdings is an additional layer of risk – the risk that the true value (positive or negative) of an investment will only be known upon exit, and that in the meantime reported values may not fully reflect the underlying economic reality.
Cybersecurity and Technology Risks. Hacking and Cyber-Attacks: Digital assets are inherently attractive targets for hackers and cyber-criminals. Cybersecurity breaches, including the hacking of exchanges or other platforms, malware attacks on systems, phishing attacks on personnel or other malicious intrusions, could lead to the theft or loss of the Fund’s assets. The pseudonymous, irreversible nature of cryptocurrency transactions means that if the Fund’s assets are stolen, they will likely be lost forever. The Fund, its portfolio companies, and the service providers it relies on (exchanges, custodians, etc.) all face an ongoing threat of cyber-attacks and unauthorized access attempts. Even with robust cybersecurity measures in place, a sophisticated attacker may still be able to breach defenses using new exploits or social engineering tactics. A successful attack could bypass technical safeguards and drain wallets or accounts in a matter of minutes. In the event of a breach or cyber-attack, there may be no effective recourse – for example, there is no government insurance or warranty that will cover stolen crypto assets, and many exchanges and custodians have disclaimed liability for certain breach scenarios. This risk is borne by the Fund’s investors.
Fraud and Scams: In addition to outright hacking, the Fund also faces risks from fraud schemes that are common in the digital asset space. These include Ponzi or pyramid schemes, fraudulent token offerings, “rug pulls” and phishing attacks against token holders. The Fund could be deceived into making an investment in a project that provides false information or simply disappears with the investors’ money. The Fund’s employees or systems could be duped by spoofed or fraudulent communications (such as a hacker pretending to be a legitimate counterparty or tech support). The Fund will perform due diligence on its investments and maintain strict operational procedures, but there is always a risk of being deceived. If the Fund is a victim of a fraud or scam, it may suffer losses and legal recourse may be unavailable or limited if the perpetrators are anonymous or located outside the U.S. jurisdiction. Investors should be aware that cybersecurity and fraud risks are an inherent part of investing in digital assets, and that these events could have a material impact on the Fund’s performance.
Privacy and Data Security: In addition to the risk of asset theft, cyber incidents could also result in the unauthorized disclosure of sensitive information. The Fund may have access to or store confidential information, such as its proprietary investment strategies, non-public information about portfolio companies, or personal information of investors. A breach could lead to the unauthorized release of sensitive data, which could harm the Fund or its investors (for example, by enabling identity theft or by compromising the Fund’s competitive advantage if its strategies are exposed). The Fund’s networks and communications could also be subject to surveillance or interception by malicious actors, which could lead to front-running of trades or other abusive behavior. The Fund is committed to maintaining strong cybersecurity practices, but no network can be completely secure. Investors should be aware that cyber risks are an inherent part of the digital asset landscape, and that a major cyber incident could have financial and reputational impacts on the Fund.
Very High Failure Rate of Startups: The Fund may make venture capital-like investments in early stage companies and blockchain projects (including token ventures), which have the potential to provide the Fund with very substantial returns but also involve extremely high risk. Early stage companies often have no or limited operating history, no or uncertain revenues, untested or unproven business models, and are often in very early stages of development in emerging technology industries - this means that they face a high degree of business and financial risk with a potential for both very high growth and sudden and total failure. In fact, most startups have historically failed (by some estimates over 90% of startups fail) so the chances of any one startup succeeding and ultimately producing a very high return is lowe The Fund’s venture capital investments may be entirely lost if a portfolio company or project fails. Even startups that have raised millions of dollars can and do go bankrupt, get sold for cheap, or go out of business (including possibly due to technical infeasibility, market dynamics or competition, regulatory intervention or other factors that cannot be controlled by the Fund). The Fund has no way of knowing which investments will and will not succeed and its venture investments are very highly concentrated - even the largest venture positions are less than 1% of the Fund and if the few big winners needed to offset the likely many losses do not materialize, the Fund’s performance will likely be poor.
Absence of Operating History and Execution Risk: Most early stage ventures will have little or no significant operating history or financial performance to assess. The Fund will need to rely on the talent, integrity, and good faith of the founders and key team members and there is a risk that a project’s management team does not have the ability or experience to successfully execute or adapt to changes in the competitive and market environment. The Fund’s investments in early stage companies and startups face key person risk - the loss of a member of the founding team or key member of the management team could severely impact a young company. Also, many crypto-related startups raise funds by selling tokens or coins based on a promise to do something in the future (e.g., build a platform) and the Fund may enter into token purchase agreements (SAFTs) or similar arrangements that are contingent on the project eventually delivering a functional network or product in the future. In these cases, there is a real risk that these future developmental milestones are never reached. The project’s technology may never work as planned, or if the technology does work, it may never attract users. In such an event, the tokens may never be delivered to the Fund, or if they are delivered, may be completely worthless and without any utility or market value. The Fund’s venture capital investments in early stage companies and startups are highly speculative and subject to many execution and development risks that are outside of the Fund’s control.
Illiquidity and Long Time Horizon: Venture investments (whether equity or tokens) are inherently illiquid and often require a long time horizon before a return can be generated if at all. Many startups will need to raise multiple financing rounds (diluting previous investors) and several years to mature before the Fund can liquidate the investment. The Fund’s capital may be tied up in a venture with little or no near-term progress for years, during which the Fund cannot readily sell its position. The timing of any exit (such as an acquisition or public offering) for early stage investments is uncertain, and if and when an exit opportunity becomes available, it may be at a lower valuation than anticipated, or market conditions at the time may be unfavorable. Furthermore, for token ventures, even if a project successfully launches and its tokens become tradeable, initial trading volume may be low, subject to significant volatility and potential sales restrictions or limits. The Fund could have practical difficulties in liquidating its position without materially impacting the price. This type of investing requires patience, and investors in the Fund must be willing to have their capital tied up in these illiquid, long-term investments for the life of the Fund. There is a risk that, even after many years, some of the Fund’s venture investments will generate little to no return, or that broader market conditions (such as an extended period of depressed prices for cryptoassets or the token markets) could wipe out or substantially reduce the value of what otherwise would have been a successful project.
