Risks

Risks related to mMEV

Investing in mMEV involves risks, and it is important for investors to understand these before engaging. While Midas seeks to minimise risks, the following factors are highlighted to investors. Full risk disclosure can be found in the Prospectus Documents.

The offering is made exclusively on the basis of the information contained in the formal prospectus issued in connection with the offering. The prospectus is available at Prospectus Documents. Any decision to invest in the securities should be based on a consideration of the prospectus as a whole by the investor. The approval of the prospectus by the FMA should not be understood as an endorsement of the quality of the offering.

Third-Party Project Risks

mMEV invests collateral assets in third-party DeFi opportunities. These projects introduce risks that are outside the direct control of mMEV. Such risks include the operational, financial, and regulatory risks associated with these third-party platforms. Issues such as failure of a protocol, changes in terms, or operational mismanagement can significantly affect the returns on investments.

Collateral Asset Risks

The collateral assets in mMEV are deployed across a range of DeFi protocols, each with its own risk profile. Internal factors such as technological failures or operational disruptions within DeFi protocols may further impact the stability and value of the collateral. These assets are subject to potential fluctuations in value, liquidity constraints, and changes in market dynamics and other external factors. In particular, collateral assets may lose value in volatile market conditions, affecting the overall value of the portfolio. Investors should be aware that the risk of asset devaluation could result in a loss of principal, particularly during periods of significant market stress.

Smart Contract Risks

mMEV relies on smart contracts to interact with various DeFi protocols. Although mMEV takes measures to mitigate these risks, such as conducting regular audits, implementing security best practices, and selecting reputable protocols, these measures cannot guarantee complete protection. Additionally, smart contracts may rely on external data sources (e.g., oracles), which introduce further risks of inaccuracy or manipulation.

Market Conditions and Volatility

DeFi investments are highly sensitive to market conditions and can experience significant volatility. The value of collateral assets and the yields generated by DeFi platforms can be impacted by factors such as general market sentiment, regulatory changes, technological advancements, and macroeconomic events. Market downturns, liquidity shocks, or sudden price movements can affect the ability of mMEV to maintain desired returns, and may lead to capital losses losses or the inability to redeem collateral at expected values. Investors should consider their risk tolerance and time horizon when evaluating exposure to market volatility.

Execution Risks

Execution risk arises from the possibility that mMEV may not be able to efficiently implement its investment strategy or deploy collateral as intended. This can result from various factors, such as delays in executing trades, network congestion, or technical failures within the DeFi protocols themselves. Additionally, poor timing or errors in transaction execution can lead to suboptimal returns or direct financial losses. While mMEV works to minimize these risks through automation and efficient systems, execution risks are inherent in any DeFi-based investment strategy.

Liquidation Risks

The collateral assets in mMEV are exposed to liquidation risks, especially in the case of leveraged positions or falling asset prices. If the value of the underlying collateral falls below a specified threshold, or if a DeFi protocol enforces a liquidation event due to market movements, assets may be liquidated at unfavorable prices, potentially resulting in partial or complete losses. mMEV works to mitigate this risk by monitoring and adjusting positions as market conditions change, but the inherent volatility in DeFi markets means that liquidation events can still occur, especially during periods of significant market stress.

Regulatory Risks

The DeFi space is still relatively new and is subject to evolving regulations. Changes in regulatory frameworks could impact the operations of DeFi protocols, as well as the ability of mMEV to continue deploying capital in these ecosystems. Regulatory scrutiny, especially in jurisdictions where DeFi is not fully regulated, could lead to restrictions or bans on certain activities, causing disruptions in the investment strategy and potential losses for investors.

Liquidity Risks

While mMEV is designed to invest in liquid DeFi strategies, there is still a risk of liquidity issues, particularly during times of market stress. DeFi protocols may experience lower liquidity, higher slippage, or reduced ability to redeem assets quickly. If liquidity is constrained, mMEV may not be able to exit positions or redeem collateral at the expected price, potentially leading to significant losses.

Tracking Error

The value of an investment in a Product however may not perfectly reflect or track the value of the Underlying. At any time, the price at which any Underlying trades on stock exchanges, regulated or unregulated markets within the EEA or abroad or any other exchange or market on which they may be quoted or traded may not accurately be reflected in changes to the value or price of the product"

Qualified Subordination

A qualified subordination agreement was entered into for all current and future claims of the tokenholders. The qualified subordination means that interest payments and loan repayment to the tokenholder will rank below all other creditors of the company in the event of insolvency, but above the shareholders. Additionally, the tokenholder cannot assert claims for interest payments or loan repayment if doing so would lead to the company’s insolvency. The claims of the holders of the mTBILL Token are secured by a pledge of the collateral. Further details can be found in the prospectus, which is available at Prospectus Documents.

Operational Risks

mMEV’s success depends on the effective operation of various internal systems and processes. Any failures or inefficiencies in the operational infrastructure, including risk management, compliance, and reporting systems, could lead to financial losses or mismanagement of the investment strategy. mMEV has implemented robust operational protocols to minimize such risks, but they remain an inherent part of the operation of any financial platform.

Counterparty Risks

mMEV invests in DeFi platforms and protocols that may have their own counterparties. These counterparties may include other users, liquidity providers, or external organizations involved in the DeFi ecosystem. There is a risk that these counterparties may not fulfill their obligations, fail to meet financial commitments, or experience insolvency, which could affect the performance of mMEV’s investments. In the event of a counterparty default, mMEV’s investments may be significantly affected, potentially leading to financial losses, reduced liquidity, or the inability to access or redeem invested assets.