Risk Disclosure

1. Unregulated Entity Risk

2. ZoneX Service Model and Where Risk Falls

ZoneX offers three distinct services, each with a different risk profile. This section explains where financial risk sits in each case; the market, leverage, exchange, and technology risks described in Sections 3–7 below are relevant to trading outcomes generally, but they only translate into loss of your own assets in the standalone Terminal scenario described in 2.3.

2.1 Challenge — Simulated Evaluation

2.2 Funded Trader Arrangement

2.3 Standalone ZoneX Terminal / Personal Exchange Trading

Full contractual terms for all services are set out in our Terms of Use.

3. Cryptocurrency Market Risks

3.1 Extreme Price Volatility

Cryptocurrency prices can fluctuate dramatically within minutes or hours. Price movements of 10-50% in a single day are common. This extreme volatility affects trading outcomes generally and, where you are trading your own assets on the standalone Terminal (see Section 2.3), can result in:

• Rapid and total loss of capital
• Inability to exit positions at desired prices
• Forced liquidation of leveraged positions
• Slippage exceeding stop-loss levels
• Gap risk where prices jump between trading levels

3.2 Market Manipulation Risk

Cryptocurrency markets are largely unregulated and susceptible to manipulation:

• Wash Trading: Artificial volume creation to mislead traders
• Pump and Dump Schemes: Coordinated buying followed by mass selling
• Spoofing: Placing fake orders to influence prices
• Whale Manipulation: Large holders moving markets through significant trades
• Social Media Influence: Price manipulation through coordinated social media campaigns

3.3 Liquidity Risk

Cryptocurrency markets can experience sudden liquidity droughts:

• Wide bid-ask spreads increasing trading costs
• Inability to execute large orders without significant price impact
• Market depth disappearing during volatile periods
• Complete absence of buyers during market crashes
• Order book imbalances causing cascading liquidations

4. Leverage and Margin Trading Risks

4.1 Liquidation Risk

• Automatic Liquidation: Positions closed automatically when losses reach maintenance margin requirements
• Cascading Liquidations: Mass liquidations triggering further price declines
• Liquidation Fees: Additional costs incurred during forced position closure
• Total Loss: Entire position value can be lost before stop-loss execution
• Negative Balance: In extreme cases, losses may exceed account balance

4.2 Margin Call Risk

When market moves against a position:

• Immediate margin top-up may be required
• Failure to meet margin calls results in forced liquidation
• No guarantee of execution at favorable prices
• Limited time to respond to margin requirements

4.3 Funding Rate Risk

Perpetual futures contracts involve periodic funding payments:

• Continuous costs for holding positions
• Funding rates can be extremely high during volatile periods
• Negative carry eroding position value over time
• Unpredictable funding rate changes

5. Exchange and Platform Risks

5.1 Exchange Insolvency and Bankruptcy

Cryptocurrency exchanges have failed or become insolvent, resulting in total loss of customer funds:

• FTX (2022): $8+ billion in customer losses
• Mt. Gox (2014): 850,000 Bitcoin lost
• QuadrigaCX (2019): $190 million lost
• No deposit insurance or government protection
• Recovery of funds through bankruptcy proceedings uncertain and can take years

5.2 Exchange Hacks and Security Breaches

Exchanges are frequent targets for cyberattacks:

• Theft of customer funds through security breaches
• Hot wallet compromises leading to immediate losses
• Insider attacks by exchange employees
• Phishing attacks targeting user accounts
• API key theft enabling unauthorized trading

5.3 Technical and Operational Failures

• System Outages: Platform unavailability during critical market movements preventing position management
• Order Execution Failures: Orders not filled, filled at wrong prices, or duplicated
• Price Feed Errors: Incorrect price data causing improper liquidations
• API Connectivity: Connection failures preventing trading or risk management
• Rollback Risk: Exchanges reversing trades after execution

5.4 Exchange Policy and Rule Changes

• Sudden changes to trading fees or leverage limits
• Delisting of trading pairs without notice
• Withdrawal restrictions or freezes
• Changes to API access or functionality
• Jurisdictional restrictions affecting service availability

6. Regulatory and Legal Risks

6.1 Regulatory Uncertainty

Cryptocurrency regulation is rapidly evolving and uncertain:

• Classification Changes: Cryptocurrencies may be reclassified as securities, commodities, or currencies in a given jurisdiction
• Trading Bans: Jurisdictions may prohibit cryptocurrency trading entirely
• Exchange Restrictions: Regulators may restrict or ban specific exchanges
• Leverage Limits: Authorities may impose maximum leverage restrictions
• Tax Changes: Sudden changes to cryptocurrency taxation

6.2 Compliance and Legal Risk

• Activities that are currently legal may become illegal
• Retroactive application of new regulations
• Civil or criminal penalties for non-compliance
• Forced closure of accounts or seizure of assets
• Cross-border legal complications

6.3 Tax Obligations

You are solely responsible for tax compliance:

• Trading gains and performance-based remuneration are taxable in most jurisdictions
• Tax treatment varies by country and transaction type
• Record-keeping requirements for all trades
• Potential penalties for non-compliance or incorrect reporting
• We do not provide tax advice or reporting assistance

7. Technology and Security Risks

7.1 Blockchain Technology Risks

• Network Forks: Blockchain splits causing asset duplication or loss of value
• Consensus Failures: Network attacks (51% attacks) enabling double-spending
• Smart Contract Bugs: Coding errors in DeFi protocols causing loss of funds
• Network Congestion: High gas fees and delayed transactions during peak usage
• Protocol Changes: Updates to blockchain protocols affecting token functionality

7.2 Cybersecurity Risks

• Account hacking through phishing, malware, or social engineering
• SIM swapping attacks compromising two-factor authentication
• Keyloggers capturing passwords and private keys
• Man-in-the-middle attacks intercepting communications
• Ransomware targeting trading systems

7.3 Software and Terminal Risks

Our trading terminal and software may experience:

• Bugs causing incorrect order execution or position management
• Latency issues affecting order timing and fills
• Data feed errors providing incorrect market information
• Compatibility issues with operating systems or devices
• Unplanned maintenance or downtime

8. Trading Firm Specific Risks

8.1 Challenge Risks

8.2 Funded Trader Arrangement Risks

• Not Your Capital: Under a Funded Trader Arrangement, any actual capital, trading account, crypto-assets, positions, and proceeds belong exclusively to ZoneX, whether the arrangement uses simulated capital, ZoneX-owned proprietary capital, or a combination. You do not own or have any proprietary interest in any of it
• Performance Remuneration: Payment may be withheld, rejected or adjusted only on justified grounds under the funded-stage documents, including prohibited trading, fraud, account sharing, rule breaches, non-qualifying activity, failed verification, legal prohibition or a bona fide investigation
• Remuneration Is Not a Withdrawal: Any payout you receive is contractual, performance-based remuneration for services rendered — it is not a withdrawal of an account balance, not a repayment of any fee, and not an investment return
• Disbursement Uncertainty: Payment of performance-based remuneration is subject to verification and eligibility checks under the applicable agreement
• Account Termination: Access may be suspended or terminated on the defined grounds in the funded-stage documents. Capital availability may affect prospective admission, continuation or proprietary-capital deployment, but does not by itself cancel properly earned Performance Remuneration
• Rule Changes: Material economic changes to an existing Account Configuration apply prospectively. Express acceptance is required where specified, and no amendment retrospectively cancels properly earned Performance Remuneration
• Monitoring: All trading activity is monitored; privacy is limited

8.3 Performance Pressure and Psychological Risks

Trading with evaluation criteria and performance targets creates psychological pressure:

• Pressure to meet targets leading to excessive risk-taking
• Emotional trading from fear of rule violations
• Overtrading in pursuit of performance-based remuneration
• Revenge trading after losses
• Sleep deprivation and stress from continuous monitoring

8.4 Company Insolvency Risk

If ZoneX becomes insolvent or ceases operations:

• Unpaid, accrued or conditionally payable performance-based remuneration may be permanently lost
• Active Challenges and Funded Trader Arrangements will be terminated
• No compensation or refunds for fees paid, except as required by mandatory consumer law
• Limited legal recourse for recovery
• No government safety net or deposit insurance

9. Conflicts of Interest

Several conflicts of interest exist in our business model:

• Challenge Revenue: We earn service-fee revenue from Challenges regardless of participant success
• Failure Rate: High failure rates increase our Challenge fee revenue
• Performance-Based Remuneration Structure: Performance-based remuneration under a Funded Trader Arrangement is calculated as a percentage of net trading results on capital that belongs to ZoneX; ZoneX retains the balance, creating potential incentive alignment considerations
• Rule Enforcement: Strict enforcement benefits us through forfeiture of entitlement to performance-based remuneration
• Evaluation Criteria: Pass/fail determinations are based on predefined, objective risk and performance limits as set out in the Challenge Rules

10. Past Performance and Forward-Looking Statements

Any forward-looking statements about potential performance-based remuneration, success rates, or market conditions are estimates only and should not be relied upon.

11. Suitability and Eligibility

Cryptocurrency trading and our programs are NOT suitable for everyone. You should NOT participate if:

• You do not have substantial trading experience
• You do not fully understand cryptocurrency markets and derivatives
• You cannot afford to lose the fees paid to participate, or, for standalone Terminal trading, the trading capital you place at risk
• You need trading income to meet essential living expenses
• You are relying on borrowed funds or credit
• You have not read and understood this Risk Disclosure
• You are under 18 years of age
• You are located in a prohibited jurisdiction

12. No Investment Advice

ZoneX and its employees:

• Do NOT provide investment, financial, or trading advice
• Do NOT recommend specific cryptocurrencies or trading strategies
• Are NOT licensed investment advisors or financial planners
• Provide educational information only, not personalized recommendations
• Cannot guarantee any level of profitability or performance-based remuneration

You are solely responsible for your own trading decisions. You should seek advice from qualified, independent financial advisors before participating in our programs.

13. Limitations and Disclaimers

13.1 No Guarantees

We provide NO GUARANTEES regarding:

• Platform availability or uptime
• Order execution or fill prices
• Data accuracy or reliability
• Profit potential or success rates
• Amounts or timing of performance-based remuneration
• Continued service availability

13.2 Limitation of Liability

To the maximum extent permitted by Swiss law:

• We are not liable for trading losses or missed opportunities
• We are not liable for exchange failures, hacks, or insolvencies
• We are not liable for technical failures or software bugs
• We are not liable for regulatory actions or legal consequences
• Our total liability is limited to fees you paid in the preceding 12 months

14. Your Responsibilities

By participating in our programs, you acknowledge and accept responsibility for:

• Due Diligence: Conducting your own research and analysis
• Risk Assessment: Evaluating whether programs suit your circumstances
• Compliance: Following all applicable laws and regulations
• Tax Obligations: Reporting and paying taxes on any profits or performance-based remuneration
• Security: Protecting your account credentials and devices
• Education: Continuously learning about markets and risks
• Rule Compliance: Strictly adhering to the Challenge Rules and Funded Trader Rules as applicable
• Monitoring: Actively managing positions and risk exposure

15. Seeking Professional Advice

Before participating in our programs, we strongly recommend you:

• Consult with a qualified, independent financial advisor
• Seek legal advice regarding applicable laws and tax obligations
• Review this Risk Disclosure with professional advisors
• Understand your country's regulations regarding cryptocurrency trading
• Consider psychological readiness and risk tolerance

16. Changes to Risk Disclosure

We may update this Risk Disclosure at any time. Material changes will be communicated via email and prominent website notice. Your continued participation after changes constitutes acceptance of the updated disclosure.

It is your responsibility to regularly review this Risk Disclosure, our Terms of Use, the Challenge Rules, and the Funded Trader Rules for updates.

17. Contact Information