Risk Disclosure

1. Digital-Asset Risk

Digital assets can experience extreme and rapid price movements. A token may:

• lose most or all of its value;
• become illiquid;
• stop trading;
• be delisted;
• experience manipulation;
• experience a technical failure; or
• become inaccessible.

ApeCover does not guarantee the value or liquidity of any covered asset.

2. Protection Is Not a Guarantee of Capital

ApeCover protection is designed to provide a predefined payout when the specific conditions of an applicable policy are met.

It does not guarantee recovery of your original investment.

The payout may be substantially less than your actual trading loss.

The current protocol design deliberately limits payouts so that they cannot exceed the corresponding real loss on the covered position.

3. Protection Is Time-Limited

Protection applies only during the period specified by the applicable policy.

Under the current design, a policy lasts approximately 15 minutes, with a subsequent claim window.

A price movement occurring outside the applicable protection period may not qualify for a payout.

4. Trigger Risk

A claim is payable only if the applicable trigger conditions are satisfied.

The fact that the token price falls substantially does not necessarily mean that a claim will be triggered.

The protocol may require multiple conditions to be satisfied, including price and time-related conditions.

5. Oracle and Price Risk

ApeCover may rely on on-chain price data, TWAP calculations, spot prices and other data sources.

Prices can be manipulated or temporarily distorted.

The current design requires both spot and TWAP conditions and applies a minimum TWAP age, with invalid or insufficiently aged data failing closed.

These mechanisms reduce certain risks but cannot eliminate all oracle or market-manipulation risks.

6. Smart-Contract Risk

Smart contracts can contain vulnerabilities.

Even where code has undergone internal review, testing and independent audits, vulnerabilities may remain undiscovered.

ApeCover’s development record currently reports 580 passing tests and two internal audit passes, with additional issues discovered through real-chain testing.

Independent third-party audits are planned, but:

An audit does not guarantee that smart contracts are secure.

7. Blockchain Risk

Blockchain networks may experience:

• congestion;
• high transaction fees;
• reorganisation;
• validator failures;
• outages;
• consensus failures;
• network upgrades;
• chain splits;
• unexpected behaviour; or
• permanent cessation.

Any of these events may affect your ability to purchase protection, execute a trade, submit a claim or receive a payout.

8. Liquidity Risk

A token may have insufficient liquidity to allow you to exit your position at a reasonable price.

Protection does not guarantee that you can sell your tokens.

The protocol screens for certain liquidity characteristics because liquidity conditions are material to the protection model.

9. Token and Contract Risk

Certain tokens may have characteristics that make them unsuitable for ApeCover. These may include:

• mintability;
• rebasing;
• mutable taxes;
• unusual transfer mechanics;
• liquidity removal;
• unsupported token standards; or
• other contract behaviour.

The protocol’s screening mechanism may refuse such assets.

The development plan specifically states that tokens outside the model can be rejected through bytecode screening and that an unverified token is treated as uninsurable rather than automatically insurable.

10. Liquidity Removal and Rug Risk

ApeCover does not protect against every form of rug pull.

In particular, the current protection model depends on defined liquidity conditions.

The development testing found that many apparent token collapses were actually liquidity removals rather than trading losses, and the protocol therefore uses liquidity-burn/lock conditions as part of eligibility.

A token that fails the applicable liquidity requirements may be refused protection.

11. Adverse Selection

Protection products are exposed to adverse-selection risk.

Users may have information about a token or trade that is not reflected in the pricing model.

ApeCover therefore uses staged limits and monitors realised claims.

The current development plan uses pilot and ramp stages and includes a hard stop if the realised loss ratio exceeds 1.0 over a trailing 100 policies.

These measures do not eliminate adverse-selection risk.

12. Reserve and Solvency Risk

ApeCover protection depends on available reserves and protocol capacity.

Although the protocol is designed to require sufficient reserves before issuing policies and to cap utilisation, extreme events may create stresses that cannot be completely anticipated.

A reserve pool is not an unlimited source of funds.

13. Underwriter Risk

Where underwriting vaults are available, underwriters may experience losses.

Underwriting capital may be exposed to claims and other protocol risks.

The current architecture places first-loss underwriting capital junior to policyholders.

Underwriting participation should therefore be treated as a high-risk activity.

14. Governance Risk

ApeCover may use governance mechanisms, timelocks, multisignature controls and emergency guardians.

Governance participants or administrators may make decisions affecting:

• supported assets;
• pricing;
• protection parameters;
• capacity;
• contracts;
• supported chains;
• emergency pauses; or
• other protocol functions.

The current architecture uses timelocked governance and a guardian that can pause but cannot independently restart the protocol.

Governance mechanisms reduce certain risks but cannot eliminate governance risk.

15. Emergency Pause Risk

ApeCover may pause the issuance of new protection when a security or operational issue is identified.

A pause may occur unexpectedly and may prevent you from purchasing new cover.

The pause mechanism is intended to protect the protocol but may also affect user access and trading strategies.

16. Third-Party and Integration Risk

ApeCover may integrate with:

• launchpads;
• DEXs;
• wallets;
• trading interfaces;
• blockchain networks;
• liquidity venues; and
• other third-party systems.

Failures in these systems may affect ApeCover even when ApeCover’s own contracts are functioning correctly.

17. Regulatory Risk

The legal and regulatory treatment of blockchain-based protection, digital assets, financial products and token-based ecosystems varies between jurisdictions and may change.

ApeCover may be subject to regulatory requirements that affect:

• who may use the Services;
• where Services may be offered;
• how protection may be structured;
• whether users must undergo identity verification;
• token availability;
• underwriting participation; or
• other protocol functions.

You are responsible for determining whether use of ApeCover is lawful in your jurisdiction.

18. Tax Risk

Transactions involving digital assets, protection products, premiums, claims, tokens and underwriting may have tax consequences.

ApeCover does not provide tax, accounting or financial advice.

You are solely responsible for determining and reporting your tax obligations.

19. No Investment Advice

Nothing on the ApeCover website, application, documentation, social media channels or other communications constitutes:

• investment advice;
• financial advice;
• trading advice;
• legal advice;
• tax advice; or
• a recommendation to purchase or sell any digital asset.

You make all trading and protection decisions independently.

20. Do Your Own Research

Before using ApeCover, you should independently evaluate:

• the underlying token;
• the trading venue;
• liquidity;
• the applicable protection terms;
• the premium;
• the maximum payout;
• the protection period;
• the applicable exclusions;
• smart-contract risks;
• reserve capacity; and
• the legal and regulatory implications of using the product.

21. No Promise of Profit

ApeCover does not promise or guarantee:

• profits;
• protection against all losses;
• recovery of principal;
• successful claims;
• uninterrupted operation;
• token appreciation;
• liquidity;
• availability of protection;
• future token value; or
• future protocol performance.

22. Only Risk Capital

You should use ApeCover only with funds you can afford to lose.

Never use funds required for essential living expenses, debt obligations or other critical financial commitments.