FundamentalFundamental
CriticalTotal loss of principal · true nature of dividends · NAV valuation limits
RISK DISCLOSURE v1.0 · CONFIDENTIAL
Risk Disclosure
Risk Disclosure
This document is required reading before subscription. Confirming that you understand all the risks herein constitutes voluntary assumption of those risks. This fund is not a guarantee of principal or returns of any kind.
Risk Overview · Ten Categories
StrategyStrategy
HighStrategy failure · leverage risk · counterparty risk
TechnicalTechnical
CriticalSmart contracts · keys & multisig · oracle · blockchain network
LiquidityLiquidity
MediumLock-up · redemption delay · emergency freeze · secondary liquidity
Legal / RegulatoryLegal / Regulatory
HighRegulatory uncertainty · KYC / sanctions · founder personal risk
OperationalOperational
MediumDisclosure limits · team risk · governance risk
Dividend MechanismDividend Mechanism
HighPool exhaustion · accounting nature · tax impact
SuitabilitySuitability
MediumRecommended ≤ 10% of total assets · unsuitable for some
Dispute ResolutionDispute Resolution
MediumBVI arbitration · waiver of class-action rights
OtherOther
UnknownBlack-swan events · unforeseeable factors
01 — FUNDAMENTAL RISKS
Fundamental Risks
The three most important risks — they must be fully understood before subscription.
1.1 Risk of total loss of principal
TOTAL LOSS OF PRINCIPALCrypto asset prices are highly volatile, quantitative strategies may fail, and smart contracts may be exploited. The entire amount you invest may go to zero. Unless a loss is caused by proven fraud or gross negligence, the fund team bears no obligation to compensate.
1.2 The true nature of the daily dividend
TRUE NATURE OF DAILY DIVIDENDSThe daily dividend is, in essence, an early distribution of fund assets — not a guarantee of stable returns from any external source. If the reserve is exhausted, in the event of prolonged losses, a black-swan event, a DAO vote to suspend or a contract failure, the dividend may be reduced, suspended or fall to zero.
1.3 Limits of NAV disclosure
NAV DISCLOSURE LIMITATIONSDespite the three-party verified oracle, the daily NAV may still contain valuation error, particularly with illiquid asset valuation, abnormal cross-market spreads, oracle latency or extreme liquidity stress.
02 — STRATEGY RISKS
Strategy Risks
2.1 Strategy failure risk
Past backtests do not indicate future performance. Market structure change, capital crowding that erodes alpha, black-swan events outside the model's training range and AI model over-fitting may all cause strategies to fail.
2.2 Leverage risk
The fund may use up to 3x total leverage. In extreme volatility, forced liquidation may execute at the most unfavourable price; leverage amplifies losses and may cause losses exceeding the principal.
2.3 Counterparty risk
Fund assets are held across multiple CEXs and DeFi protocols. Exchange bankruptcy (cf. FTX), DeFi protocol exploits, stablecoin depegging and a custodian being frozen by regulators may all occur.
03 — TECHNICAL RISKS
Technical Risks
3.1 Smart contract risk
An audit is not a guarantee against bugs. Despite a dual audit by CertiK and Trail of Bits, undiscovered code, economic-model or cross-contract vulnerabilities may remain. In an exploit, assets may be lost within seconds and cannot be recovered.
3.2 Key & multisig risk
Under the 5/9 multisig + Fireblocks MPC architecture, collusion among signers, coercion or key theft may all cause losses.
3.3 Oracle risk
The NAV oracle may be manipulated or fail, leading to incorrect subscription prices, redemption prices, dividend calculation or liquidation triggers.
3.4 Blockchain network risk
L2 networks such as Arbitrum and Base may experience congestion, sequencer failures, major bugs causing rollbacks, or cross-layer bridge failures — all beyond our control.
04 — LIQUIDITY RISKS
Liquidity Risks
Your liquidity timeline.
- 1
T0 · Subscribe
USDC locked, QDF minted
- 2
Day 30 · Lock-up ends
Redemption can be initiated; dividend paid throughout
- 3
T+3 · Redemption settles
Strategies closed, USDC returns to your wallet
- 4
After 180 days
Zero redemption fee, fully free; secondary market optional
- No redemption during lock-up: principal cannot be withdrawn for 30 days; redemption settles on T+3, during which the market may keep falling.
- Emergency freeze risk: in extreme situations, the DAO or foundation may vote to invoke a redemption freeze of up to 7 days.
- Thin secondary liquidity: whitelisted DEXs for the QDF token may be highly illiquid, and the secondary price may deviate significantly from NAV.
05 — LEGAL & REGULATORY
Legal & Regulatory Risks
5.1 Regulatory uncertainty
Your jurisdiction may suddenly ban holding crypto funds; legal change in the registration jurisdiction may force restructuring; regulators such as the SEC may take action; a change in tax characterisation may lead to retroactive taxation.
5.2 KYC & sanctions risk
If you are deemed a sanctioned entity after subscribing, tokens may be frozen; if your jurisdiction becomes restricted, redemption may be refused; failure to report KYC changes promptly may affect access to assets.
5.3 Founder personal risk
Personal events affecting Mr Xue Manzi (legal, health, reputational) may affect the fund's brand. A legal segregation clause separates personal risk from fund operations, but brand-level impact cannot be fully isolated.
06 — OPERATIONAL RISKS
Operational Risk & Disclosure Limits
You must accept the cost of the fundamental “private positions” design.
What you can verify
Daily NAV (three-party signed) · ZK proof of reserves · Armanino monthly on-chain PoR · broad strategy exposure (daily) · strategy attribution (weekly) · open-source contract code · holder balances and dividend records (on-chain).
What you cannot verify
Specific positions · exact rebalancing timing and price · AI model parameters and training data · factor weights and strategy paths · counterparty identities · multisig signer identities (partly anonymous).
07 — DIVIDEND DISCLOSURE
Special Disclosure on the Dividend
This is the most important and most easily misunderstood part of this document.
The Accounting Nature of the Dividend
The daily dividend is deducted directly from the fund's NAV. The dividend is not extra income — it is a portion of your account value paid out to you early, in cash.
- Receiving a dividend ≠ the fund made money
- Falling NAV + receiving a dividend = you may actually be losing money
- True return = change in NAV + cumulative dividends − cumulative subscription cost
Pool A exhausted
Aave / Pendle rates fall to zero or turn negative → the base yield pool dries up.
Pool B negative
Strategies lose money for more than 30 consecutive days → the alpha pool turns negative.
Pool C at zero
An extreme single-day loss exceeds the reserve → the reserve falls to zero.
08 — SUITABILITY
Investor Suitability
If any of the following apply, you should not invest in this fund.
- You cannot bear a total loss of principal — if you would invest funds needed for daily life, do not buy.
- You do not understand the basics of crypto assets — if you are unfamiliar with smart contracts, quantitative strategies and on-chain trading, do not buy.
- You are over 70 years of age without an independent adult child or professional adviser co-signing.
- Your jurisdiction prohibits it — the US (except accredited investors), mainland China, Hong Kong & Macau, OFAC-sanctioned jurisdictions.
- You cannot read and understand legal documents in Chinese and English.
- You would rely on this fund as your only investment.
The Golden Rule
This fund should make up no more than 10% of your total liquid assets. Diversification is the only defence against a black swan.
09 — RESERVE TESTING
Reserve Stress Testing & Extreme Scenarios
A transparent view of the reserve's capacity — but not a guarantee of principal.
20,000,000
Assumed AUM (USDC)
6.0%
Annualised fixed dividend
3,288
Average daily dividend (USDC)
3,000,000
Target reserve · 15% of AUM
≈ 912 days
Consecutive loss days sustainable
23 days
Worst backtested loss streak
Extreme Scenario Statement
The 912-day buffer is based on backtested assumptions. In extreme market conditions (an event on the scale of the 2022 Luna collapse), a single-day loss may directly exceed the reserve, sending the dividend immediately to zero and sharply eroding principal. Always remember: every mathematical model can fail.
10 — CONFIRMATION
Confirmation & Signature
Before subscribing, you must confirm each of the following statements in the holder portal.
- I understand I may lose all of my principal.
- I understand the daily dividend is not a guarantee of principal.
- I understand the private-positions design.
- I have a basic knowledge of crypto asset investing.
- I am not a resident of a restricted jurisdiction.
- I have consulted independent legal / tax / investment advisers, or voluntarily waive doing so.
Signature Record (on-chain)
The signing address, timestamp and on-chain hash will be recorded and permanently stored in the holder portal.
Issuing entity: Quantum Dream Foundation (BVI); management entity: Quantum Dream Capital Ltd. (Cayman); legal opinions by Walkers (BVI / Cayman) and Cooley (US); disputes resolved at the BVI International Arbitration Centre.