# Crypto-Backed Loan Risk Statement This Risk Statement describes the principal risks and important considerations involved when you borrow Canadian dollars (“**CAD**”) or U.S. dollars (“**USD**”) from Shakepay Credit Inc. (“**Shakepay Credit**”, “**we**”, “**us**”, “**our**”) using eligible crypto assets as collateral (the “**Collateral**”). It is intended to help you understand the nature of the loan arrangement and the particular characteristics of pledging crypto assets as security. It does not, and cannot, describe every possible risk. In order to borrow from Shakepay Credit, you will be required to enter into a Loan Agreement. The Loan Agreement sets out the terms and conditions under which you may borrow CAD or USD against crypto collateral. **Before you enter into a crypto-backed loan you should carefully review this Risk Statement together with your Loan Agreement and any other documents that we provide to you in connection with the loan. You should proceed only if you are able to bear the financial and operational risks described here and if you have the ability to meet all of your obligations under the Loan Agreement even in periods of extreme market volatility.** ## 1. Nature of the Product and Collateral Arrangements When you obtain a crypto-backed loan from Shakepay Credit, you transfer supported crypto assets (such as bitcoin or ether) into a wallet or address that we designate solely for the purpose of holding those assets as Collateral. The transfer does not represent a sale of your crypto assets to us; instead you grant Shakepay Credit a first-ranking security interest in the pledged assets so that we can enforce our rights if you fail to meet the terms of your loan. While the loan is outstanding, you will not have access to the pledged Collateral and you may not withdraw, trade or otherwise deal with it unless and until you have fully repaid the loan and satisfied all amounts owing. We, in turn, hold the Collateral either directly or through qualified third-party custodians and hot-wallet providers. **Although we segregate pledged assets from our own property, your Collateral remains exposed to the risks described below, including the operational and legal risks associated with our custodians, the technical risks of the underlying blockchains, and the possibility that market conditions will reduce the value of your Collateral before you are able to take protective action.** The Loan Agreement governs your relationship with Shakepay Credit regarding the loan. It contains important information regarding your rights and obligations in conjunction with the loan. It is important that you read it carefully and understand it. You may want to get professional legal and/or tax advice prior to entering into the Loan Agreement. **No securities regulatory authority or regulator in Canada has assessed or endorsed the Loan Agreement.** The loan proceeds are advanced in CAD or USD and will be available in your Shakepay Inc. account, where they can then be sent to your external bank account. Because this is an “open-loop” arrangement, fiat funds may leave the Shakepay environment and travel through normal banking or payments channels. The regulatory framework for such loans is still evolving. Shakepay Credit is registered with FINTRAC as a money services business but neither it, nor any related SPV, is registered as an investment dealer in any jurisdiction in Canada and the loan product is not covered by any Canadian investor-protection scheme. **Crypto assets pledged as Collateral are not insured by the Canadian Investor Protection Fund (CIPF) or the Canada Deposit Insurance Corporation (CDIC).** ## 2. Market Volatility, LTV Mechanics and the Two-Threshold Notice Model The market price of crypto assets can be highly volatile, and sudden price movements can sharply increase the ratio of your outstanding loan balance to the market value of your Collateral, commonly referred to as the loan-to-value ratio or LTV. Shakepay Credit monitors the LTV of each loan in real time and has established two distinct levels at which notices are provided: * **Margin Notice Threshold**. When the LTV reaches the first level, called the Margin Notice Threshold, we will notify you through the channels specified in your Loan Agreement (for example, email or in-app notification). You are then required to take prompt action, within the cure period set out in the Loan Agreement, to restore the LTV to a healthy level. This can be done by transferring additional Collateral to the designated pledge address or by making a partial repayment of the loan. Acting early is critical: network congestion on the relevant blockchain, delays in banking rails or unexpected operational issues can all slow the posting of additional Collateral or repayments. If those delays occur while the market price of your Collateral continues to fall, your LTV can continue to rise even after you have initiated a top-up or repayment. * **Liquidation Notice Threshold**. If your LTV continues to deteriorate and reaches the second level—called the Liquidation Notice Threshold—we will send a further notice indicating that we intend to liquidate some or all of your Collateral unless you immediately cure the LTV as described in the Loan Agreement. Market movements can be abrupt; in fast conditions the price of your Collateral may fall below the Liquidation Notice Threshold before you can act, and liquidation may proceed without additional warning. When a liquidation occurs we sell the pledged crypto assets on one or more trading venues or through multiple liquidity providers and apply the net proceeds to the repayment of the loan, accrued interest, and any applicable fees and costs. Execution prices in a stressed market can differ materially from prices observed on public exchanges, and the final proceeds of liquidation may be substantially less than the market value you expected. If the proceeds of liquidation are insufficient to repay the loan and all related amounts, you remain fully responsible for any deficiency. Conversely, if there is a surplus after repayment and fees, the balance will be returned to you in accordance with the Loan Agreement. These LTV mechanics and the timing of notices are fundamental to the product: your ability to maintain the LTV below the Margin Notice Threshold is the primary safeguard against involuntary liquidation. ## 3. Liquidity, Pricing and Valuation Methodology Because the pledged crypto assets serve as security for your loan, their valuation directly determines the LTV. Shakepay Credit relies on pricing sources and valuation methods described in the Loan Agreement, for example a composite of multiple trading venues or a time-weighted average price. These valuation techniques are designed to be robust but may differ from the prices you observe on a particular exchange or blockchain explorer. In times of market stress, liquidity can thin out and spreads can widen dramatically. Outages or unusual trading activity on a major venue can cause sudden gaps between indicative and executable prices. These effects can make it difficult to assess the true market value of your Collateral and can accelerate a move toward the Liquidation Notice Threshold even when overall market sentiment appears stable. ## 4. Operational, Technological and Network Risks You must also consider the operational risks of both blockchain networks and internet-based lending platforms. Public blockchains such as Bitcoin and Ethereum are open-source technologies that can experience bugs, unexpected chain reorganizations, protocol upgrades or forks. Developers or miners may adopt changes without universal consensus, resulting in splits of the blockchain or the creation of new digital assets. Shakepay Credit may be unable or unwilling to allocate to you any new tokens or “airdrops” that arise while the pledged Collateral is in custody; unless expressly provided in your Loan Agreement you should not expect to receive such distributions. Deposits of additional Collateral or fiat repayments intended to reduce LTV may be delayed by network congestion, wallet maintenance, node desynchronization or failures in banking or payment networks. Even if you act promptly after receiving a Margin Notice, these delays can prevent your Collateral or repayment from being credited before the LTV rises to the Liquidation Notice Threshold. Internet-based platforms face risks of hacking, credential theft, phishing, denial-of-service attacks and other cybersecurity incidents. Despite the security controls and contingency plans maintained by Shakepay Credit and its third-party service providers, service disruptions and losses can occur, including at critical moments when you are attempting to add Collateral or repay your loan. ## 5. Custody and Insurance Limitations Shakepay Credit holds pledged Collateral either directly or through qualified custodians and hot-wallet technology providers. We segregate client assets from our own and employ a combination of cold storage and multi-signature (“**multi-sig**”) hot wallets to facilitate operations. This approach is designed to provide both strong protection and operational efficiency: cold storage and segregation from Shakepay Credit’s own assets help shield your Collateral from hacking and from commingling with corporate property, while multi-sig hot wallets permit timely processing of loan advances, repayments and withdrawals without exposing the full balance to online risk. These controls mean that, under ordinary circumstances, the Collateral remains readily identifiable and accessible for your benefit. The structure, however, also carries risk. Collateral may be subject to the insolvency and property laws of the jurisdiction where the custodian or any special purpose vehicle (“**SPV**”) operates. If Shakepay Credit, an SPV or an acceptable third-party custodian becomes insolvent, the legal treatment of crypto assets remains unsettled and recovery of your Collateral could be delayed or require you to assert ownership in court, and in extreme cases may be incomplete. Under the Loan Agreement, Shakepay Credit holds a perfected security interest over your Collateral and retains the technical ability, through multi-sig controls or comparable mechanisms, to access, transfer or liquidate the Collateral if required. This access protects the lender’s security interest and allows rapid action to preserve value in the event of default or severe market moves, which in turn supports the ongoing stability of the lending program. But it also means that, in a default or forced-sale scenario, Collateral may need to be sold quickly in stressed market conditions, potentially at prices materially below prevailing market levels, and that technological or governance failures could result in unauthorized or erroneous movements of assets. Although Shakepay Credit and its service providers maintain insurance or other protective arrangements, such coverage is subject to limits, exclusions and claims processes and may not fully compensate you in the event of loss or theft of crypto assets. No public investor-protection program, such as the Canadian Investor Protection Fund (CIPF) or the Canada Deposit Insurance Corporation (CDIC), covers crypto assets pledged as Collateral. ## 6. Regulatory and Banking Uncertainty The legal and regulatory environment for crypto assets and for crypto-secured lending continues to evolve in Canada and internationally. Future legislative or regulatory changes, new guidance from Canadian or foreign authorities, or changes in the policies of banks and other financial institutions could limit the ability of Shakepay Credit to operate its lending program or could restrict the transfer or custody of crypto assets. Such developments may occur with little notice and may delay or prevent you from adding Collateral, making repayments or withdrawing fiat loan proceeds, and could lead to the early termination or forced repayment of outstanding loans. Banks or custodians may also tighten their internal risk policies, restrict services to crypto-asset businesses, or require modifications to the lending program. In the event of a sudden change, Shakepay Credit may have to suspend operations or liquidate Collateral to protect its security interests, which could negatively impact the value you ultimately receive. ## 7. Concentration and Network-Level Risks Large holders of a particular crypto asset may significantly influence its price. A decision by one or more large market participants to sell a substantial position could produce sudden and dramatic price declines. In addition, a successful “51% attack” or other compromise of the consensus mechanism of a blockchain network could undermine confidence in that network and cause the value of the affected crypto asset to drop sharply. Either scenario can raise your LTV to the Liquidation Notice Threshold in a matter of minutes. ## 8. Interest, Fees and Tax Considerations Your Loan Agreement sets out the interest rate, the manner in which interest accrues, and any applicable fees, including, for example, origination charges, liquidation or execution fees, custody or network fees, and costs associated with the sale of Collateral. These amounts are payable in addition to the principal loan balance and will be deducted from the proceeds of any liquidation. Borrowing against crypto assets and any subsequent liquidation of Collateral may have tax consequences. **Shakepay Credit does not provide tax advice and you are responsible for obtaining independent advice regarding the tax treatment of all aspects of the loan.** ## 9. Borrower Responsibilities and Potential Events of Default Under the Loan Agreement, you are responsible for monitoring the LTV of your loan at all times and for acting promptly on both the Margin Notice and the Liquidation Notice. You must maintain current and accurate contact information and protect the security of your Shakepay Credit account, email, phone and any two-factor authentication devices. Unauthorized access to these channels could result in missed notices or unauthorized instructions. In addition to the LTV-based triggers, the Loan Agreement may define other events of default, such as failure to pay interest when due, breach of covenants, insolvency, or legal restraint orders, any of which can allow Shakepay Credit to accelerate the loan and liquidate Collateral even if LTV thresholds have not been reached. ## 10. Force Majeure and Business Continuity Events beyond our control, such as natural disasters, widespread power or telecommunications outages, pandemics, cyber incidents, or acts of terrorism, may disrupt Shakepay Credit’s operations or those of its service providers. Although we maintain business-continuity and disaster-recovery plans, these events could delay notices, prevent timely processing of collateral top-ups or repayments, or impair our ability to safeguard pledged assets. This Risk Statement is intended to provide a detailed, plain-language explanation of the significant risks of borrowing CAD or USD from Shakepay Credit using crypto assets as collateral. It should be read together with your Loan Agreement and any related documents before you decide to proceed with a crypto-backed loan. **You should not rely on this statement as legal, tax or investment advice and should seek professional advice on those matters as needed.** ## 11. Statutory Protections The statutory rights in sections 217 and 221 of the *Securities Act*, RLRQ, c. V-1.1 (Québec) and section 130.1 of the *Securities Act*, R.S.O. 1990, c. S.5 (Ontario) and (if applicable to you) similar statutory rights under securities legislation of other Canadian jurisdictions, do not apply in respect of this Risk Statement to the extent a security is distributed pursuant to the loan, the Loan Agreement, and other applicable documents. *Last update: April 21, 2026* --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://legal.shakepay.com/master/crypto-backed-loan-risk-statement.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. 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