Company: TOXR
Filing Date: 2025-11-07
Form Type: S-1/A
Source: 0001213900-25-107665
Chunk: 55

Company: 21Shares XRP ETF
Filing Date: 2025-11-07
Form: S-1/A
Chunk 55
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 each other under certain circumstances.

Moreover, in the event of an insolvency or bankruptcy of the Prime Broker (in the case of the Trading Balance) or the XRP Custodians (in the case of the Cold Vault Balance) in the future, given that the contractual protections and legal rights of customers with respect to digital assets held on their behalf by third parties are relatively untested in a bankruptcy of entities such as the XRP Custodians or Prime Broker in the virtual currency industry, there is a risk that customers’ assets — including the Trust’s assets — may be considered the property of the bankruptcy estate of the Prime Broker (in the case of the Trading Balance) or the XRP Custodians (in the case of the Cold Vault Balance), and customers — including the Trust — may be at risk of being treated as general unsecured creditors of such entities and subject to the risk of total loss or markdowns on value of such assets.

The Coinbase Custodial
Services Agreement contains an agreement by the parties thereto to treat the XRP credited to the Trust’s Cold Vault Balance with
Coinbase as financial assets under Article 8 of the New York Uniform Commercial Code (“Article 8”), in addition
to stating that the Coinbase Custodian will serve as fiduciary and custodian on the Trust’s behalf. The Coinbase Custodian’s
parent, Coinbase Global, has stated in public securities filings that in light of the inclusion in its custody agreements of provisions
relating to Article 8 it believes that a court would not treat custodied digital assets as part of its general estate in the event
the Coinbase Custodian were to experience insolvency.

Due to the novelty of digital asset custodial arrangements courts have not yet considered this type of treatment for custodied digital assets and it is not possible to predict with certainty how they would rule in such a scenario. If the XRP Custodians become subject to insolvency proceedings and a court were to rule that the custodied XRP were part of the XRP Custodians’ general estate and not the property of the Trust, then the Trust would be treated as a general unsecured creditor in the XRP Custodians’ insolvency proceedings and the Trust could be subject to the loss of all or a significant portion of its assets. Moreover, in the event of the bankruptcy of the XRP Custodians, an automatic stay could go into effect and protracted litigation could be required in order to recover the assets held with the XRP Custodians, all of