Company: ZCSH
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0000950170-25-035469
Chunk: 195

Company: Grayscale Zcash Trust (ZEC)
Filing Date: 2025-03-07
Form: 10-K
Item: Item 1A
Chunk 195
---
 Trust’s assets represented by each Share each time its assets are sold or transferred to the Sponsor. 

•Assuming that the Trust is a grantor trust for U.S. federal income tax purposes, each delivery or sale of ZEC, Incidental Rights or IR Virtual Currency by the Trust to pay the Sponsor’s Fee and/or Additional Trust Expenses will be a taxable event to beneficial owners of Shares. Thus, the Trust’s payment of expenses could result in beneficial owners of Shares incurring tax liability without an associated distribution from the Trust. Any such tax liability could adversely affect an investment in the Shares. See “Item 1. Business—Material U.S. Federal Income Tax Consequences.” 

The Trust’s delivery or sale of ZEC to pay expenses or other operations of the Trust could result in shareholders’ incurring tax liability without an associated distribution from the Trust. 

Assuming that the Trust is treated as a grantor trust for U.S. federal income tax purposes, each delivery of ZEC by the Trust to pay the Sponsor’s Fee or other expenses and each sale of ZEC by the Trust to pay Additional Trust Expenses will be a taxable event to beneficial owners of Shares. Thus, the Trust’s payment of expenses could result in beneficial owners of Shares incurring tax liability without an associated distribution from the Trust. Any such tax liability could adversely affect an investment in the Shares. See “Item 1. Business—Material U.S. Federal Income Tax Consequences.” 

The value of the Shares will be adversely affected if the Trust is required to indemnify the Sponsor, the Trustee, the Transfer Agent or the Custodian under the Trust Documents. 

Under the Trust Documents, each of the Sponsor, the Trustee, the Transfer Agent and the Custodian has a right to be indemnified by the Trust for certain liabilities or expenses that it incurs without gross negligence, bad faith or willful misconduct on its part. Therefore, the Sponsor, Trustee, Transfer Agent or the Custodian may require that the assets of the Trust be sold in order to cover losses or liability suffered by it. Any sale of that kind would reduce the NAV of the Trust and the value of the Shares. 

Intellectual property rights claims may adversely affect the Trust and the value of the Shares. 

The Sponsor is not aware of any intellectual property rights claims that may prevent the Trust from operating and holding ZEC, Incidental Rights or IR Virtual Currency. However, third parties may assert intellectual property rights claims relating to the operation of the Trust and the mechanics