SEC Filing Document

Company: Canary Staked TRX ETF
Ticker: 
CIK: 2064768
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-04-18
Accession Number: 0001999371-25-004423
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2064768/000199937125004423/canary-s1_041825.htm

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trading venues. For example, in 2019 there were reports claiming that 80.95% of bitcoin trading volume on digital asset trading platforms was false or noneconomic in nature, with specific focus on unregulated trading platforms located outside of the United States. Such reports alleged that certain overseas trading platforms have displayed suspicious trading activity suggestive of a variety of manipulative or fraudulent practices, such as fake or artificial trading volume or trading volume based on non-economic “wash trading” (where offsetting trades are entered into for other than bona fide reasons, such as the desire to inflate reported trading volumes), and attributed such manipulative or fraudulent behavior to motives like the incentive to attract listing fees from token issuers who seek the most liquid and high-volume trading platforms on which to list their coins. Although these reports concerned bitcoin, it is possible that similar concerns are present for TRX markets as well.

Other academics
and market observers have put forth evidence to support claims that manipulative trading activity has occurred on certain digital asset
trading platforms. For example, in a 2017 paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary
Cyber Research Center at Tel Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction
data from a 2014 Mt. Gox security breach, to identify and analyze the impact of “suspicious trading activity” on Mt. Gox between
February and November 2013, which, according to the authors, caused the price of bitcoin to increase from around $150 to more than $1,000
over a two-month period.

In August 2017,
it was reported that a trader or group of traders nicknamed “Spoofy” was placing large orders on Bitfinex without actually
executing them, presumably in order to influence other investors into buying or selling by creating a false appearance that greater demand
existed in the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex’d) cited publicly available
trading data to support his or her claim that a trading bot nicknamed “Picasso” was pursuing a paint-the-tape-style manipulation
strategy by buying and selling bitcoin and bitcoin cash between affiliated accounts in order to create the appearance of substantial trading
activity and thereby influence the price of such assets. Although bitcoin and TRX are different assets, TRX prices may be subject to similar
activity. Even in the United States, there have been allegations of wash trading even on regulated venues. Any actual or perceived false
trading in the digital asset exchange market, and any other fraudulent or manipulative acts and practices, could adversely affect the
value of digital assets and/or negatively affect the market perception of digital assets.

The TRX market globally
and in the United States is not subject to comparable regulatory guardrails as exist in regulated securities markets. Furthermore, many
TRX trading venues lack certain safeguards put in place by exchanges for more traditional assets to enhance the stability of trading on
the exchanges and prevent “flash crashes,” such as limit-down circuit breakers. As a result, the prices of TRX on trading
venues may be subject to larger and/or more frequent sudden declines than assets traded on more traditional exchanges. Tools to detect
and deter fraudulent or manipulative trading activities such as market manipulation, front-running of trades, and wash trading may not
be available to or employed by digital asset trading platforms, or may not exist at all.

TRX Trading
Platforms May Be Exposed To Fraud And Manipulation

The SEC has identified
possible sources of fraud and manipulation in the TRX market generally, including, among others (1) “wash trading”; (2) persons
with a dominant position in TRX manipulating TRX pricing; (3) hacking of the Tron Network and trading platforms; (4) malicious control
of the Tron Network; (5) trading based on material, non-public information (for example, plans of market participants to significantly
increase or decrease their holdings in TRX, new sources of demand for TRX) or based on the dissemination of false and misleading information;
(6) manipulative activity involving purported “stablecoins,” including Tether (for more information, see “Risk Factors—Risk
Factors Related to Digital Assets—Prices of TRX may be affected due to stablecoins (including Tether and US Dollar Coin (“USDC”)),
the activities of stablecoin issuers and their regulatory treatment”); and (7) fraud and manipulation at TRX trading platforms.
The effect of potential market manipulation, front-running, wash trading, and other fraudulent or manipulative trading practices may inflate
the volumes actually present in crypto market and/or cause distortions in price, which could adversely affect the Trust or cause losses
to Shareholders.

Over the past
several years, some digital asset trading platforms have been closed due to fraud and manipulative activity, business failure or
security breaches. In many of these instances, the customers of such digital asset trading platforms were not compensated or made
whole for the partial or complete losses of their account balances in such digital asset trading platforms. While, generally
speaking, smaller digital asset trading platforms are less likely to have the infrastructure and capitalization that make larger
digital asset trading platforms more stable, larger digital asset trading platforms are more likely to be appealing targets for
hackers and malware and their shortcomings or ultimate failures are more likely to have contagion effects on the digital asset
ecosystem, and may be more likely to be targets of regulatory enforcement action. For example, the collapse of Mt. Gox, which filed
for bankruptcy protection in Japan in late February 2014, demonstrated that even the largest digital asset trading platforms could
be subject to abrupt failure with consequences for both users of digital asset exchanges and the digital asset industry as a whole.
In particular, in the two weeks that followed the February 7, 2014 halt of bitcoin withdrawals from Mt. Gox, the value of one
bitcoin fell on other trading platforms from around $795 on February 6, 2014 to $578 on February 20, 2014. Additionally, in January
2015, Bitstamp announced that approximately 19,000 bitcoin had been stolen from its operational or “hot” wallets.
Further, in August 2016, it was reported that almost 120,000 bitcoins worth around $78 million were stolen from Bitfinex. The value
of bitcoin and other digital assets immediately decreased over 10% following reports of the theft at Bitfinex. In July 2017, FinCEN
assessed a $110 million fine against BTC-E, a now defunct digital asset trading platform, for facilitating crimes such as drug sales
and ransomware attacks. In addition, in December 2017, Yapian, the operator of Seoul-based cryptocurrency trading platform Youbit,
suspended digital asset trading and filed for bankruptcy following a hack that resulted in a loss of 17% of Yapian’s assets.
Following the hack, Youbit users were allowed to withdraw approximately 75% of the digital assets in their platform accounts, with
any potential further distributions to be made following Yapian’s pending bankruptcy proceedings. In addition, in January
2018, the Japanese digital asset trading platform, Coincheck, was hacked, resulting in losses of approximately $535 million, and in
February 2018, the Italian digital asset trading platform, Bitgrail, was hacked, resulting in approximately $170 million in losses.
In May 2019, one of the world’s largest digital asset trading platform, Binance, was hacked, resulting in losses of
approximately $40 million. In November 2022, FTX Trading Ltd. (“FTX”), one of the largest digital asset trading platform
by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which
were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned and FTX and many of its affiliates filed for
bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the
globe. The U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and
commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO.
Around the same time, there were reports that approximately $300-600 million of digital assets were removed from FTX and the full
facts remain unknown, including whether such removal was the result of a hack, theft, insider activity, or other improper
behavior.

The potential consequences
of a digital asset trading platform failure or failure to prevent market manipulation could adversely affect the value of the Shares.
Manipulative trading or market abuse could create artificial or distorted prices, cause a loss of investor confidence in TRX, adversely
impact pricing trends in TRX markets broadly, and cause losses from an investment in Shares of the Trust.