SEC Filing Document

Company: T. Rowe Price Active Crypto ETF
Ticker: 
CIK: 2089855
Filing Type: S-1
Document Type: S-1
Date Filed: 2025-10-22
Accession Number: 0001999371-25-015832
Exchange: 
SIC Code: 6221
SIC Description: Commodity Contracts Brokers & Dealers
URL: https://www.sec.gov/Archives/edgar/data/2089855/000199937125015832/activecrypto-s1_102225.htm

Chunk 21 of 56
Word Count: 1284
Character Count: 8178

Document Content:

platforms provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance, many other crypto platforms may not provide some or any such information. Crypto trading platforms may not view themselves as being subject to, or may not comply with, regulation in a similar manner as other regulated trading platforms, such as national securities exchanges or designated contract markets. As a result, the marketplace may lose confidence in crypto platforms, including prominent platforms that handle a significant volume of the Eligible Assets’ trading. Trading activity on or reported by many crypto trading platforms may reflect behavior that would be prohibited in regulated U.S. trading venues. Any actual or perceived false trading in the crypto platforms market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of the Eligible Assets and/or negatively affect the market perception of the Eligible Assets.

In addition, over the past several
years, some crypto trading platforms have been closed due to fraud and manipulative activity, business failures or security breaches.
In many of these instances, the customers of such crypto platforms were not compensated or made whole for the partial or complete losses
of their account balances in such crypto platforms. For example, a number of crypto trading platforms including Mt. Gox (in 2014), Bitstamp
(in 2015), Bitfinex (in 2016), Youbit (in 2017), Coincheck (in 2018), Bitgrail (in 2018), Binance (in 2019), FTX (in 2022, following its
bankruptcy) and ByBit (in 2025) have all been reported to be subject to hacks, thefts or other cybersecurity breaches.

Most recently, Binance suffered a $40
million hack, and FTX, formerly one of the world’s largest exchanges, collapsed amid allegations of fraud and asset misappropriation,
leading to criminal and civil charges against its executives. These events underscore the risks of abrupt failure, theft, and legal action
in the crypto platform ecosystem, with substantial consequences for users and the broader market. The fact that many crypto platforms
are not registered and fail to comply with regulations or operate in jurisdictions with less stringent regulations than in the US may
expose the investors to behaviors that can jeopardize their investments. These behaviors include, but are not limited to, wash trading,
fraud, front-running, and other security issues that could adversely impact the value of an investment in the Fund.

Negative perceptions, a
lack of stability in the crypto asset markets and the closure or temporary shutdown of crypto platforms due to fraud, failure or
security breaches may reduce confidence in the Eligible Assets Networks and result in greater volatility or decreases in the prices
of the Eligible Assets. Furthermore, the closure or temporary shutdown of one or more crypto platforms used in calculating the value
of the Eligible Assets may result in a loss of confidence in the Fund’s ability to determine its NAV on a daily basis. The
potential consequences of a crypto trading platform’s failure could adversely affect the value of the Shares.

Crypto trading platforms may be
exposed to wash trading

Crypto platforms on which the Eligible
Assets trade may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for other than bona fide
reasons, such as the desire to inflate reported trading volumes. Wash trading may be motivated by a number of reasons, such as a desire
for increased visibility on popular websites that monitor markets for crypto assets so as to improve their attractiveness to investors
who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from crypto asset issuers who seek the most
liquid and high-volume platforms on which to list their coins. Results of wash trading may include unexpected obstacles to trade and erroneous
investment decisions based on false information.

In the U.S., there have been allegations
of wash trading on a number of crypto asset trading venues. Any actual or perceived false trading in the crypto venue market, and any
other fraudulent or manipulative acts and practices, could adversely affect the value of the Eligible Assets and/or negatively affect
the market perception of crypto assets.

To the extent that wash trading either
occurs or appears to occur on trading platforms on which the Eligible Asset trades, investors may develop negative perceptions about crypto
assets, which could adversely impact the price the Eligible Assets and, therefore, the price of Shares.

Crypto trading platforms may be
exposed to front-running

Crypto trading platforms on which Eligible
Assets trade may be susceptible to “front-running,” which refers to the process when a market participant uses technology
or market advantage to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralized
crypto platforms. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming
price movement and make economic gains at the cost of those who had initiated these transactions. The objective of a front runner is to
buy crypto assets at a low price and later sell them at a higher price while simultaneously exiting the position. Front-running happens
via manipulations of gas prices or timestamps, also known as slow matching. To the extent that front-running occurs, it may result in
investor frustrations and concerns as to the price integrity of crypto platforms and crypto assets more generally.

Networked systems are vulnerable
to attacks

All networked systems are vulnerable
to various kinds of attacks. As with any computer network, the Eligible Assets Networks contain certain flaws. For example, the Bitcoin
Network is currently vulnerable to a “51% attack” where, if a mining pool were to gain control of more than 50% of the “hash”
rate, or the amount of computing and process power being contributed to the network through mining, a malicious actor would be able to
gain full control of the network and the ability to manipulate the blockchain. To the extent that such malicious actor or botnet did not
yield its control of the processing power on the network, or the network community did not reject the fraudulent blocks as malicious,
reversing any changes made to the blockchain may not be possible.

In addition, in May 2019, the Bitcoin
Cash network, a proof-of-work network, experienced a >50% attack when two large mining pools reversed a series of transactions in order
to stop an unknown miner from taking advantage of a flaw in a recent Bitcoin Cash protocol upgrade.

The Ethereum Network also remains vulnerable
to various types of attacks and coordinated adverse activity. In particular, following the “Merge,” where the Ethereum Network
moved from a proof-of-work to a PoS mechanism under Ethereum 2.0 and the switch to PoS validation, the Ethereum Network is currently vulnerable
to several types of attacks, including:

attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection of computers controlled by networked
software coordinating the actions of the computers) or group of validators acting in concert were to gain control of more than 33%
of the total staked ether on the Ethereum Network, a malicious actor could temporarily impede or delay block confirmation or even
cause a temporary fork in the blockchain. This is designed to be a temporary risk, as the Ethereum Network’s inactivity leak
would be expected to eventually penalize the attacker enough for the chain to finalize again (i.e., the honest majority would be
expected to reclaim a 2/3rd stake as the attacker’s stake is penalized). Moreover, it is believed that a 33% attack would not
be sufficient to allow a malicious actor to engage in double-spending or fraudulent block propagation. Even without 33% control,
however, a malicious actor or botnet could create a flood of transactions in order to slow down the Ethereum Network.