SUBJECT
TO COMPLETION, DATED DECEMBER 5, 2025
PRELIMINARY
PROSPECTUS
Grayscale
Sui Trust (SUI)
Grayscale
Sui Trust (SUI) (the “Trust”) is a Delaware statutory trust that issues common
units of fractional undivided beneficial interest (“Shares”), which represent
ownership in the Trust. In connection with the effectiveness of this
registration statement and the listing of the Shares on NYSE Arca, the Sponsor
intends to rename the Trust as Grayscale Sui Trust ETF by filing a Certificate
of Amendment to the Certificate of Trust with the Delaware Secretary of State in
accordance with the provisions of the DSTA. The Trust’s purpose is to hold
“SUI”, which are digital assets based on an open source cryptographic protocol
existing on the Sui Network, comprising units that constitute the assets
underlying the Trust’s Shares. The Trust’s investment objective is for the value
of the Shares (based on SUI per Share) to reflect the value of SUI held by the
Trust, including SUI earned as Staking Consideration (to the extent that the
Staking Condition is satisfied and Staking is implemented), as determined by
reference to the Index Price (as defined herein), less the Trust’s expenses and
other liabilities. While an investment in the Shares is not a direct investment
in SUI, the Shares are designed to provide investors with a cost-effective and
convenient way to gain investment exposure to SUI. Grayscale Investments
Sponsors, LLC is the sponsor of the Trust (the “Sponsor”). CSC Delaware Trust
Company is the trustee of the Trust (the “Trustee”), The Bank of New York Mellon
is the transfer agent of the Trust (in such capacity, the “Transfer Agent”) and
the administrator of the Trust (in such capacity, the “Administrator”),
Coinbase, Inc. is the prime broker of the Trust (the “Prime Broker”), and
Coinbase Custody Trust Company, LLC is the custodian of the Trust (the
“Custodian”).
The
Shares are currently quoted on OTCQX under the ticker symbol “GSUI” and
following the effectiveness of the registration statement of which this
prospectus forms a part, the Trust intends to list the Shares on NYSE Arca, Inc.
(“NYSE Arca”) under the symbol “GSUI.” The Trust intends to issue Shares on a
continuous basis and is registering an indeterminate number of Shares. It is
expected that the Shares will be sold to the public at varying prices to be
determined by reference to, among other considerations, the price of SUI and the
trading price of the Shares on the NYSE Arca at the time of each
sale.
The
Shares may be purchased from the Trust only in one or more blocks of 10,000
Shares (a block of 10,000 Shares is called a “Basket”). The Trust issues Baskets
of Shares to certain authorized participants (“Authorized Participants”) on an
ongoing basis as described in “Plan of Distribution.” In addition, the Trust
redeems Shares in Baskets on an ongoing basis from Authorized Participants. As
of the date of this prospectus, NYSE Arca has received regulatory approval
permitting the Trust to conduct creations and redemptions of Shares via in-kind
transactions with Authorized Participants or their designees (any such designee,
an “AP Designee”) in exchange for SUI. The Trust is also able to accept Cash
Orders (as defined herein). Accordingly, the Trust currently conducts creations
and redemptions of Shares pursuant to In-Kind Orders and Cash Orders (each as
described herein). See “Description of Creation and Redemption of Shares.” Some
of the activities of the Authorized Participants MAY result in their being
deemed participants in a distribution in a manner which would render them
statutory underwriters and subject them to the prospectus-delivery and liability
provisions under the Securities Act of 1933, as amended (the “Securities Act”).
See “Plan of Distribution.”
Investing
in the Shares involves significant risks. You should carefully consider the risk
factors described in “Risk Factors” starting on page 20
before you invest in the Shares.
The
Trust is an “emerging growth company” as defined in the Jumpstart Our Business
Startups Act and will therefore be subject to reduced reporting requirements.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
Shares are neither interests in nor obligations of the Sponsor or the
Trustee.
The
U.S. dollar value of a Basket of Shares at 4:00 p.m., New York time, on the
trade date of a creation or redemption order is equal to the “Basket Amount”,
which is the amount of SUI required to create or redeem a Basket of Shares,
multiplied by the “Index Price,” which is the U.S. dollar value of a SUI derived
from the Digital Asset Trading Platforms (as defined herein) that are reflected
in the CoinDesk SUI CCIXber Reference Rate (the “Index”), calculated at 4:00
p.m., New York time, on each business day. The Index Price is calculated using
non-GAAP methodology and is not used in the Trust’s financial
statements.
The
Trust is not a registered investment company under the Investment Company Act of
1940, as amended (the “Investment Company Act”) and is therefore not subject to
regulation under the Investment Company Act. Furthermore, the Sponsor believes
that the Trust is not a commodity pool for purposes of the Commodity Exchange
Act of 1936, as amended (the “CEA”), as administered by the Commodity Futures
Trading Commission (the “CFTC”) and that neither the Sponsor nor the Trustee is
subject to regulation by the CFTC as a commodity pool operator or a commodity
trading advisor. See “Risk Factors—Risk Factors Related to the Trust and the
Shares— Shareholders do not have the protections associated with ownership of
shares in an investment company registered under the Investment Company Act or
the protections afforded by the CEA.”
The
date of this prospectus is , 2025.
table
of contents
Neither
the Trust nor the Sponsor has authorized anyone to provide you with any
information other than that contained in this prospectus or any free writing
prospectus prepared by or on behalf of the Trust. Neither the Trust nor the
Sponsor takes any responsibility for, and can provide no assurance as to the
reliability of, any information that others may give you. Neither the Trust nor
the Sponsor is making an offer to sell any security or soliciting any offer to
buy any security in any jurisdiction where the offer or sale is not permitted.
You should not assume that the information appearing in this prospectus or any
free writing prospectus is accurate as of any date other than the respective
dates on the front of such documents. The Trust’s business, assets, financial
condition, results of operations and prospects may have changed since those
dates.
This
prospectus does not constitute an offer to sell, or an invitation on behalf of
the Trust or the Sponsor, to subscribe to or purchase any securities, and may
not be used for or in connection with an offer or solicitation by anyone, in any
jurisdiction in which such an offer or solicitation is not authorized or to any
person to whom it is unlawful to make such an offer or solicitation.
Authorized
Participants may be required to deliver a prospectus when making transactions in
the Shares. The information contained in the section captioned
“Business—Overview of the Sui Industry and Market” is based on information
obtained from sources that the Sponsor believes are reliable. This prospectus
summarizes certain documents and other information in a manner the Sponsor
believes to be accurate. In making an investment decision, you must rely on your
own examination of the Trust, the Sui industry, the operation of the SUI market
and the terms of the offering and the Shares, including the merits and risks
involved. Although the Sponsor believes this information to be reliable, the
accuracy and completeness of this information is not guaranteed and has not been
independently verified.
See
“Glossary of Defined Terms” for the definition of certain capitalized terms used
in this prospectus.
Forward-Looking
Statements
This
prospectus contains “forward-looking statements” with respect to the Trust’s
financial conditions, results of operations, plans, objectives, future
performance and business. Statements preceded by, followed by or that include
words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,”
“believe,” “estimate,” “predict,” “potential” or “continue,” the negative of
these terms and other similar expressions are intended to identify some of the
forward-looking statements. All statements (other than statements of historical
fact) included in this prospectus that address activities, events or
developments that will or may occur in the future, including such matters as
changes in market prices and conditions, the Trust’s operations, the Sponsor’s
plans
and references to the Trust’s future success and other similar matters are
forward-looking statements. These statements are only predictions. Actual events
or results may differ materially from such statements. These statements are
based upon certain assumptions and analyses the Sponsor made based on its
perception of historical trends, current conditions and expected future
developments, as well as other factors appropriate in the circumstances. You
should specifically consider the numerous risks described in “Risk Factors” in
this prospectus. Whether or not actual results and developments will conform to
the Sponsor’s expectations and predictions, however, is subject to a number of
risks and uncertainties, including:
•
recent
developments in the digital asset economy which have led to extreme volatility
and disruption in digital asset markets, a loss of confidence in participants of
the digital asset ecosystem, significant negative publicity surrounding digital
assets broadly and market-wide declines in liquidity;
•
the
extreme volatility of trading prices that many digital assets, including SUI,
have experienced in recent periods and may continue to experience, which could
cause the value of the Shares to be volatile and/or have a material adverse
effect on the value of the Shares;
•
the
recency of the development of digital assets and the uncertain medium-to-long
term value of the Shares due to a number of factors relating to the capabilities
and development of blockchain technologies and to the fundamental investment
characteristics of digital assets;
•
the
value of the Shares depending on the acceptance of digital assets, such as SUI,
which represent a new and rapidly evolving industry;
•
the
value of the Shares relating directly to the value of SUI then held by the
Trust, the value of which may be highly volatile and subject to fluctuations due
to a number of factors;
•
the
risk that validators may suffer losses due to Staking (as defined herein), or
Staking may prove unattractive to validators, which could adversely affect the
Sui Network;
•
a
temporary or permanent “fork” or a “clone”, which could adversely affect the
value of the Shares;
•
the
largely unregulated nature and lack of transparency surrounding the operations
of Digital Asset Trading Platforms, which may adversely affect the value of
digital assets and, consequently, the value of the Shares;
•
the
limited history of the Index;
•
the
lack of active trading markets for the Shares, which may result in losses on
investors’ investments at the time of disposition of Shares;
•
the
possibility that illiquid markets may exacerbate losses or increase the
variability between the Trust’s NAV and its market price;
•
the
possibility that there may be less liquidity or wider spreads in the market for
the Shares as compared to the shares of other spot SUI exchange-traded products,
if and when the listing of such products has been approved;
•
competition
from the emergence or growth of other digital assets could have a negative
impact on the price of SUI and adversely affect the value of the
Shares;
•
the
liquidity of the Shares may be affected if Authorized Participants cease to
perform their obligations under the Participant Agreements or the Liquidity
Engager is unable to engage Liquidity Providers;
•
the
possibility that the Shares may trade at a price that is at, above or below the
Trust’s NAV per Share as a result of the non-concurrent trading hours between
NYSE Arca and the Digital Asset Trading Platform
Market;
•
regulatory
changes or actions by the U.S. Congress or any U.S. federal or state agencies
that may affect the value of the Shares or restrict the use of one or more
digital assets, validating activity or the operation of their networks or the
Digital Asset Trading Platform Market in a manner that adversely affects the
value of the Shares;
•
a
determination that SUI or any other digital asset is a “security” may adversely
affect the value of SUI and the value of the Shares and result in potentially
extraordinary, nonrecurring expenses to, or termination of, the
Trust;
•
changes
in the policies of the U.S. Securities and Exchange Commission (the “SEC”) that
could adversely impact the value of the Shares;
•
regulatory
changes or other events in foreign jurisdictions that may affect the value of
the Shares or restrict the use of one or more digital assets, validating
activity or the operation of their networks or the Digital Asset Trading
Platform Market in a manner that adversely affects the value of the
Shares;
•
the
possibility that an Authorized Participant, the Trust or the Sponsor could be
subject to regulation as a money service business or money transmitter, which
could result in extraordinary expenses to such Authorized Participant, the Trust
or the Sponsor and also result in decreased liquidity for the
Shares;
•
regulatory
changes or interpretations that could obligate the Trust or the Sponsor to
register and comply with new regulations, resulting in potentially
extraordinary, nonrecurring expenses to the Trust;
•
potential
conflicts of interest that may arise among the Sponsor or its affiliates and the
Trust;
•
the
potential discontinuance of the Sponsor’s continued services, which could be
detrimental to the Trust;
•
the
limited ability to facilitate in-kind creations and redemptions of Shares, which
could have adverse consequences for the Trust;
•
the
lack of ability to participate in Staking (as defined herein) to the extent the
Staking Condition (as defined herein) is not satisfied, which could have adverse
consequences for the Trust;
•
the
risk of loss of SUI from Staking, which could adversely affect the value of the
Shares;
•
the
inaccessibility of staked SUI tokens for a variable period of time, which could
result in certain liquidity risks to the Trust;
•
the
Trust’s dependence on third parties to effectively execute the Trust’s Staking
Arrangements (as defined herein);
•
the
uncertain regulatory landscape surrounding Staking;
•
potential
tax liabilities for beneficial owners of Shares without receiving corresponding
distributions from the Trust in connection with Staking;
•
the
Trust’s reliance on third-party service providers to perform certain functions
essential to the affairs of the Trust and the challenges replacement of such
service providers could pose to the safekeeping of the Trust’s SUI and to the
operations of the Trust; and
•
the
Custodian’s possible resignation or removal by the Sponsor or otherwise, without
replacement, which could trigger early termination of the
Trust.
Consequently,
all forward-looking statements made in this prospectus are qualified by these
cautionary statements, and there can be no assurance that the actual results or
developments the Sponsor anticipates will be realized or, even if substantially
realized, that they will result in the expected consequences to, or have the
expected effects on, the Trust’s operations or the value of the Shares. Should
one or more of these risks discussed in “Risk Factors” in this prospectus, or
other uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those described in
forward-looking statements. Forward-looking statements are made based on the
Sponsor’s beliefs, estimates and opinions on the date the statements are made
and neither the Trust nor the Sponsor is under a duty or undertakes an
obligation to update forward-looking statements if these beliefs, estimates and
opinions or other circumstances should change, other than as required by
applicable laws. Moreover, neither the Trust, the Sponsor, nor any other person
assumes responsibility for the accuracy and completeness of any of these
forward-looking statements. Investors are therefore cautioned against relying on
forward-looking statements.
Prospectus
Summary
This
summary highlights information contained elsewhere in this prospectus. This
summary may not contain all of the information that you should consider before
deciding to invest in the Shares. You should read this entire prospectus
carefully, including the “Risk Factors” section and the consolidated financial
statements and the notes to those statements, before making an investment
decision about the Shares.
Grayscale
Sui Trust (SUI)
Trust
Overview
Grayscale
Sui Trust (SUI) (the “Trust”) is a Delaware Statutory Trust that was formed on
April 30, 2024, by the filing of the Certificate of Trust with the Delaware
Secretary of State in accordance with the provisions of the Delaware Statutory
Trust Act (“DSTA”). Prior to the effectiveness of the registration statement of
which this prospectus forms a part, the name of the Trust was Grayscale Sui
Trust (SUI). In connection with the effectiveness of this registration statement
and the listing of the Shares on NYSE Arca, the Sponsor intends to rename the
Trust as Grayscale Sui Trust ETF by filing a Certificate of Amendment to the
Certificate of Trust with the Delaware Secretary of State in accordance with the
provisions of the DSTA. The Trust’s purpose is to hold “SUI”, which are digital
assets that are created and transmitted through the operations of the
peer-to-peer Sui Network, a decentralized network of computers that operates on
cryptographic protocols. Out
of the 10 billion initially issued SUI, approximately 3,569 million SUI have
entered circulation as of September 30, 2025. As of September 30, 2025, the
24-hour trading volume of SUI was approximately $1.0 billion. As of September
30, 2025, the aggregate market value of SUI was $11.6 billion. As of September
30, 2025, SUI was the fifteenth largest digital asset by market capitalization,
as tracked by CoinMarketCap.com.
As
a passive investment vehicle, the Trust’s investment objective is for the value
of the Shares (based on SUI per Share) to reflect the value of SUI held by the
Trust, including SUI earned as Staking Consideration (to the extent that the
Staking Condition has been
satisfied and Staking is implemented), determined
by reference to the Index Price, less the Trust’s expenses and other
liabilities. The Trust does not seek to generate returns beyond tracking the
price of SUI and any SUI earned as Staking Consideration (to the extent
that
the Staking Condition has been satisfied and Staking is implemented). There can
be no assurance that the Trust will be able to achieve its investment objective.
The Trust will not utilize leverage, derivatives or any similar arrangements in
seeking to meet its investment objective.
From
and after the date of this prospectus, the Trust intends to issue Shares on an
ongoing basis pursuant to this registration statement, intends to rely on an
exemption or other relief from the SEC under Regulation M to operate a
redemption program, and intends to list the Shares on NYSE Arca under the symbol
“GSUI.” The Shares will be distributed by Authorized Participants who will be
able to take advantage of arbitrage opportunities to keep the value of the
Shares closely linked to the Index Price (referred to as the “arbitrage
mechanism”). In particular, upon listing on NYSE Arca, the Sponsor expects there
to be a net creation of Shares if the Shares trade at a premium to NAV per Share
and a net redemption of Shares if the Shares trade at a discount to NAV per
Share, representing the effective functioning of the arbitrage
mechanism.
Thereafter,
it is expected that the Shares will be sold by the Authorized Participants to
the public at varying prices to be determined by reference to, among other
considerations, the price of the SUI represented by each Share and the trading
price of the Shares on NYSE Arca at the time of each sale.
Until
December 31, 2024, Grayscale Investments, LLC was the sponsor of the Trust. As a
result of the Reorganization (as defined herein), on January 1, 2025, Grayscale
Investments Sponsors, LLC (“GSIS”) and Grayscale Operating, LLC (“GSO”),
consolidated subsidiaries of Digital Currency Group, Inc. (“DCG”), became
Co-Sponsors of the Trust. On January 3, 2025 GSO voluntarily withdrew as a
Sponsor of the Trust, and effective May 3, 2025 GSIS is the sole remaining
Sponsor. Prior to May 3, 2025, all references herein to the “Sponsor” shall be
deemed to include both GSIS and GSO as Sponsors unless the context otherwise
requires, and on or after May 3, 2025, all references herein to the “Sponsor”
shall refer only to GSIS. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Recent Developments” for more information.
CSC Delaware Trust Company is the trustee (the “Trustee”) of the Trust, The Bank
of New York Mellon is the transfer agent (in such capacity, the “Transfer
Agent”) and the administrator (in such capacity, the “Administrator”) of the
Trust, Continental Stock Transfer & Trust Company is the co-transfer agent
of the Trust (the “Co-Transfer Agent”), Coinbase, Inc. is the prime broker (the
“Prime Broker”) of the Trust, and Coinbase Custody Trust Company, LLC is the
custodian (the “Custodian”).
The
Trust issues Shares only in one or more blocks of 10,000 Shares (a block of
10,000 Shares is called a “Basket”) to certain authorized participants
(“Authorized Participants”) from time to time. Baskets are offered in exchange
for SUI. Through its redemption program, the Trust will redeem Shares from
Authorized Participants on an ongoing basis.
The
U.S. dollar value of a Basket of Shares at 4:00 p.m., New York time, on the
trade date of a creation or redemption order is equal to the Basket Amount,
which is the amount of SUI required to create or redeem a Basket of Shares,
multiplied by the “Index Price,” which is the U.S. dollar value of a SUI derived
from the Digital Asset Trading Platforms that are reflected in, from the
commencement of the Trust’s operations until September 30, 2025, the CoinDesk
SUI Reference Rate Price (the “Index”) at 4:00 p.m., New York time, on each
business day. The Index Price is calculated using non-GAAP methodology and is
not used in the Trust’s financial statements. Prior to the listing of the Shares
on NYSE Arca, the Sponsor intends to change the Index to the CoinDesk SUI
CCIXber Reference Rate. See “Business—Overview
of the Sui Industry and Market—The Index and the Index Price.”
The
Basket Amount on any trade date is determined by dividing (x) the amount of SUI
owned by the Trust at 4:00 p.m., New York time, on such trade date, after
deducting the amount of SUI representing the U.S. dollar value of accrued but
unpaid fees and expenses of the Trust (converted using the Index Price at such
time, and carried to the eighth decimal place), by (y) the number of Shares
outstanding at such time (with the quotient so obtained calculated to one
one-hundred-millionth of one SUI (i.e., carried to the eighth decimal place)),
and multiplying such quotient by 10,000.
The
Trust creates Baskets of Shares only upon receipt of SUI and will redeem Shares
only by distributing SUI or proceeds from the disposition of SUI. Authorized
Participants may submit orders to create or redeem Shares under one of two
procedures, which are referred to as “In-Kind Orders” and “Cash Orders” in this
prospectus. In connection with In-Kind Orders, Authorized Participants, or their
AP Designees, deposit SUI directly with the Trust or receive SUI directly from
the Trust. Cash Orders are made through the participation of a Liquidity
Provider (as defined herein) and facilitated by the Transfer Agent, as described
in “Description of Creation and Redemption of Shares.” Authorized Participants
must pay a Variable Fee (as defined herein) in connection with certain Cash
Orders, which is not applicable to In-Kind Orders, and thus will result in
different execution prices for Cash Orders versus In-Kind Orders.
The
Shares are neither interests in nor obligations of the Sponsor or the Trustee.
As provided under the Trust Agreement, the Trust’s assets will not be loaned or
pledged, or serve as collateral for any loan, margin, rehypothecation, or other
similar activity to which the Sponsor, the Trust or any of their respective
affiliates are a party.
Some
of the notable features of the Trust and its Shares include the holding of SUI
in the Trust’s own accounts, the experience of the Sponsor’s management team in
the Sui Industry and the use of the Custodian to protect the Trust’s private
keys. See “Business—Activities of the Trust.”
The
Sponsor maintains an Internet website at etfs.grayscale.com/gsui, through which
the Trust’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), will be made available free of charge after they have been
filed with or furnished to the Securities and Exchange Commission (the “SEC”) in
each case following the effective date of the registration statement of which
this prospectus forms a part. Additional information regarding the Trust may
also be found on the SEC’s EDGAR database at www.sec.gov.
The
contents of the websites referred to above and any websites referred to herein
are not incorporated into this filing or any other reports or documents we file
with or furnish to the SEC. Further, our references to the URLs for these
websites are intended to be inactive textual references only.
Trust
Objective and Determination of Principal Market NAV and NAV
The
Trust’s investment objective is for the value of the Shares (based on SUI per
Share) to reflect the value of SUI held by the Trust, including SUI earned as
Staking Consideration (to the extent that the Staking Condition is satisfied and
Staking is
implemented), determined by reference to the Index Price, less the
Trust’s expenses and other liabilities. There can be no assurance that the Trust
will be able to achieve its investment objective.
While
an investment in the Shares is not a direct investment in SUI, the Shares are
designed to provide investors with a cost-effective and convenient way to gain
investment exposure to SUI. A substantial direct investment in SUI may require
expensive and sometimes complicated arrangements in connection with the
acquisition, security and safekeeping of the SUI and may involve the payment of
substantial fees to acquire such SUI from third-party facilitators through cash
payments of U.S. dollars. Because the value of the Shares is designed to be
correlated with the value of SUI held by the Trust, it is important to
understand the investment attributes of, and the market for, SUI. To date, the
Trust has not met its investment objective and the Shares quoted on OTCQX have
not reflected the value of the SUI held by the Trust, less the Trust’s expenses
and other liabilities, but instead have traded at both premiums and discounts to
such value, which at times has been substantial.
The
Trust’s SUI are carried, for financial statement purposes, at fair value, as
required by U.S. generally accepted accounting principles (“GAAP”). The Trust
determines the fair value of SUI based on the price provided by the Digital
Asset Market (defined below) that the Trust considers its principal market as of
4:00 p.m., New York time, on the valuation date. The net asset value of
the
Trust
determined on a GAAP basis is referred to in this prospectus as “Principal
Market NAV.” “Digital Asset Market” means a “Brokered Market,” “Dealer Market,”
“Principal-to-Principal Market” or “Exchange Market,” as each such term is
defined in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Master Glossary. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Critical Accounting
Policies and Estimates—Principal Market and Fair Value Determination” in this
prospectus for more information on the Trust’s principal market
selection.
The
Trust uses the Index Price to calculate its “NAV,” a non-GAAP metric, which is
the aggregate value, expressed in U.S. dollars, of the Trust’s assets (other
than U.S. dollars or other fiat currency), less the U.S. dollar value of the
Trust’s expenses and other liabilities calculated in the manner set forth under
“Business —Valuation of SUI and Determination of NAV.” “NAV per Share” is
calculated by dividing NAV by the number of Shares then outstanding.
NAV
and NAV per Share are not measures calculated in accordance with GAAP. NAV is
not intended to be a substitute for the Trust’s Principal Market NAV calculated
in accordance with GAAP, and NAV per Share is not intended to be a substitute
for the Trust’s Principal Market NAV per Share calculated in accordance with
GAAP.
Staking
The
Trust Agreement provides that the Trust may engage in Staking, but only if (and,
then, only to the extent that) the Staking Condition has been satisfied. Subject
to the Staking Condition being satisfied, and subject to compliance with any
additional requirements that may arise in connection with satisfaction of the
Staking Condition, in the future the Sponsor may cause the Trust to stake a
portion of its SUI holdings to receive Staking Consideration comprising
additional SUI.
As
of the date of this prospectus, the Staking Condition has not been met for the
Trust, and there can be no assurance as to whether or when the Staking Condition
will be met for the Trust in the future. As a result, the Trust currently is
prohibited from engaging in Staking, and there can be no assurance that the
Trust will be permitted to engage in Staking in the future. See “Risk
Factors—Risk Factors Related to Staking—The Trust will not be permitted to
engage in Staking unless (and, then, only to the extent that) the Staking
Condition is satisfied in addition to the Trust satisfying any additional
requirements that may arise in connection with the satisfaction of the Staking
Condition, which could negatively affect the value of the Shares.”
The
Sponsor may decide in its sole discretion not to pursue satisfaction of the
Staking Condition, and there can be no assurance that the Sponsor will cause the
Trust to engage in Staking.
Staking
Arrangements and Provider-Facilitated Staking Model
If
the Staking Condition is satisfied, the Sponsor anticipates that the Trust would
enter into written arrangements (the “Staking Arrangements”) with the Custodian
to indirectly stake the Trust’s SUI to one or more vetted third party staking
providers (each, a “Staking Provider”) operating validator software and
associated hardware (“Provider-Facilitated Staking”). The Sponsor anticipates
that the Trust’s SUI would be staked exclusively by means of
Provider-Facilitated Staking.
Under
the Staking Arrangements, the Trust would be permitted to accept only Native
Staking Consideration received in the form of SUI, and would not be permitted to
accept any Other Staking Consideration in the form of other digital assets.
Neither the Trust, nor the Sponsor on behalf of the Trust, would have the
ability under the Staking Arrangements to take advantage of any variations in
the market to improve the investments of Shareholders, including with respect to
variations based on the value of SUI or the amount of Native Staking
Consideration received as a staking rewards. As a whole, the Staking
Arrangements would permit the Trust to retain ownership of its SUI at all times
for U.S. federal income tax purposes while simultaneously protecting and
conserving the Trust Estate by mitigating the risk that another party or group
could control a majority of the SUI Network and engage in transactions that
could reduce the Trust Estate’s value.
A
Staking Provider must meet certain requirements in order to be selected to
participate in the Provider-Facilitated Staking model contemplated by the
Staking Arrangements. For example, each Staking Provider would be required to be
unrelated to both the Trust and the Sponsor. Moreover, a Staking Provider would
also be required to regularly enter into staking arrangements with unrelated
persons involving activities similar to the Staking Arrangements. Under the
Staking Arrangements, the Staking Provider would bear all of its own expenses
(including those on account of its validation activities).
The
Staking Provider would be the node operator and would be obligated to operate
the validator through which the Trust’s SUI is staked to ensure that validation
occurs. The Trust’s SUI would be staked directly from the Trust’s wallets
administered by the Custodian, and the Staking Provider would perform any
related validation activities. The Trust would retain control of its staked SUI
because (1) the staked SUI would remain in the Trust’s wallet administered by
the Custodian (rather than transferred to a wallet address controlled by the
Staking Provider) and (2) the Trust (rather than the Staking Provider) would
retain the ability through the Custodian to un-stake its SUI from the applicable
smart contracts. Because staked SUI would remain in the Trust wallet
administered by the Custodian, even when staked, the Trust’s SUI would not be
commingled with the SUI of any other SUI holder in connection
with
Staking, such as the Staking Provider or others who stake to the Staking
Provider, despite the Trust delegating its validation rights to the Staking
Provider, which may be in receipt of other SUI holders’ validation rights. In
particular, the Staking Provider would not be able to transfer unstaked SUI or
Staking Consideration to another address on the Sui Network. The Trust would not
itself undertake any validation activities, and the Sponsor is not required to
perform any services. Moreover, the Sponsor would not be required to make any
decisions or take any actions, other than (i) selecting the Staking Provider(s)
and entering into the corresponding Staking Arrangement(s), and (ii)
determining, from time to time, what portion of the Trust’s SUI to stake and
un-stake and informing the Staking Provider(s) of those
determinations.
Subject
to the Staking Condition being satisfied and subject to compliance with certain
related requirements, the Sponsor has sole discretion over whether the Trust
will engage in Staking, and there can be no assurance that the Sponsor will
cause the Trust to engage in Staking. If the Sponsor causes the Trust to engage
in Staking, the Sponsor would cause the Trust to engage in staking with respect
to all of the Trust’s SUI at all times, except (i) as necessary to pay the
Sponsor’s Fee and the Sponsor’s Staking Fee, (ii) as necessary to pay any
additional Trust expenses, (iii) as necessary to satisfy existing and reasonably
foreseen potential redemption requests (assuming the Trust is then permitted to
operate an ongoing redemption program) as determined by the Sponsor, (iv) as
necessary to reduce the SUI obtained by the Trust as Native Staking
Consideration to cash for distribution at regular intervals, (v) as necessary to
reduce the SUI obtained by the Trust as Native Staking Consideration to cash in
connection with the Trust’s liquidation, (vi) as necessary to take protective
actions in respect of vulnerabilities in the source code or cryptography
underlying the Sui Network and/or its proof-of-stake protocol, its staking smart
contracts or its validator client software, (vii) if the Custodian discontinues
its arrangements with the Trust and such discontinuance affects the Trust’s SUI,
for so long as is reasonably necessary to re-establish those arrangements or to
establish similar arrangements with other parties, (viii) if the Custodian
discontinues its arrangements with the Staking Provider and such discontinuance
affects the Trust’s SUI, for so long as is reasonably necessary to re-establish
those arrangements or to establish similar arrangements with other parties, (ix)
in the event of a change in applicable law or regulation, (x) as necessary to
maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a
“contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS
Revenue Procedure 2025-31 or (xii) in accordance with any other exception that
is expressly contemplated by an opinion, ruling or tax guidance that satisfies
the Staking Condition. All SUI received by the Trust in connection with the
creation of new Shares, or as Native Staking Consideration, would also be staked
upon receipt by the Trust, unless one or more of the exceptions described in
clauses (i)-(xii) above applies. Moreover, any staked SUI which must be
un-staked in order to fulfill a distribution in connection with a redemption (to
the extent such distribution cannot be fulfilled utilizing the portion of the
Trust’s SUI that has not been staked, or through another mechanism to manage
liquidity in connection with Redemption Orders contemplated by an opinion of a
Tax Advisor, a Tax Ruling or Tax Guidance that satisfies the Staking Condition)
would be un-staked only after the redemption request is approved by the Trust,
the Sponsor executes an un-stake or withdrawal transaction through the
Custodian, and such transaction is processed by the Sui Network. During the
portion of any Uplisted Period during which the Staking Condition has been
satisfied with respect to a particular form of Staking, the Trust Agreement
imposes further requirements relating to recently released IRS
guidance.
If
the Sponsor, in its sole discretion, causes the Trust to engage in Staking, the
Sponsor generally would stake as much of the Trust’s SUI as is practicable
(i.e., up to 100%) at all times, with the remainder of the Trust’s SUI remaining
unstaked in order to address the various exceptions and other considerations
described herein, including the satisfaction of the Staking Condition, and the
approximate percentage of the Trust’s SUI that is staked each day would be
reported the following day at 4:00 p.m., New York time, on
etfs.grayscale.com/gsui. In the future and subject to the satisfaction of the
Staking Condition thereto, the Sponsor, on behalf of the Trust, may be able to
enter into other financing arrangements or implement other mechanisms to manage
SUI liquidity constraints, including entering into short-term financing
arrangements with its Custodian to provide SUI to the Trust for settlement of
trades with the Trust’s Liquidity Provider(s), if necessary. These liquidity
risk policies and procedures are intended to be consistent with NYSE Arca’s
proposed generic listing standards. However, there can be no assurance that such
arrangements would be available as intended or provide sufficient liquidity to
satisfy redemption requests.
Under
the Staking Arrangements, any Staking Consideration earned would accrue
automatically on a periodic basis by the Sui Network to the Trust’s wallets
administered by the Custodian. Periodically, the Trust would either (i)
distribute SUI received as Staking Consideration to the Trust’s beneficiaries
(likely using a liquidating agent), (ii) sell that SUI for cash and distribute
the proceeds to the Trust’s beneficiaries, (iii) pay a portion of the Staking
Consideration to the Sponsor (the “Sponsor’s Staking Fee”) as consideration for
its facilitation of the Staking Arrangements or (iv) a combination of the
foregoing, in the Sponsor’s sole discretion. Before engaging in Staking, the
Sponsor expects to implement a Staking Policy with respect to the Trust, which
describes the frequency of, and conditions under which the Trust would make such
distributions, if any, to the Trust’s beneficiaries. The Sponsor would make such
Staking Policy available to shareholders on the Sponsor’s website. Subject to
any slashing risk, the Trust (through the Custodian) would maintain control and
remain the record and beneficial owner of the staked tokens at all times, and
the tokens would remain associated with the Trust’s wallet.
To
the extent that the Staking Condition is satisfied and Staking is implemented,
the Sponsor anticipates that the Custodian and the Staking Provider would be
entitled to receive a portion of the gross Native Staking Consideration
generated under the Staking Arrangements, reflecting the Custodian’s fee and the
Staking Provider’s share of such Staking Consideration, with the
remainder
received
by the Trust. The allocation of gross Native Staking Consideration between the
Custodian and the Staking Provider shall reflect an arm’s length allocation that
is independent of the expenses of both the Staking Provider and Custodian, and
may be stated as a percentage of the gross Native Staking Consideration. In
addition, pursuant to the Trust Agreement and as consideration for the Sponsor’s
facilitation of Staking, the Sponsor would be permitted to receive a fee equal
to a portion of the Native Staking Consideration, which accrues daily in U.S.
dollars in an amount calculated as a per annum percentage of any Native Staking
Consideration received by the Trust, as may be directed by the Sponsor in its
sole discretion. The Sponsor’s Staking Fee would be payable to the Sponsor daily
in arrears. See “Description of the Shares—Staking—Staking Arrangements and
Provider-Facilitated Staking Model” for more information.
Security
and Controls
The
Trust’s Custodian has multiple layers of security protocols designed to protect
the Trust’s assets from unauthorized access or transfer, which remain in place
when the Trust’s SUI is staked.
The
Trust’s SUI is staked directly from the Trust’s wallets and is not transferred
to any other wallet to be staked. The Sui protocol
(a)
mandates that the executor of the staking transaction (i.e., the Sponsor on
behalf of the Trust) can execute the withdraw function at any time through the
Trust’s wallets administered by the Custodian and (b) limits the activities of
the Staking Provider to executing only those activities specified by the
protocol,
such as staking, un-staking and performing validation activities. Accordingly,
the Staking Provider does not have any control over the Trust’s staked SUI other
than to stake or un-stake SUI at the direction of the Sponsor. In particular,
the Staking Provider is not authorized to leverage or rehypothecate the Trust’s
SUI tokens. The Staking Provider is also not able to change the designated
wallet addresses on the Sui Network to which staked SUI is to be withdrawn or to
which Staking Consideration shall be sent.
In
addition, the Staking Arrangements do not alter the Trust’s custody environment
or security procedures. The controls currently in place between the Sponsor and
the Custodian also govern the activities related to staking and un-staking SUI,
as outlined in the Staking Arrangements.
See
“Description of the Shares—Staking—Security and Controls” and “Risk Factors—Risk
Factors Related to Staking” for more information.
Sui
History
SUI
is a digital asset that is created and transmitted through the operations of the
peer-to-peer Sui Network, a decentralized network of computers that operates on
cryptographic protocols. No single entity owns or operates the Sui Network, the
infrastructure of which is collectively maintained by a decentralized user base.
The Sui Network allows people to exchange tokens of value, called SUI, which are
recorded on a public transaction ledger known as a blockchain. SUI can be used
to pay for goods and services, including computational power on the Sui Network,
or it can be converted to fiat currencies, such as the U.S. dollar, at rates
determined on Digital Asset Trading Platforms (as defined herein) or in
individual end-user-to-end-user transactions under a barter system. Furthermore,
the Sui Network was designed to allow users to write and implement smart
contracts—that is, general-purpose code that executes redundantly across the
network and can instruct the transmission of information and value based on a
sophisticated set of logical conditions. Using smart contracts, users can create
markets, store registries of debts or promises, represent the ownership of
property, move funds in accordance with conditional instructions and create
digital assets other than SUI on the Sui Network. Smart contract operations are
executed on the Sui Network in exchange for payment of SUI. Like the Ethereum
Network, the Sui Network is one of a number of projects intended to expand
blockchain use beyond just a peer-to-peer money system. The price of SUI on
public Digital Asset Trading Platforms has a limited history, and during this
history, SUI prices on the Digital Asset Markets more generally, and on Digital
Asset Trading Platforms individually, have been volatile and subject to
influence by many factors, including operational interruptions. While the Index
is designed to limit exposure to the interruption of individual Digital Asset
Trading Platforms, the Index Price, and the price of SUI generally, remains
subject to volatility experienced by Digital Asset Trading Platforms, and such
volatility could adversely affect the value of the Shares. For example, from
October 1, 2024 through September 30, 2025, the Index Price
ranged from $1.67 to $5.23, with the straight average being $3.28.
See “Business—Overview of the Sui Industry and Market—Historical NAV and SUI
Prices.”
Several
U.S. regulators, including the Financial Crimes Enforcement Network of the U.S.
Department of the Treasury (“FinCEN”), the SEC, the Commodity Futures Trading
Commission (“CFTC”), the U.S. Internal Revenue Service (“IRS”), and state
regulators, including the New York Department of Financial Services (“NYDFS”),
have made official pronouncements or issued guidance or rules regarding the
treatment of digital assets. Similarly, the treatment of SUI and other digital
assets is often uncertain or contradictory in other countries. The regulatory
uncertainty surrounding the treatment of SUI creates risks for the Trust and its
Shares. See “Risk Factors—Risk Factors Related to the Regulation of Digital
Assets, the Trust and the Shares.”
Recent
Developments
On
October 22, 2025, GSO Intermediate Holdings Corporation (“GSOIH”), a Delaware
corporation which was the sole managing member of GSO, a Delaware limited
liability company which is the sole member of the Sponsor, consummated an
internal corporate reorganization (the “Management Reorganization”). Pursuant to
the Management Reorganization, GSOIH transferred a portion of its common
membership units of GSO for Class A shares of Grayscale Investments, Inc.
(“Grayscale Investments”), a Delaware corporation incorporated in connection
with the Management Reorganization, and ceded its managing member rights in GSO
to Grayscale Investments. As a result of the Management Reorganization,
Grayscale Investments is now the sole managing member of GSO, the sole member of
the Sponsor.
Also
in connection with the Management Reorganization, on October 22, 2025, DCG
Grayscale Holdco, LLC (“DCG Holdco”), the sole stockholder of Grayscale
Investments, elected a board of directors (the “Board”) at Grayscale
Investments. Prior to the Management Reorganization, GSOIH’s board of directors
was responsible for managing and directing the affairs of the Sponsor. As a
result of the Management Reorganization, the Board of Grayscale Investments is
responsible for managing and directing the affairs of the Sponsor, and consists
of Barry Silbert, Mark Shifke, Simon Koster, Peter Mintzberg and Edward McGee,
the same members as the board of directors of GSOIH prior to the Management
Reorganization. Mr. Mintzberg and Mr. McGee also retain the authority granted to
them as officers of the Sponsor under the limited liability company agreement of
the Sponsor. Mr. Silbert is the Chairperson of the Board of Grayscale
Investments. See “Key Personnel of the Sponsor.”
DCG
Holdco, Grayscale Investments, GSOIH, GSO and the Sponsor are all consolidated
subsidiaries of Digital Currency Group, Inc.
The
Sponsor does not expect the Management Reorganization to have any material
impact on the operations of the Trust.
Summary
Risk Factors
Before
you invest in the Shares, you should carefully consider all the information in
this prospectus, including matters set forth under the heading “Risk Factors.”
Some of the more significant challenges and risks relating to an investment in
the Shares include those associated with the following:
•
Extreme
volatility of trading prices that many digital assets, including SUI, have
experienced in recent periods and may continue to experience, could have a
material adverse effect on the value of the Shares and the Shares could lose all
or substantially all of their value;
•
The
medium-to-long term value of the Shares is subject to a number of factors
relating to the capabilities and development of blockchain technologies and to
the fundamental investment characteristics of digital assets;
•
The
value of the Shares is dependent on the acceptance of digital assets, such as
SUI, which represent a new and rapidly evolving industry;
•
Digital
assets may have concentrated ownership and large sales or distributions by
holders of such digital assets could have an adverse effect on the market price
of such digital assets;
•
Recent
developments in the digital asset economy have led to extreme volatility and
disruption in digital asset markets, a loss of confidence in participants of the
digital asset ecosystem, significant negative publicity surrounding digital
assets broadly and market-wide declines in liquidity;
•
The
largely unregulated nature and lack of transparency surrounding the operations
of Digital Asset Trading Platforms may adversely affect the value of digital
assets and, consequently, the value of the Shares;
•
The
value of the Shares relates directly to the value of SUI held by the Trust, the
value of which may be highly volatile and subject to
fluctuations;
•
The
Shares may trade at a price that is at, above or below the Trust’s NAV per Share
as a result of the non-concurrent trading hours between NYSE Arca and the
Digital Asset Trading Platform Market;
•
Shareholders
may suffer a loss on their investment if the Shares trade above or below the
Trust’s NAV per Share;
•
Validators
may suffer losses due to Staking, or Staking may prove unattractive to
validators, which could adversely affect the Sui Network;
•
A
temporary or permanent “fork” or a “clone” could adversely affect the value of
the Shares;
•
The
lack of active trading markets for the Shares may result in losses on investors’
investments at the time of disposition of Shares;
•
Possible
illiquid markets may exacerbate losses or increase the variability between the
Trust’s NAV and its market price;
•
The
possibility that there may be less liquidity or wider spreads in the market for
the Shares as compared to the shares of other spot SUI exchange-traded products,
if and when the listing of such products has been approved;
•
The
limited history of the Index;
•
Competition
from the emergence or growth of other digital assets could have a negative
impact on the price of SUI and adversely affect the value of the
Shares;
•
The
liquidity of the Shares may be affected if Authorized Participants cease to
perform their obligations under the Participant Agreements or the Liquidity
Engager is unable to engage Liquidity Providers;
•
Any
suspension or other unavailability of the Trust’s redemption program may cause
the Shares to trade at a discount to the NAV per Share;
•
A
determination that SUI or any other digital asset is a “security” may adversely
affect the value of SUI and the value of the Shares, and result in potentially
extraordinary, nonrecurring expenses to, or termination of, the
Trust;
•
Regulatory
changes or actions by the U.S. Congress or any U.S. federal or state agencies
may affect the value of the Shares or restrict the use of SUI, validating
activity or the operation of the Sui Network or the Digital Asset Markets in a
manner that adversely affects the value of the Shares;
•
Changes
in the policies of the U.S. Securities and Exchange Commission (the “SEC”) could
adversely impact the value of the Shares;
•
Regulatory
changes or other events in foreign jurisdictions may affect the value of the
Shares or restrict the use of one or more digital assets, validating activity or
the operation of their networks or the Digital Asset Trading Platform Market in
a manner that adversely affects the value of the Shares;
•
An
Authorized Participant, the Trust or the Sponsor could be subject to regulation
as a money service business or money transmitter, which could result in
extraordinary expenses to the Authorized Participant, the Trust or the Sponsor
and also result in decreased liquidity for the Shares;
•
Regulatory
changes or interpretations could obligate the Trust or the Sponsor to register
and comply with new regulations, resulting in potentially extraordinary,
nonrecurring expenses to the Trust;
•
Conflicts
of interest may arise among the Sponsor or its affiliates and the
Trust;
•
The
Sponsor’s services may be discontinued, which could be detrimental to the
Trust;
•
The
limited ability to facilitate in-kind creations and redemptions of Shares could
have adverse consequences for the Trust;
•
If
the Custodian resigns or is removed by the Sponsor, or otherwise, without
replacement, it could trigger early termination of the Trust;
•
To
the extent the Staking Condition is not satisfied, the lack of ability to
participate in Staking could have adverse consequences for the
Trust;
•
Staking
introduces a risk of loss of SUI, which could adversely affect the value of the
Shares;
•
Staked
SUI tokens will be inaccessible for a variable period of time, determined by a
range of factors, which could result in certain liquidity risk to the
Trust;
•
The
Trust will be dependent on third parties to effectively execute the Trust’s
Staking Arrangements;
•
The
regulatory landscape surrounding Staking is uncertain;
•
Beneficial
owners of Shares could incur tax liabilities without receiving corresponding
distributions from the Trust;
•
The
Trust relies on third-party service providers to perform certain functions
essential to the affairs of the Trust and the replacement of such service
providers could pose a challenge to the safekeeping of the Trust’s SUI and to
the operations of the Trust; and
•
There
is no guarantee that an active trading market for the Shares will continue to
develop.
Emerging
Growth Company Status
The
Trust is an “emerging growth company” as defined in the Jumpstart Our Business
Startups Act (the “JOBS Act”). For as long as the Trust is an emerging growth
company, unlike other public companies that are not emerging growth companies
under the JOBS Act, it will not be required to:
•
provide
an auditor’s attestation report on management’s assessment of the effectiveness
of our system of internal control over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act;
•
provide
more than two years of audited financial statements and related management’s
discussion and analysis of financial condition and results of
operations;
•
comply
with any new requirements that may be adopted by the Public Company Accounting
Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a
supplement to the auditor’s report in which the auditor would be required to
provide additional information about the audit and the financial statements of
the issuer;
•
provide
certain disclosure regarding executive compensation required of larger public
companies; or
•
obtain
shareholder approval of any golden parachute payments not previously
approved.
The
Trust will cease to be an emerging growth company upon the earliest
of:
•
the
last day of the fiscal year in which the Trust has $1.235 billion or more in
annual revenues;
•
the
date on which the Trust becomes a “large accelerated filer” under Rule 12b-2
promulgated under the Exchange Act;
•
the
date on which the Trust issues more than $1.0 billion of non-convertible debt
over a three-year period; or
•
the
last day of the fiscal year following the fifth anniversary of the Trust’s
initial public offering.
In
addition, Section 107 of the JOBS Act provides that an emerging growth company
can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. The Trust intends to take advantage of these reporting exemptions
until it is no longer an emerging growth company. The Trust’s election to use
the phase-in periods permitted by this election may make it difficult to compare
its financial statements to those of non-emerging growth companies and other
emerging growth companies that have opted out of the longer phase-in periods
under Section 107 of the JOBS Act and who will comply with new or revised
financial accounting standards. If the Trust were to subsequently elect
instead to comply with these public company effective dates, such election would
be irrevocable pursuant to Section 107 of the JOBS Act.
Corporate
Information
The
offices of the Trust and the Sponsor are located at 290 Harbor Drive,
4th
Floor, Stamford, Connecticut 06902 and the Trust’s telephone number is (212)
668-1427. The Trustee has a trust office at 2711 Centerville Road, Wilmington,
Delaware 19808. The Prime Broker’s and the Custodian’s office is located at 548
Market Street, #23008, San Francisco, CA 94104. The Transfer Agent’s office is
located at 240 Greenwich Street, New York, NY 10286. Our Internet site is
etfs.grayscale.com/gsui. Our website and the information contained therein or
connected thereto is not incorporated into this prospectus or the registration
statement of which it forms a part.
The
Offering
|
|
|
Shares
Offered by the Trust |
Shares
representing units of fractional undivided beneficial interest in, and
ownership of, the Trust. |
|
Use of
Proceeds |
Proceeds
received by the Trust from the issuance and sale of Baskets will consist
of SUI deposited with the Trust in connection with creations. Such SUI
will only be (i) owned by the Trust, (ii) transferred (or converted to
U.S. dollars, if necessary) to pay the Trust’s expenses, (iii) distributed
or otherwise disposed of in connection with the redemption of Baskets,
(iv) liquidated in the event that the Trust terminates or as otherwise
required by law or regulation or (v) used in Staking, only if (and, then,
only to the extent that) the Staking Condition relating to the
qualification of the Trust as a grantor trust for U.S. federal income tax
purposes is satisfied and subject to compliance with any additional
requirements that may arise in connection with satisfaction of the Staking
Condition. |
|
Proposed
NYSE Arca symbol |
GSUI |
|
CUSIP |
38964T100 |
|
Index
Price |
The
Index Price is the price of a SUI at 4:00 p.m., New York time, calculated
based on the price and trading volume data of the Digital Asset Trading
Platforms included in the Index over the preceding 24-hour period. The
Index Price is calculated using non-GAAP methodology and is not used in
the Trust’s financial statements.
The
Index is a U.S. dollar-denominated composite reference rate for the price
of SUI. The Index is designed to (1) mitigate the effects of fraud,
manipulation and other anomalous trading activity from impacting the SUI
reference rate, (2) provide a real-time, volume-weighted fair value of SUI
and (3) appropriately handle and adjust for non-market related events. The
Index Provider formally re-evaluates the weighting algorithm quarterly,
but maintains discretion to change the way in which an Index Price is
calculated based on its periodic review or in extreme circumstances. The
exact methodology to calculate the Index Price is not publicly available.
Still, the Index is designed to limit exposure to trading or price
distortion of any individual Digital Asset Trading Platform that
experiences periods of unusual activity or limited liquidity by
discounting, in real-time, anomalous price movements at individual Digital
Asset Trading Platforms. The Digital Asset Trading Platforms that are
included in the Index are selected by the Index Provider utilizing a
methodology that is guided by the International Organization of Securities
Commissions (“IOSCO”) principles for financial benchmarks. For an exchange
to become a Constituent Trading Platform (as defined herein), it must
satisfy the Inclusion Criteria described in this prospectus, as may be
updated by the Index Provider from time to time. See “Risk Factors—Risk
Factors Related to the Digital Asset Markets—The Index Price used to
calculate the value of the Trust’s SUI may be volatile, and purchasing and
selling activity in the Digital Asset Markets associated with Basket
creations and redemptions may affect the Index Price and Share trading
prices, adversely affecting the value of the Shares.”
From the
commencement of the Trust’s operations until September 30, 2025, the value
of the Trust’s SUI was calculated as the U.S. dollar value of SUI derived
from the Digital Asset Trading Platforms that are reflected in the
CoinDesk SUI Reference Rate Price, calculated at 4:00 p.m., New York time,
on each business day.
Prior to
the listing of the Shares on NYSE Arca, the Sponsor intends to change the
Index to the CoinDesk SUI CCIXber Reference Rate. The value of
the
|
|
|
|
|
Trust’s
SUI is the U.S. dollar value of SUI derived from the Digital Asset Trading
Platforms that are reflected in the CoinDesk SUI CCIXber Reference Rate,
calculated at 4:00 p.m., New York time, on each business day.
Index
price data and the description of the Index are based on information
publicly available at the Index Provider’s website at
www.coindesk.com/indices/. None of the information on the Index Provider’s
website is incorporated by reference into this prospectus.
The
Index Provider may change the trading venues that are used to calculate
the Index Price or otherwise change the way in which the Index Price is
calculated at any time. If the Index Price becomes unavailable, or if the
Sponsor determines in good faith that the Index Price does not reflect an
accurate SUI price, then the Sponsor will, on a best efforts basis,
contact the Index Provider to obtain the Index Price directly from the
Index Provider. If after such contact the Index Price remains unavailable
or the Sponsor continues to believe in good faith that the Index Price
does not reflect an accurate SUI price, then the Sponsor will employ a
cascading set of rules to determine the Index Price, as described in
“Business—Overview of the Sui Industry and Market—The Index and the Index
Price.”
The
Sponsor may, in its sole discretion, select a different Index Provider,
select a different index price provided by the Index Provider, calculate
the Index Price using a cascading set of rules as described above, or
change such cascading set of rules at any time. The Sponsor will provide
notice of any such changes in the Trust’s periodic or current reports and,
if the Sponsor makes such a change other than on an ad hoc or temporary
basis, will file a proposed rule change with the SEC.
Digital
Asset Trading Platform Public Market Data - SUI Reference Rate
Price
On each
online Digital Asset Trading Platform, SUI is traded with publicly
disclosed valuations for each executed trade, measured by one or more fiat
currencies such as the U.S. dollar or euro, or stablecoins such as U.S.
Dollar Coin (“USDC”).
Over-the-counter
dealers or market makers do not typically disclose their trade
data.
As of
September 30, 2025, the Digital Asset Trading Platforms included in the
Index were Coinbase, Crypto.com, and Kraken. As further described below,
the Sponsor and the Trust reasonably believe each of these Digital Asset
Trading Platforms are in material compliance with applicable U.S. federal
and state licensing requirements and maintain practices and policies
designed to comply with know-your-customer (“KYC”) and
anti-money-laundering (“AML”) regulations.
Coinbase: A
U.S.-based trading platform that has entities registered as MSBs with
FinCEN, licensed as a virtual currency business under the New York State
Department of Financial Services’ (“NYDFS”) BitLicense, licensed as a
money transmitter in various U.S. states, and chartered as a limited
purpose trust company under New York Banking Law.
Crypto.com: A
Singapore-based trading platform that has entities registered as MSBs with
FinCEN and that is licensed as a money transmitter in various U.S. states
and chartered as non-depository trust company by the New Hampshire Banking
Department. Crypto.com does not hold a BitLicense.
Kraken: A
U.S.-based trading platform that has entities registered as MSBs with
FinCEN, and that is licensed as a money transmitter in various U.S.
states, and chartered as a Special Purpose Depository Institution by the
Wyoming Division of Banking. Kraken does not hold a
BitLicense. |
|
|
|
|
Currently,
there are several Digital Asset Trading Platforms operating worldwide, and
online Digital Asset Trading Platforms represent a substantial percentage
of SUI buying and selling activity and provide the most data with respect
to prevailing valuations of SUI. These trading platforms include
established trading platforms such as the Digital Asset Trading Platforms
included in the Index, which provide a number of options for buying and
selling SUI. The below table reflects the trading volume in SUI and market
share of the SUI-U.S. dollar trading pairs of each of the Digital Asset
Trading Platforms included in the Index as of September 30, 2025
(collectively, “Constituent Trading Platforms”), using data since the
commencement of the Trust’s operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
|
Coinbase |
|
|
11,046,621,720 |
|
|
|
83.60 |
% |
|
|
Kraken |
|
|
1,680,118,155 |
|
|
|
12.72 |
% |
|
|
Crypto.com |
|
|
292,115,994 |
|
|
|
2.21 |
% |
|
|
Total
SUI-U.S. dollar trading pair |
|
|
2,687,512,032 |
|
|
|
98.53 |
% |
|
|
|
|
(1)
Market
share is calculated using trading volume (in SUI) for certain Digital
Asset Trading Platforms including, Coinbase, Crypto.com and Kraken, as
well as certain other large U.S.-dollar denominated Digital Asset Trading
Platforms that were not included in the Index as of September 30, 2025,
including Bitfinex, Bitstamp by Robinhood, CEX.IO (data included through
December 2, 2024).
Digital
Asset Trading Platform Public Market Data - CCIXBER
On each
online Digital Asset Trading Platform, SUI is traded with publicly
disclosed valuations for each executed trade, measured by one or more fiat
currencies such as the U.S. dollar or euro, or stablecoins such as U.S.
Dollar Coin (“USDC”).
Over-the-counter
dealers or market makers do not typically disclose their trade
data.
As of
September 30, 2025, the Digital Asset Trading Platforms included in the
Index were Bitfinex, Bitstamp by Robinhood, Bullish, Bybit, Crypto.com,
Kraken, and OKX. As further described below, the Sponsor and the Trust
reasonably believe each of these Digital Asset Trading Platforms are in
material compliance with applicable licensing requirements based on the
Trading Platform Category and jurisdiction, as detailed below, and
maintain practices and policies designed to comply with
anti-money-laundering (“AML”) and know-your-customer (“KYC”)
regulations.
Bitfinex: A
British Virgin Islands based trading platform. Bitfinex does not hold any
licenses or registrations in the U.S. and is not available to U.S.-based
customers. Bitfinex is categorized by the Index Provider as a “Category 2”
trading platform that meets the Inclusion Criteria but is non-U.S.
licensed.
Bitstamp
by Robinhood: A
U.K.-based trading platform that has U.S. operations and entities
registered as MSB’s with FinCEN, holds a BitLicense, and that is licensed
as a money transmitter in various U.S. states.
Bullish: A
Gibraltar-based trading platform that has entities registered as MSBs with
FinCEN. Bullish is not available to U.S.-based customers. Bullish is
categorized by the Index Provider as a “Category 2” trading platform that
meets the Inclusion Criteria but is non-U.S. licensed.
Bybit: A
United Arab Emirates-based trading platform. Bybit does not hold any
licenses or registrations in the U.S. and is not available to U.S. based
customers.
|
|
|
|
|
Bybit is
categorized by the Index Provider as a “Category 2” trading platform that
meets the Inclusion Criteria but is non-U.S. licensed.
Crypto.com: A
Singapore-based trading platform that has entities registered as MSBs with
FinCEN, and that is licensed as a money transmitter in various U.S. states
and chartered as a non-depository trust company by the New Hampshire
Banking Department. Crypto.com does not hold a BitLicense.
Kraken: A
U.S.-based trading platform that has entities registered as MSBs with
FinCEN, and that is licensed as a money transmitter in various U.S. states
and chartered as a Special Purpose Depository Institution by the Wyoming
Division of Banking. Kraken does not hold a BitLicense.
OKX: A
Seychelles-based trading platform. OKX does not hold any licenses or
registrations in the U.S. and is not available to U.S.-based customers.
OKX is categorized by the Index Provider as a “Category 2” trading
platform that meets the Inclusion Criteria but is non-U.S.
licensed.
Currently,
there are several Digital Asset Trading Platforms operating worldwide, and
online Digital Asset Trading Platforms represent a substantial percentage
of SUI buying and selling activity and provide the most data with respect
to prevailing valuations of SUI. These trading platforms include
established trading platforms such as the Digital Asset Trading Platforms
included in the Index, which provide a number of options for buying and
selling SUI. The below table reflects the trading volume in SUI and market
share of the SUI-U.S. dollar and SUI-USDC trading pairs of each of the
Digital Asset Trading Platforms included in the Index as of September 30,
2025 (collectively, “Constituent Trading Platforms”), using data since
January 1, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
|
Kraken |
|
|
1,821,150,990 |
|
|
|
11.61 |
% |
|
|
Crypto.com |
|
|
347,093,455 |
|
|
|
2.21 |
% |
|
|
Bitstamp
by Robinhood |
|
|
197,628,513 |
|
|
|
1.26 |
% |
|
|
Bitfinex |
|
|
60,209,605 |
|
|
|
0.38 |
% |
|
|
OKX |
|
|
3,699,693 |
|
|
|
0.02 |
% |
|
|
Total
U.S. Dollar-SUI trading pair |
|
|
2,429,782,256 |
|
|
|
15.48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
|
Bybit |
|
|
657,932,927 |
|
|
|
8.53 |
% |
|
|
OKX |
|
|
88,917,605 |
|
|
|
1.15 |
% |
|
|
Bullish |
|
|
6,172,941 |
|
|
|
0.08 |
% |
|
|
Total
USDC-SUI trading pair |
|
|
753,023,473 |
|
|
|
9.76 |
% |
|
|
|
Creation
and Redemption |
(1)
Market
share is calculated using trading volume (in SUI) for certain Digital
Asset Trading Platforms including, Bitfinex, Bullish, Bybit, Bitstamp by
Robinhood, Crypto.com, Kraken, and OKX, as well as certain other large
U.S.-dollar denominated Digital Asset Trading Platforms that were not
included in the Index as of September 30, 2025, including Coinbase,
Binance, Gate.IO, KuCoin, MEXC, and OKX.
The
Trust creates and redeems Shares from time to time, but only in one or
more whole Baskets of 10,000 Shares each, but may be subject to change. At
this time, a Basket is only made in exchange for delivery to the Trust or
the distribution by the Trust of an amount of cash, equivalent to the
amount of SUI represented by the Basket being created or redeemed, as the
case may be, the amount of which is representative of the combined NAV of
the number of Shares included in the Baskets being created or redeemed
determined as of 4:00 p.m., New York time, on the day the order to create
or redeem Baskets is properly received. Except when
|
|
|
|
|
aggregated
in Baskets or under extraordinary circumstances permitted under the Trust
Agreement, the Shares are not individually redeemable
securities.
The
Trust issues and redeems Shares on an ongoing basis, but only in one or
more whole Baskets of 10,000 Shares each. The creation and redemption of
Baskets requires the delivery to or acquisition by the Trust, or the
distribution or disposition by the Trust, of the amount of SUI represented
by the Baskets being created or redeemed, the number of which is equal to
the “Basket Amount” as of 4:00 p.m., New York time, on the trade date of a
creation or redemption order multiplied by the number of Baskets being
created or redeemed (the “Total Basket Amount”). The amount of SUI
required to create a Basket, or to be delivered or disposed of upon the
redemption of a Basket, will gradually decrease over time due to the
transfer of the Trust’s SUI to pay the Sponsor’s Fee and the delivery or
sale of the Trust’s SUI to pay any Trust expenses not assumed by the
Sponsor. See “Description of Creation and Redemption of Shares” in this
prospectus.
Although
the Trust creates Baskets only upon the receipt of SUI, and redeems
Baskets only by distributing SUI or proceeds from the disposition of SUI,
an Authorized Participant may choose to submit Cash Orders, pursuant to
which the Authorized Participant will deposit cash into, or accept cash
from, the Cash Account in connection with the creation and redemption of
Baskets. Cash Orders will be facilitated by the Transfer Agent and
Grayscale Investments Sponsors, LLC, which will engage one or more
eligible companies (each, a “Liquidity Provider”) to obtain or receive SUI
in connection with such orders. The Sponsor may in its sole discretion
limit the number of Shares created pursuant to Cash Orders on any
specified day without notice to the Authorized Participants and may direct
the Marketing Agent to reject any Cash Orders in excess of such capped
amount. The redemption of Shares pursuant to Cash Orders will only take
place if approved by the Sponsor in writing, in its sole discretion and on
a case-by-case basis. The Trust may also create and redeem Baskets via
In-Kind Orders, pursuant to which an Authorized Participant or its AP
Designee would deposit SUI directly with the Trust or receive SUI directly
from the Trust. See “Description of Creation and Redemption of
Shares.”
The
Sponsor has engaged certain unaffiliated Liquidity Providers, and intends
to engage additional Liquidity Providers who are unaffiliated with the
Trust in the future. |
|
Net
Asset Value |
The net
asset value of the Trust determined on a GAAP basis is referred to in this
prospectus as “Principal Market NAV.” The Sponsor also calculates
Principal Market NAV per Share in accordance with GAAP. See “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Selected Operating Data” for additional information reconciling
the Trust’s NAV and NAV per Share presented against the GAAP metrics
presented in our financial statements included hereto. |
|
The
Trust’s NAV |
The
Trust’s NAV is the aggregate value, expressed in U.S. dollars, of the
Trust’s assets (other than U.S. dollars or other fiat currency), less the
U.S. dollar value of the Trust’s expenses and other liabilities calculated
in the manner set forth under “Business—Overview of the Sui Industry and
Market.”
The
Sponsor also calculates the NAV per Share, which equals the NAV of the
Trust divided by the number of Shares then outstanding. The Sponsor will
publish the NAV and NAV per Share each business day as of 4:00 p.m., New
York time, or as soon thereafter as practicable at the Trust’s website at
etfs.grayscale.com/gsui. The contents of the website referred to above and
any websites referred to herein are not incorporated into this filing.
Further, our references to the URL for this website is intended to be an
inactive textual reference only. See “Business—Valuation of SUI and
Determination of NAV” for
|
|
|
|
|
a more
detailed description of how the Trust’s NAV and NAV per Share are
calculated. |
|
Staking |
The
Trust Agreement provides that the Trust may engage in Staking, but only if
(and, then, only to the extent that) the Staking Condition has been
satisfied. Subject to the Staking Condition being satisfied, and subject
to compliance with any additional requirements that may arise in
connection with satisfaction of the Staking Condition, in the future the
Sponsor may cause the Trust to stake a portion of its SUI holdings to
receive Staking Consideration comprising additional SUI.
As of
the date of this prospectus, the Staking Condition has not been met for
the Trust, and there can be no assurance as to whether or when the Staking
Condition will be met for the Trust in the future. As a result, the Trust
currently is prohibited from engaging in Staking, and there can be no
assurance that the Trust will be permitted to engage in Staking in the
future. See “Risk Factors—Risk Factors Related to Staking—The Trust will
not be permitted to engage in Staking unless (and, then, only to the
extent that) the Staking Condition is satisfied in addition to the Trust
satisfying any additional requirements that may arise in connection with
the satisfaction of the Staking Condition, which could negatively affect
the value of the Shares.”
The
Sponsor may decide in its sole discretion not to pursue satisfaction of
the Staking Condition, and there can be no assurance that the Sponsor will
cause the Trust to engage in Staking.
If the
Staking Condition is satisfied, the Sponsor anticipates that the Trust
would enter into Staking Arrangements with the Custodian to indirectly
stake the Trust’s SUI to one or more Staking Providers through
Provider-Facilitated Staking. Under the Staking Arrangements, the Trust
would be permitted to accept only Native Staking Consideration received in
the form of SUI, and would not be permitted to accept any Other Staking
Consideration in the form of other digital assets. Furthermore, the
Staking Arrangements would also require that a Staking Provider meet
certain requirements in order to be selected to participate in
Provider-Facilitated Staking. The Staking Provider would be the node
operator and would be obligated to operate the validator through which the
Trust’s SUI is staked to ensure that validation occurs. The Trust’s SUI
would be staked directly from the Trust’s wallets administered by the
Custodian, and the Staking Provider would perform any related validation
activities. The Trust would retain control of its staked SUI because (1)
the staked SUI would remain in the Trust’s wallet administered by the
Custodian (rather than transferred to a wallet address controlled by the
Staking Provider) and (2) the Trust (rather than the Staking Provider)
would retain the ability through the Custodian to un-stake its SUI from
the applicable smart contracts. Because staked SUI would remain in the
Trust wallet administered by the Custodian, even when staked, the Trust’s
SUI would not be commingled with the SUI of any other SUI holder in
connection with Staking, such as the Staking Provider or others who stake
to the Staking Provider, despite the Trust delegating its validation
rights to the Staking Provider, which may be in receipt of other SUI
holders’ validation rights. The Trust would not itself undertake any
validation activities, and the Sponsor would not be required to perform
any services. If the Sponsor causes the Trust to engage in Staking, the
Sponsor anticipates that it would cause the Trust to engage in Staking
with respect to all of the Trust’s SUI at all times, except as needed as
further described herein. The Trust’s SUI would be un-staked (or not
staked in the first instance) only under certain circumstances described
in the Trust Agreement and under “Description of the Shares—Staking.” The
Staking Arrangements are expected to generally be on market terms,
consistent with those typically offered by leading digital asset firms
that offer staking functionality. However, the Trust would negotiate
certain provisions as necessary or helpful to preserve the Trust’s status
as a grantor trust and the security of the Trust’s SUI, as well as to
address governmental, policy or regulatory
|
|
|
|
|
concerns.
Staking would introduce a risk of loss of SUI, which may include
penalties, slashing and inactivity leaks, and would require dependency on
third parties to effectively execute the Trust’s Staking
Arrangements.
See
“Description of the Shares—Staking” and “Risk Factors—Risk Factors Related
to Staking” for more information.
Capitalized
terms used but not defined in this subsection have the meanings given to
such terms under “Glossary of Defined Terms.” |
|
Incidental
Rights and IR Virtual
Currency |
Other
than receiving and distributing cash from the Cash Account in connection
with the creation and redemption of Baskets as described under
“Description of Creation and Redemption of Shares,” the Trust will not
hold cash, and will not engage a cash custodian. The Trust may from time
to time be entitled to come into possession of rights incident to its
ownership of SUI, which permit the Trust to acquire, or otherwise
establish dominion and control over, other virtual currencies. These
rights are generally expected to arise in connection with forks in the
Blockchain, airdrops offered to holders of SUI or other similar events and
arise without any action of the Trust or of the Sponsor or Trustee on
behalf of the Trust. We refer to these rights as “Incidental Rights” and
any such virtual currency acquired through Incidental Rights as “IR
Virtual Currency.”
With
respect to any fork, airdrop or similar event, the Sponsor will cause the
Trust to irrevocably abandon the Incidental Rights or IR Virtual Currency.
In the event the Trust seeks to change this position, an application would
need to be filed with the SEC by NYSE Arca seeking approval to amend its
listing rules to permit the Trust to distribute the Incidental Rights or
IR Virtual Currency in-kind to an agent of the shareholders for resale by
such agent. Because the Trust will abandon any Incidental Rights and IR
Virtual Currency, the Trust would not receive any direct or indirect
consideration for the Incidental Rights or IR Virtual Currency and thus
the value of the Shares will not reflect the value of the Incidental
Rights or IR Virtual Currency. See “Business—Incidental Rights and IR
Virtual Currency.” |
|
Trust
Expenses |
The
Trust’s only ordinary recurring expense is expected to be the “Sponsor’s
Fee.” The Sponsor’s Fee will accrue daily in U.S. dollars at an annual
rate of % of the NAV Fee Basis Amount of the Trust as of 4:00 p.m., New
York time, on each day; provided
that for
a day that is not a business day, the calculation will be based on the NAV
Fee Basis Amount from the most recent business day, reduced by the accrued
and unpaid Sponsor’s Fee for such most recent business day and for each
day after such most recent business day and prior to the relevant
calculation date. This dollar amount for each daily accrual will then be
converted into SUI by reference to the same Index Price used to determine
such accrual. The Sponsor’s Fee is payable in SUI to the Sponsor daily in
arrears.
To cause
the Trust to pay the Sponsor’s Fee, the Sponsor will instruct the
Custodian to withdraw from the Trust’s Vault Balance (as defined below)
the amount of SUI equal to the accrued but unpaid Sponsor’s Fee and
transfer such SUI to the Sponsor’s account at such times as the Sponsor
determines in its absolute discretion.
The
Sponsor, from time to time, may temporarily waive all or a portion of the
Sponsor’s Fee in its sole discretion. Presently, the Sponsor does not
intend to waive any of the Sponsor’s Fee and there are no circumstances
under which the Sponsor has determined it will definitely waive the
fee.
After
the Trust’s payment of the Sponsor’s Fee to the Sponsor, the Sponsor may
elect to convert any SUI received as payment of the Sponsor’s Fee into
U.S. dollars. The rate at which the Sponsor converts such SUI to U.S.
dollars may differ from the rate at which the relevant Sponsor’s Fee was
determined. The Trust will
|
|
|
|
|
not be
responsible for any fees and expenses incurred by the Sponsor to convert
SUI received in payment of the Sponsor’s Fee into U.S. dollars.
As
partial consideration for its receipt of the Sponsor’s Fee, the Sponsor is
obligated under the Trust Agreement to assume and pay all fees and other
expenses incurred by the Trust in the ordinary course of its affairs,
excluding taxes, but including: (i) the Marketing Fee, (ii) the
Administrator Fee, (iii) the Custodian Fee and fees for any other security
vendor engaged by the Trust, (iv) the Transfer Agent Fee, (v) the Trustee
fee, (vi) the fees and expenses related to the listing, quotation or
trading of the Shares on any Secondary Market (including customary legal,
marketing and audit fees and expenses) in an amount up to $600,000 in any
given fiscal year, (vii) ordinary course, legal fees and expenses, (viii)
audit fees, (ix) regulatory fees, including, if applicable, any fees
relating to the registration of the Shares under the Securities Act or the
Exchange Act, (x) printing and mailing costs, (xi) costs of maintaining
the Trust’s website and (xii) applicable license fees (each, a
“Sponsor-paid Expense” and collectively, the “Sponsor-paid Expenses”),
provided
that any
expense that qualifies as an Additional Trust Expense will be deemed to be
an Additional Trust Expense and not a Sponsor-paid Expense.
The
Trust may incur certain extraordinary, nonrecurring expenses that are not
Sponsor-paid Expenses, including, but not limited to, taxes and
governmental charges, expenses and costs of any extraordinary services
performed by the Sponsor (or any other service provider) on behalf of the
Trust to protect the Trust or the interests of shareholders, any
indemnification of the Custodian or other agents, service providers or
counterparties of the Trust, the fees and expenses related to the listing,
quotation or trading of the Shares on any Secondary Market (including
legal, marketing and audit fees and expenses) to the extent exceeding
$600,000 in any given fiscal year and extraordinary legal fees and
expenses, including any legal fees and expenses incurred in connection
with litigation, regulatory enforcement or investigation matters
(collectively, “Additional Trust Expenses”).
In such
circumstances, the Sponsor or its delegate (i) will instruct the Custodian
to withdraw from the Trust’s Vault Balance SUI in such quantity as may be
necessary to permit payment of such Additional Trust Expenses and (ii) may
either (x) cause the Trust (or its delegate) to convert such SUI into U.S.
dollars or other fiat currencies at the Actual Exchange Rate or (y) when
the Sponsor incurs such expenses on behalf of the Trust, cause the Trust
(or its delegate) to deliver such SUI in kind to the Sponsor in
satisfaction of such Additional Trust Expenses.
Although
the Sponsor is obligated to use its commercially reasonable efforts to
obtain the highest price when engaging other parties to assist with the
sale of the Trust’s SUI to raise proceeds for any Additional Trust
Expenses, the Sponsor will have some discretion in arranging for the sale
of the Trust’s SUI, and may engage one or more of its affiliates to assist
with any such sale. The Sponsor and its respective directors, officers,
employees, affiliates, and/or parties engaged to assist with the sale of
the Trust’s SUI may trade in the SUI, digital asset, derivative or other
markets for their own accounts, and in doing so may take positions
opposite to or ahead of those held by the Trust and may compete with the
Trust for positions in the marketplace. For example, sales of the Trust’s
SUI for the satisfaction of any Additional Trust Expenses may create
conflicts of interest on behalf of one or more such parties in respect of
their obligation to the Trust. The Sponsor has adopted and implemented
policies and procedures that are reasonably designed to ensure compliance
with applicable law, including a Compliance Manual and Code of Ethics,
which address conflicts of interest. See “Risk Factors—Risk Factors
Related to Potential Conflicts of Interest—Potential conflicts of interest
may arise among the Sponsor or its affiliates and the Trust. The Sponsor
and its affiliates have no fiduciary duties to the Trust and its
shareholders other than as provided in the Trust Agreement, which may
permit them to favor their own interests to the detriment of the Trust and
its shareholders.” |
|
|
|
|
In order
to raise proceeds to pay for any Additional Trust Expenses, the Sponsor
would execute the sale of SUI through eligible financial institutions that
are subject to federal and state licensing requirements and practices
regarding AML and KYC regulations, which may include a Liquidity Provider
or one or more of their respective affiliates. The Sponsor expects that
these financial institutions will generally only have access to Digital
Asset Trading Platforms or other venues that they reasonably believe are
operating in compliance with applicable law, including federal and state
licensing requirements, based upon information and assurances provided to
it by each venue. The Trust is not responsible for paying any costs
associated with the transfer of SUI to the Sponsor in connection with the
payment of the Sponsor’s Fee or the sale of SUI in connection with the
payment of any Additional Trust Expenses. The amount of SUI represented by
a Share will decline each time the Trust pays the Sponsor’s Fee or any
Additional Trust Expenses by transferring or selling SUI. See
“Business—Expenses; Sales of SUI.”
The
quantity of SUI to be delivered to the Sponsor or other relevant payee in
payment of the Sponsor’s Fee or any Additional Trust Expenses, or sold to
permit payment of Additional Trust Expenses, will vary from time to time
depending on the level of the Trust’s expenses and the value of SUI held
by the Trust. See “Business—Expenses; Sales of SUI.” Assuming that the
Trust is a grantor trust for U.S. federal income tax purposes, each
delivery or sale of SUI by the Trust for the payment of expenses will be a
taxable event to shareholders. See “Material U.S. Federal Income Tax
Consequences—Tax Consequences to U.S. Holders.” |
|
Voting
Rights |
The
shareholders take no part in the management or control of the Trust. Under
the Trust Agreement, shareholders have limited voting rights. For example,
in the event that the Sponsor withdraws, a majority of the shareholders
may elect and appoint a successor sponsor to carry out the affairs of the
Trust. The Sponsor is also permitted to make certain restatements,
amendments or supplements to the Trust Agreement that would materially
adversely affect the interests of the shareholders as determined by the
Sponsor in its sole discretion with a 20-day notice to shareholders.
Additionally, the Sponsor is permitted to make certain restatements,
amendments, or supplements to the Trust Agreement that could adversely
affect the status of the Trust as a grantor trust for U.S. federal income
tax purposes, but only if certain conditions set forth in the amendments
relating to the qualification of the Trust as a grantor trust for U.S.
federal income tax purposes are satisfied. Furthermore, subject to certain
limitations, the Sponsor may make any other amendments to the Trust
Agreement which do not materially adversely affect the interests of the
shareholders in its sole discretion without shareholder consent. See
“Description of the Shares.” |
|
Termination
Events |
Upon
dissolution of the Trust and surrender of Shares by the shareholders,
shareholders will receive a distribution in U.S. dollars after the Sponsor
has sold the Trust’s SUI, if applicable, and has paid or made provision
for the Trust’s claims and obligations. See “Business—Description of the
Trust Agreement—Termination of the Trust.” The Sponsor currently expects
to execute the sales of any SUI in connection with the termination of the
Trust through eligible financial institutions that are subject to federal
and state licensing requirements and practices regarding Bank Secrecy Act
and AML regulations, which may include a Liquidity Provider or one or more
of their respective affiliates. |
|
Authorized
Participants |
Baskets
may be created or redeemed only by Authorized Participants. Each
Authorized Participant must (i) be a registered broker-dealer, (ii) have
entered into a Participant Agreement with the Sponsor and the Transfer
Agent and (iii) in the case of any creation or redemption pursuant to
In-Kind Orders, own, or their AP Designee (as defined below) must own, a
SUI wallet address that is known to the Custodian as belonging to the
Authorized Participant or its AP Designee and maintain an account with the
Custodian. The Participant Agreement provides the procedures for the
creation and redemption of Baskets and for the delivery of SUI
|
|
|
|
|
required
for the creation and redemption of Baskets, as well as the deposit with
and subsequent delivery by the Trust of cash required in connection
therewith, from or to an Authorized Participant or Liquidity Provider, as
applicable. See “Description of Creation and Redemption of
Shares.”
As of
the date of this prospectus, the Sponsor, on behalf of the Trust, and the
Transfer Agent entered into a Participant Agreement with and pursuant to
which such entities have agreed to act as an Authorized Participants, and
are able to conduct creations and redemptions pursuant to Cash Orders. In
addition, as of the date of this prospectus, is able to conduct creations
and redemptions in-kind. The Sponsor may engage additional Authorized
Participants who are unaffiliated with the Trust in the future, and such
Authorized Participants may be able to conduct creations and redemptions
in-kind, in cash, or both. |
|
Liquidity
Providers |
Liquidity
Providers facilitate the purchase and sale of SUI in connection with Cash
Orders for creations or redemptions of Baskets. Liquidity Providers are
engaged by Grayscale Investments Sponsors, LLC (in such capacity, the
“Liquidity Engager”). See “Description of Creation and Redemption of
Shares.” The Liquidity Engager’s criteria for engaging one or more
Liquidity Providers includes the completion of due diligence that
considers each such Liquidity Provider’s SUI trading capabilities,
organizational structure, operating history, lines of business, controls,
and other details necessary to evaluate their ability to facilitate Cash
Orders. Liquidity Providers formalize their relationship through a
Liquidity Provider Agreement between the Liquidity Engager, Liquidity
Provider, and the Sponsor (on behalf of the Trust). Pursuant to such
Liquidity Provider Agreements, the Liquidity Providers will be
contractually obligated to deliver or receive SUI in exchange for cash in
connection with Cash Orders for creations or redemptions.
The
Liquidity Providers with which Grayscale Investments Sponsors, LLC, acting
in its capacity as the Liquidity Engager, will engage in SUI transactions
are third parties that are not affiliated with the Sponsor or the Trust
and are not acting as agents of the Trust, the Sponsor, or any Authorized
Participant, but may be affiliated with the Authorized Participant, and
all transactions will be done on an arms-length basis. Except for the
contractual relationships between each Liquidity Provider and Grayscale
Investments Sponsors, LLC in its capacity as the Liquidity Engager and the
Sponsor (on behalf of the Trust), there is no other pre-existing
contractual relationship between each Liquidity Provider, on the one hand,
and the Trust or the Sponsor, on the other hand, in each case that relates
to the Trust or the Trust’s Shares. When seeking to buy SUI in connection
with creations or sell SUI in connection with redemptions, the Liquidity
Engager will seek to obtain commercially reasonable prices and terms from
the approved Liquidity Providers. Once agreed upon, the transaction will
generally occur on an “over-the-counter” basis.
As of
the date of this prospectus, the Liquidity Engager has engaged and as
Liquidity Providers. The Liquidity Engager may engage additional Liquidity
Providers who are unaffiliated with the Trust in the future.
,
one of the Authorized Participants, is an affiliate of , one of the
Liquidity Providers.
|
|
Clearance
and Settlement |
The
Shares are evidenced by one or more global certificates that the Transfer
Agent issues to DTC. The Shares are primarily available in book-entry
form. Shareholders may hold their Shares through DTC if they are direct
participants in DTC (“DTC Participants”), or indirectly through entities
that are DTC Participants. |
|
Risk
Factors |
See the
risks discussed in “Risk Factors” in this prospectus before you invest in
the Shares. |
Risk
Factors
You
should carefully consider the following risks and all of the other information
set forth in this prospectus before deciding to invest in Shares of the Trust.
If any of the following risks actually occurs, our business, financial condition
or results of operations would likely suffer. In such case, the trading price of
the Shares could decline due to any of these risks, and you may lose all or part
of your investment.
Risk
Factors Related to Digital Assets
The
trading prices of many digital assets, including SUI, have experienced extreme
volatility in recent periods and may continue to do so. Extreme volatility in
the future, including declines in the trading prices of SUI, could have a
material adverse effect on the value of the Shares and the Shares could lose all
or substantially all of their value.
The
trading prices of many digital assets, including SUI, have experienced extreme
volatility throughout their existence, including in recent periods and may
continue to do so. For instance, following significant increases throughout the
majority of 2020, digital asset prices, including SUI, experienced significant
volatility throughout 2021 and 2022. This volatility became extreme in November
2022 when FTX Trading Ltd. (“FTX”) halted customer withdrawals. Additionally, on
October 10, 2025, it was reported that a sharp decline in digital asset market
prices triggered the liquidation of approximately $20 billion in leveraged
positions across the digital asset industry. Any similar halting of withdrawals
or liquidations across leveraged positions in the digital asset industry in the
future could further impact trading prices. See “—Risk Factors Related to the
Digital Asset Markets—Recent developments in the digital asset economy have led
to extreme volatility and disruption in digital asset markets, a loss of
confidence in participants of the digital asset ecosystem, significant negative
publicity surrounding digital assets broadly and market-wide declines in
liquidity.” Digital asset prices, including SUI, have continued to fluctuate
widely through the date of this prospectus.
Extreme
volatility in the future, including declines in the trading prices of SUI, could
have a material adverse effect on the value of the Shares and the Shares could
lose all or substantially all of their value. Furthermore, negative perception,
a lack of stability and standardized regulation in the digital asset economy may
reduce confidence in the digital asset economy and may result in greater
volatility in the price of SUI and other digital assets, including a
depreciation in value. The Trust is not actively managed and will not take any
actions to take advantage, or mitigate the impacts, of volatility in the price
of SUI. For additional information that quantifies the volatility of SUI prices
and the value of the Shares, see “Business—Overview of the Sui Industry and
Market—Historical NAV and SUI Prices.”
Furthermore,
changes in U.S. political leadership and economic policies may create
uncertainty that materially affects the price of SUI and the Trust’s Shares. For
example, on March 6, 2025, President Trump signed an Executive Order to
establish a Strategic Bitcoin Reserve and a United States Digital Asset
Stockpile. Pursuant to this Executive Order, the Strategic Bitcoin Reserve will
be capitalized with Bitcoin owned by the Department of Treasury that was
forfeited as part of criminal or civil asset forfeiture proceedings, and the
Secretaries of Treasury and Commerce are authorized to develop budget-neutral
strategies for acquiring additional bitcoin, provided that those strategies
impose no incremental costs on American taxpayers. Conversely, the Digital Asset
Stockpile will consist of all digital assets other than Bitcoin owned by the
Department of Treasury that were forfeited in criminal or civil asset forfeiture
proceedings, but the U.S. government will not acquire additional assets for the
U.S. Digital Asset Stockpile beyond those obtained through such proceedings. The
anticipation of a U.S. government-funded strategic cryptocurrency reserve had
motivated large-scale purchases of certain digital assets in the expectation of
the U.S. government acquiring certain digital assets to fund such reserve, and
the market price of certain digital assets decreased significantly as a result
of the ultimate content of the Executive Order. Any similar action or omission
by the U.S. federal administration or other government authorities with respect
to SUI or other digital assets may negatively and significantly impact the price
of SUI and the Trust’s Shares.
Digital
assets such as SUI were only introduced within the past two decades, and the
medium-to-long term value of the Shares is subject to a number of factors
relating to the capabilities and development of blockchain technologies and to
the fundamental investment characteristics of digital assets.
Digital
assets such as SUI were only introduced within the past two decades, and the
medium-to-long term value of the Shares is subject to a number of factors
relating to the capabilities and development of blockchain technologies, such as
the recency of their development, their dependence on the internet and other
technologies, their dependence on the role played by users, developers and
validators and the potential for malicious activity. For example, the
realization of one or more of the following risks could materially adversely
affect the value of the Shares:
•
Digital
asset networks and related protocols are in the early stages of development.
Given the recency of the development of digital asset networks and related
protocols, digital assets and the underlying digital asset networks and related
protocols may
not
function as intended and parties may be unwilling to use digital assets, which
would dampen the growth, if any, of digital asset networks and related
protocols.
•
The
loss of access to a private key required to access a digital asset may be
irreversible. If a private key is lost, and no backup of the private key is
accessible, or if the private key is otherwise compromised, the owner would be
unable to access the digital asset corresponding to that private
key.
•
Digital
asset networks and related protocols are dependent upon the internet. A
disruption of the internet or a digital asset network or related protocol, such
as the Sui Network, would affect the ability to transfer digital assets,
including SUI,
and, consequently, their value.
•
The
acceptance of software patches or upgrades to a digital asset network by a
significant, but not overwhelming, percentage of the users and validators in a
digital asset network, such as the Sui Network, could result in a “fork” in such
network’s blockchain, resulting in the operation of multiple separate blockchain
networks.
•
Many
digital asset networks face significant scaling challenges and are being
upgraded with various features to increase the speed and throughput of digital
asset transactions. These attempts to increase the volume of transactions may
not be effective.
•
The
open-source structure of many digital asset network protocols, such as the
protocol for the Sui Network, means that developers and other contributors are
generally not directly compensated for their contributions in maintaining and
developing such protocols. As a result, the developers and other contributors of
a particular digital asset may lack a financial incentive to maintain or develop
the network or may lack the resources to adequately address emerging issues.
Alternatively, some developers may be funded by companies whose interests are at
odds with other participants in a particular digital asset network. A failure to
properly monitor and upgrade the protocol of the Sui Network could damage that
network.
•
Moreover,
in the past, flaws in the source code for digital asset networks and related
protocols have been exposed and exploited, including flaws that disabled some
functionality for users, exposed users’ personal information and/or resulted in
the theft of users’ digital assets. The cryptography underlying the Sui Network
could prove to be flawed or ineffective, or developments in mathematics and/or
technology, including advances in digital computing, algebraic geometry and
quantum computing, could result in such cryptography becoming ineffective. In
any of these circumstances, a malicious actor may be able to take the Trust’s
SUI,
which would adversely affect the value of the Shares. Moreover, functionality of
the Sui Network may be negatively affected by such an exploit such that it is no
longer attractive to users, thereby dampening demand for SUI.
Even if another digital asset other than SUI
were affected by similar circumstances, any reduction in confidence in the
source code or cryptography underlying digital asset networks and related
protocols generally could negatively affect the demand for digital assets and
therefore adversely affect the value of the Shares.
Moreover,
because digital assets, including SUI, have existed for a short period of time
and are continuing to be developed, there may be additional risks to digital
asset networks and related protocols that are impossible to predict as of the
date of this prospectus.
Digital
assets represent a new and rapidly evolving industry, and the value of the
Shares depends on the acceptance of SUI.
The
first digital asset, Bitcoin, was launched in 2009. SUI launched in 2023 and its
development is ongoing. In general, digital asset networks, including the
Sui
Network and related protocols
represent a new and rapidly evolving industry that is subject to a variety of
factors that are difficult to evaluate. For example, the realization of one or
more of the following risks could materially adversely affect the value of the
Shares:
•
Digital
assets have only recently become selectively accepted as a means of payment by
retail and commercial outlets, but there is no meaningful degree of use of SUI
as a means of payment by retail or commercial outlets. Banks and other
established financial institutions, whether voluntarily or in response to
regulatory feedback, may refuse to process funds for SUI transactions; process
wire transfers to or from Digital Asset Trading Platforms, SUI-related companies
or service providers; or maintain accounts for persons or entities transacting
in SUI. As a result, the prices of SUI are largely determined by speculators and
validators, thus contributing to price volatility that makes retailers less
likely to accept SUI in the future. While the use of other digital assets, such
as Bitcoin, to purchase goods and services from commercial or service businesses
is developing, SUI has not yet been accepted in the same manner because it has a
slightly different purpose than Bitcoin.
•
Banks
may not provide banking services, or may cut off banking services, to businesses
that provide digital asset-related services or that accept digital assets as
payment, which could dampen liquidity in the market and damage the public
perception of digital assets generally or any one digital asset in particular,
such as SUI, and their or its utility as a payment system, which could decrease
the price of digital assets generally or individually.
•
The
prices of digital assets may be determined on a relatively small number of
Digital Asset Trading Platforms by a relatively small number of market
participants, many of whom are speculators or those intimately involved with the
issuance of such digital assets, such as validators or developers, which could
contribute to price volatility that makes retailers less likely to accept
digital assets in the future.
•
Certain
privacy-preserving features have been or are expected to be introduced to a
number of digital asset networks. If any such features are introduced to the Sui
Network, any trading platforms or businesses that facilitate transactions in SUI
may be at an increased risk of criminal or civil lawsuits, or of having banking
services cut off if there is a concern that these features interfere with the
performance of anti-money laundering duties and economic sanctions
checks.
•
Users,
developers and validators may switch to or adopt certain digital asset networks
or protocols at the expense of their engagement with other digital asset
networks and protocols, which may negatively impact those networks and
protocols, including the Sui Network.
The
Trust is not actively managed and will not have any formal strategy relating to
the development of the Sui
Network.
The
Sui protocol was only recently conceived, and the Sui Network or its underlying
technologies may not function as intended, which could have an adverse impact on
the value of SUI and an investment in the Shares.
Components
of the Sui protocol were first conceived in 2017 by Evan Cheng, Adeniyi Abiodun,
Sam Blackshear, George Danezis, and Kostas Chalkias, continuing research
performed while employed by Meta on the Diem (previously called Libra) project.
To achieve consensus among validators, the network historically used a
dual-layer design consisting of “Narwhal,” a data-availability layer, and
“Bullshark,” a consensus protocol. However, in July 2024, the Sui Network
introduced the “Mysticeti” consensus mechanism to replace Bullshark, improving
transaction latency and throughput while continuing to use Narwhal for data
dissemination. This configuration enables the Sui Network to verify and execute
many transactions in parallel, rather than sequentially like in prominent
blockchains like Bitcoin and Ethereum. The Sui protocol, Narwhal and Mysticeti
are new technologies that are not widely used and may not function as intended.
For example, they may require more specialized equipment to participate in the
network and fail to attract a significant number of users. In addition, there
may be flaws in the cryptography underlying Narwhal and Mysticeti, including
flaws that affect functionality of the Sui Network or make the network
vulnerable to attack. The development of the Sui Network is ongoing and any
further disruption could have a material adverse effect on the value of SUI and
an investment in the Shares.
For
example, on November 21, 2024, the Sui Network experienced a significant
disruption, later attributed to a type of denial of service attack, and was
offline for over 2 hours. The development of the Sui Network is ongoing and any
further disruption could have a material adverse effect on the value of SUI and
an investment in the Shares.
Smart
contracts are a new technology and ongoing development may magnify initial
problems, cause volatility on the networks that use smart contracts and reduce
interest in them, which could have an adverse impact on the value of
SUI.
Smart
contracts are programs that run on a blockchain that execute automatically when
certain conditions are met. Since smart contracts typically cannot be stopped or
reversed, vulnerabilities in their programming can have damaging effects. For
example, in June 2016, a vulnerability in the smart contracts underlying The
DAO, a distributed autonomous organization for venture capital funding, allowed
an attack by a hacker to syphon approximately $60 million worth of Ether from
The DAO’s accounts into a segregated account. In the aftermath of the theft,
certain developers and core contributors pursued a “hard fork” of the Ethereum
Network in order to erase any record of the theft. Despite these efforts, the
price of Ether dropped approximately 35% in the aftermath of the attack and
subsequent hard fork. In addition, in July 2017, a vulnerability in a smart
contract for a multi-signature wallet software developed by Parity led to a $30
million theft of Ether, and in November 2017, a new vulnerability in Parity’s
wallet software led to roughly $160 million worth of Ether being indefinitely
frozen in an account. In another example, in February 2022, a vulnerability in a
smart contract for Wormhole, a bridge between the Ethereum and Solana networks
led to a $320 million theft of Ether. While persons associated with Solana Labs
and/or the Solana Foundation are understood to have played a key role in
bringing the network back online, the broader community also played a key role,
as Solana validators coordinated to upgrade and restart the network. Other smart
contracts, such as bridges between blockchain networks and DeFi protocols have
also been manipulated, exploited or used in ways that were not intended or
envisioned by their creators such that attackers syphoned over $3.8 billion
worth of digital assets from smart contracts in 2022. Initial problems and
continued problems with the development, design and deployment of smart
contracts may have an adverse effect on the value of SUI, which could have a
negative impact on the value of the Shares.
Changes
in the governance of a digital asset network or protocol may not receive
sufficient support from users and validators, which may negatively affect that
digital asset network’s or protocol’s ability to grow and respond to
challenges.
The
governance of some digital asset networks and protocols, such as the Sui,
Bitcoin and Ethereum Networks, is generally by voluntary consensus and open
competition. For such networks and protocols, there may be a lack of consensus
or clarity on that network’s or protocol’s governance, which may stymie such
network’s or protocol’s utility, adaptability and ability to grow and face
challenges. The foregoing notwithstanding, the underlying software for some
digital networks and protocols, such as the Sui Network, is informally or
formally managed or developed by a group of core developers that propose
amendments to the relevant network’s or protocol’s source code. Core developers’
roles may evolve over time, generally based on self-determined
participation.
If
a significant majority of users and validators were to adopt amendments to the
Sui Network based on the proposals of such core developers, the Sui Network
would be subject to new source code that may adversely affect the value of
SUI.
As
a result of the foregoing, it may be difficult to find solutions or marshal
sufficient effort to overcome any future problems, especially long-term
problems, on digital asset networks.
Digital
asset networks face significant scaling challenges and efforts to increase the
volume and speed of transactions may not be successful.
Many
digital asset networks face significant scaling challenges due to the fact that
public, permissionless blockchains generally face a tradeoff between security
and scalability. One means through which digital asset networks that utilize
public, permissionless blockchains achieve security is decentralization, meaning
that no intermediary is responsible for securing and maintaining these systems.
For example, a greater degree of decentralization of a public, permissionless
blockchain generally means a given digital asset network is less susceptible to
manipulation or capture. In practice, this typically means that every single
node on a given digital asset network is responsible for securing the system by
processing every transaction and maintaining a copy of the entire state of the
network. As a result, a digital asset network that utilizes a public,
permissionless blockchain may be limited in the number of transactions it can
process by the computing capabilities of each single fully participating node.
Many developers are actively researching and testing scalability solutions for
public blockchains that do not necessarily result in lower levels of security or
decentralization, such as off-chain payment channels and Layer 2 networks.
Off-chain payment channels would allow parties to transact without requiring the
full processing power of a blockchain. Layer 2 networks can increase the
scalability of a blockchain, by allowing users to transact on a second
blockchain deployed on top of a “Layer 1” network.
The
Sui Network can reportedly handle hundreds of thousands of transactions per
second, though as of September
30, 2025,
the network reportedly processed approximately 500
transactions per second at its peak. In
an effort to increase the volume of transactions that can be processed on a
given digital asset network, many digital assets are being upgraded with various
features to increase the speed and throughput of digital asset
transactions.
As
corresponding increases in throughput lag behind growth in the use of digital
asset networks, average fees and settlement times may increase considerably.
Since inception, SUI transaction fees are typically below 10 SUI per transaction
though have been recorded higher than 600 SUI per transaction during periods of
high congestion. Increased fees and decreased settlement speeds could preclude
certain uses for SUI (e.g., micropayments), and could reduce demand for, and the
price of, SUI, which could adversely impact the value of the Shares.
There
is no guarantee that any of the mechanisms in place or being explored for
increasing the scale of settlement or throughput of Sui
Network
transactions will be effective, or how long these mechanisms will take to become
effective, which could adversely impact the value of the Shares.
Digital
asset networks are developed by a diverse set of contributors and the perception
that certain high-profile contributors will no longer contribute to the network
could have an adverse effect on the market price of the related digital
asset.
Digital
asset networks and related protocols are often developed by a diverse set of
contributors
but
are also often developed by identifiable and high-profile contributors. The
perception that certain high-profile contributors may no longer contribute to
the applicable digital asset network or protocol may have an adverse effect on
the market price of any related digital assets. For example, in June 2017, an
unfounded rumor circulated that Ethereum protocol developer Vitalik Buterin had
died. Following the rumor, the price of Ether decreased approximately 20% before
recovering after Buterin himself dispelled the rumor. Some have speculated that
the rumor led to the decrease in the price of Ether. In the event a high-profile
contributor to the Sui Network is perceived as no longer contributing to the Sui
Network due to death, retirement, withdrawal, incapacity, or otherwise, whether
or not such perception is valid, it could negatively affect the price of Sui,
which could adversely impact the value of the Shares.
Digital
assets may have concentrated ownership and large sales or distributions by
holders of such digital assets, or any ability to participate in or otherwise
influence a digital asset’s underlying network, could have an adverse effect on
the market price of such digital asset.
As
of the date of this prospectus, the largest 100 SUI wallets held approximately
16% of the SUI in circulation. Moreover, it is possible that other persons or
entities control multiple wallets that collectively hold a significant amount of
SUI, even if they individually only hold a small amount, and it is possible that
some of these wallets are controlled by the same person or entity. As a result
of this concentration of ownership, large sales or distributions by such holders
could have an adverse effect on the market price of SUI.
Validators
may suffer losses due to Staking, or Staking may prove unattractive to
validators, which could adversely affect the Sui Network.
Staking
on the Sui Network requires SUI to be locked by the underlying blockchain
network in “objects,” or data units on the Sui Network that hold assets and are
managed by the protocol rather than the user. If the Sui Network source code or
protocol were to fail to behave as expected, suffer cybersecurity attacks or
hacks, experience security issues, or encounter other problems, such transferred
(i.e., staked) SUI may be irretrievably lost. In addition, the Sui Network’s
underlying protocol dictates requirements for participation in validation
activity, and may impose penalties, if the relevant activities are not performed
correctly. In addition, the Sui Network dictate requirements for participation
in validation activity, and may impose penalties, if the relevant activities are
not performed correctly. The Sui Network’s penalties (i.e., “slashing”) may be
imposed if a validator commits malicious acts related to the validation of
blocks with invalid transactions. Although the Sui Network does not implement
slashing of staked principal, the protocol may impose penalties—such as loss of
rewards or removal from the validator set—if a validator commits malicious acts
or fails to perform required validation activities.
SUI
is inaccessible while it is staked and as part of the “activating” and
“de-activating” or “cooling down” processes of staking. “Activation” is the
funding of a validator to be included in the active set, thereby allowing the
validator to participate in the Sui Network’s proof-of-stake consensus protocol.
“De-activating” is the request to exit from the active set and no longer
participate in the Sui Network’s proof-of-stake consensus protocol. As part of
these “activating” and “de-activating” processes of staking on the Sui Network,
any staked SUI will be inaccessible for a period of time, denominated in
“epochs.” On the Sui Network, epochs are targeted to last approximately 24
hours, though actual epoch durations may vary slightly due to validator
coordination and other timing effects inherent in the network’s consensus
protocol. De-activation typically completes when the current epoch ends, which
may be up to one full epoch after the request is submitted. Once the
de-activation period ends, the stake becomes fully inactive and can be
withdrawn. As a result, the elapsed time between a de-activation request and
withdrawal availability may differ depending on (i) when the request is
submitted and (ii) the slight variation in epoch duration.
The
Sui Network requires the payment of base fees and the practice of paying
prioritization fees is common, and such fees can become significant as the
amount and complexity of the transaction grows, depending on the degree of
network congestion and the price of SUI. Any cybersecurity attacks, security
issues, hacks, penalties, slashing events, or other problems could damage
validators’ willingness to participate in validation, discourage existing and
future validators from serving as such, and adversely impact the Sui Network’s
adoption or the price of SUI. Any disruption of validation on the Sui Network
could interfere with network operations and cause the Sui Network to be less
attractive to users and application developers than competing blockchain
networks, which could cause the price of SUI to decrease. The limited liquidity
during the “activation” or “de-activation” processes could dissuade potential
validators from participating, which could interfere with network operations or
security and cause the Sui Network to be less attractive to users and
application developers than competing blockchain networks, which could cause the
price of SUI to decrease.
Subject
to the Staking Condition being satisfied and subject to compliance with certain
related requirements, the Sponsor has sole discretion over whether the Trust
will engage in Staking, and there can be no assurance that the Sponsor will
cause the Trust to engage in Staking. If the Sponsor causes the Trust to engage
in Staking, the Sponsor will cause the Trust to engage in staking with respect
to all of the Trust's SUI at all times, except (i) as necessary to pay the
Sponsor's Fee and the Sponsor's Staking Fee, (ii) as necessary to pay any
additional Trust expenses, (iii) as necessary to satisfy existing and reasonably
foreseen potential redemption requests (assuming the Trust is then permitted to
operate an ongoing redemption program) as determined by the Sponsor, (iv) as
necessary to reduce the SUI obtained by the Trust as Native Staking
Consideration to cash for distribution at regular intervals, (v) as necessary to
reduce the SUI obtained by the Trust as Native Staking Consideration to cash in
connection with the Trust's liquidation, (vi) as necessary to take protective
actions in respect of vulnerabilities in the source code or cryptography
underlying the Sui Network and/or its proof-of-stake protocol, its staking smart
contracts or its validator client software, (vii) if the Custodian discontinues
its arrangements with the Trust and such discontinuance affects the Trust's SUI,
for so long as is reasonably necessary to re-establish those arrangements or to
establish similar arrangements with other parties, (viii) if the Custodian
discontinues its arrangements with the Staking Provider and such discontinuance
affects the Trust's SUI, for so long as is reasonably necessary to re-establish
those arrangements or to establish similar arrangements with other parties, (ix)
in the event of a change in applicable law or regulation, (x) as necessary to
maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a
“contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS
Revenue Procedure 2025-31 or (xii) in accordance with any other exception that
is expressly contemplated by an opinion, ruling or tax guidance that satisfies
the Staking Condition. All SUI received by the Trust in connection with the
creation of new Shares, or as Native Staking Consideration, would also be staked
upon receipt by the Trust, unless one or more of the exceptions described in
clauses (i)-(xii) above applies. Moreover, any staked SUI which must be
un-staked in order to fulfill a distribution in connection with a redemption (to
the extent such distribution cannot be fulfilled utilizing the portion of the
Trust's SUI that has not been staked, or through another mechanism to manage
liquidity in connection with Redemption Orders contemplated by an opinion of a
Tax Advisor, a Tax Ruling or Tax Guidance that satisfies the Staking Condition)
will be un-staked only after the redemption request is approved by the Trust,
the Sponsor executes an un-stake or withdrawal transaction through the
Custodian, and such transaction is processed by the Sui Network. During the
portion of any Uplisted Period during which the Staking Condition has been
satisfied with respect to a particular form of Staking, the Trust Agreement
imposes further requirements relating to recently released IRS
guidance.
If
the Sponsor, in its sole discretion, causes the Trust to engage in Staking, the
Sponsor generally will stake as much of the Trust’s SUI as is practicable (i.e.,
up to 100%) at all times, with the remainder of the Trust’s SUI remaining
unstaked in order to address the various exceptions and other considerations
described herein, including the satisfaction of the Staking Condition. The
approximate percentage of the Trust’s SUI that is staked each day will be
reported the following day at 4:00 p.m., New York time, on
etfs.grayscale.com/gsui.
If
the transaction fees for recording transactions on the Sui Network are not
sufficiently high to incentivize validators, or if certain jurisdictions
continue to limit or otherwise regulate validating activities, validators may
cease expanding validating power or demand high transaction fees, which could
negatively impact the value of SUI
and the value of the Shares.
If
the digital asset awards for validating transactions or the transaction fees for
recording transactions on the Sui Network are not sufficiently high to
incentivize validators, or if certain jurisdictions continue to limit or
otherwise regulate validating activities, validators may cease expending
validating power to validate transactions on the Sui Network could be slowed.
For example, the realization of one or more of the following risks could
materially adversely affect the value of the Shares:
•
Over
the past several years, digital asset validating operations have evolved from
individual users validating with computer processors, graphics processing units
and first-generation application specific integrated circuit machines to
“professionalized” validating operations using proprietary hardware or
sophisticated machines. If the profit margins of digital asset validating
operations are not sufficiently high, digital asset validators are more likely
to immediately sell digital assets earned by validating, resulting in an
increase in liquid supply of that digital asset, which would generally tend to
reduce that digital asset’s market price.
•
A
reduction in digital assets staked by validators on the Sui Network could
increase the likelihood of a malicious actor or botnet obtaining control. See
“—If a malicious actor or botnet obtains control of more than 50% of the
validating power on the Sui Network, or otherwise obtains control over the Sui
Network through its influence over core developers or otherwise, such actor or
botnet could manipulate the Blockchain to adversely affect the value of the
Shares or the ability of the Trust to operate.”
•
Validators
have historically accepted relatively low transaction confirmation fees on most
digital asset networks. If validators demand higher transaction fees for
recording transactions in the Blockchain or a software upgrade automatically
charges fees for all transactions on the Sui Network, the cost of using
SUI
may increase and the marketplace may be reluctant to accept SUI
as a means of payment. Alternatively, validators could collude in an
anti-competitive manner to reject low transaction fees on the Sui Network and
force users to pay higher fees, thus reducing the attractiveness of the Sui
Network. Higher
transaction
confirmation fees resulting through collusion or otherwise may adversely affect
the attractiveness of the Sui Network, the value of SUI
and the value of the Shares.
•
To
the extent that any validators cease to record transactions that do not include
the payment of a transaction fee or do not record a transaction because the
transaction fee is too low, such transactions will not be recorded on the
Sui
Network
until a transaction is validated by a validator who does not require the payment
of transaction fees or is willing to accept a lower fee. Any widespread delays
in the recording of transactions could result in a loss of confidence in the
digital asset network.
•
If
validators collectively increase reference gas prices, or if network conditions
cause higher gas usage, some transactions may be delayed or dropped until users
raise fees or resubmit. Any widespread delays in the recording of transactions
could result in a loss of confidence in the digital asset
network.
•
Digital
asset validating operations can consume significant amounts of electricity,
which may have a negative impact and give rise to public opinion against
allowing, or government regulations restricting, the use of electricity for
validating operations. Additionally, validators may be forced to cease
operations during an electricity shortage or power outage.
•
During
the course of ordering transactions and validating some transactions, validators
may be able to prioritize certain transactions in return for increased
transaction fees, an incentive system known as “Maximal Extractable Value” or
MEV. For example, in blockchain networks that facilitate DeFi protocols in
particular, such as the Sui Network, users may attempt to gain an advantage over
other users by increasing offered transaction fees. Certain software solutions,
such as Flashbots, have been developed which facilitate validators in capturing
MEV produced by these increased fees. The MEV incentive system may lead to an
increase in transaction fees on the Sui Network, which may diminish its use.
Users or other stakeholders on the Sui Network could also view the existence of
MEV as unfair manipulation of decentralized digital asset networks, and refrain
from using DeFi protocols or the Sui Network generally. In addition, it’s
possible regulators or legislators could enact rules which restrict the use of
MEV, which could diminish the popularity of the Sui Network among users and
validators. Any of these or other outcomes related to MEV may adversely affect
the value of SUI and the value of the Shares.
If
a malicious actor or botnet obtains control of a sufficient amount of the
validating power on the Sui Network, or otherwise obtains control over the Sui
Network through its influence over core developers or otherwise, such actor or
botnet could manipulate the Sui Network to adversely affect the value of the
Shares or the ability of the Trust to operate.
The
Sui Network is currently vulnerable to several types of attacks,
including:
•
“33%
attack” where, if a validator or group of validators were to gain control of
more than 33% of the total staked SUI on the Sui Network, a malicious actor
could temporarily impede or delay transaction confirmation or even cause a
temporary fork in the blockchain.
•
“50%
attack” where, if a validator or group of validators acting in concert were to
gain control of more than 50% of the total
staked SUI on the Sui Network, a
malicious actor would be able to gain full control of the Sui Network and the
ability to
manipulate the blockchain on a forward-looking basis, including
censoring transactions following the achievement of
threshold,
double-spending and fraudulent block propagation, while the attacker maintains
the threshold. In theory, the
minority non-attackers might reach social
consensus to reject blocks proposed by the malicious majority attacker,
reducing
the attacker’s ability to engage in malicious activity, but there
can be no assurance this would happen or that non-attackers
would be able to
coordinate effectively.
•
“>66%
attack” where, if a validator or group of validators acting in concert were to
gain control of more than 66% of the total staked SUI on the Sui Network, a
malicious actor could permanently and irreversibly manipulate the Sui Network,
including censorship, double-spending and fraudulent transaction propagation,
both on a forward-and backward-looking basis. The attacker could unilaterally
finalize their preferred chain without the votes of any other stakers, and could
also reverse past finalized transactions. The Sui Network’s proof-of-stake
consensus mechanism requires a 2/3 supermajority of validators who have staked
SUI to vote in favor in order to finalize transactions and add transactions to
the Sui Network.
For
example, in August 2020, the Ethereum Classic Network was the target of two
double-spend attacks by an unknown actor or actors that gained more than 50% of
the processing power of the Ethereum Classic Network. The attack resulted in
reorganizations of the Ethereum Classic blockchain that allowed the attacker or
attackers to reverse previously recorded transactions in excess of over
$5.0 million and $1.0 million.
In
addition, in May 2019, the Bitcoin Cash 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. Although
this
particular attack was arguably benevolent, the fact that such coordinated
activity was able to occur may negatively impact perceptions of the Bitcoin Cash
network. Although the two attacks described above took place on proof-of-work
based networks, it is possible that a similar attack may occur on the Sui
Network, which could negatively impact the value of SUI and the value of the
Shares.
Although
there are no known reports of malicious control of the Sui Network, if groups of
coordinating or connected SUI holders that together have a more than 50% of
outstanding SUI, were to stake that SUI and run validators, they could exert
authority over the validation of SUI transactions. This risk is heightened if
such amount of the validating power on the network falls within the jurisdiction
of a single governmental authority. If network participants, including the core
developers and the administrators of validating pools, do not act to ensure
greater decentralization of SUI, the feasibility of a malicious actor obtaining
control of the validating power on the Sui Network will increase, which may
adversely affect the value of SUI and the value of the Shares.
A
malicious actor may also obtain control over the Sui Network through its
influence over core developers by gaining direct control over a core developer
or an otherwise influential programmer. To the extent that the SUI ecosystem
does not grow, the possibility that a malicious actor may be able to maliciously
influence the Sui Network in this manner will remain heightened. Moreover, it is
possible that a group of SUI holders that together control more than 50% of
outstanding SUI are in fact part of the initial or current core developer group,
or are otherwise influential members of the SUI community. To the extent that
the initial or current core developer groups also control more than 50% of
outstanding SUI, as some believe, the risk of and arising from this particular
group of users obtaining control of the validating power on the Sui Network will
be even greater, and should this materialize, it may adversely affect the value
of the Shares.
A
temporary or permanent “fork” or a “clone” could adversely affect the value of
the Shares.
The
Sui Network operates using open-source protocols, meaning that any user can
download the software, modify it and then propose that the users and validators
of SUI adopt the modification. When a modification is introduced and a
substantial majority of users’ and validators’ consent to the modification, the
change is implemented and the network remains uninterrupted. However, if less
than a substantial majority of users’ and validators’ consent to the proposed
modification, and the modification is not compatible with the software prior to
its modification, the consequence would be what is known as a “hard fork” of the
Sui Network, with one group running the pre-modified software and the other
running the modified software. The effect of such a fork would be the existence
of two versions of SUI running in parallel, yet lacking interchangeability. For
example, in September 2022, the Ethereum Network transitioned to a
proof-of-stake model, in an upgrade referred to as the “Merge.” Following the
Merge, a hard fork of the Ethereum Network occurred, as certain Ethereum miners
and network participants planned to maintain the proof-of-work consensus
mechanism that was removed as part of the Merge. This version of the network was
rebranded as “Ethereum Proof-of-Work.”
Forks
may also occur as a digital asset network community’s response to a significant
security breach. For example, in July 2016, Ethereum “forked” into Ethereum and
a new digital asset network, Ethereum Classic, as a result of the Ethereum
Network community’s response to a significant security breach. In June 2016, an
anonymous hacker exploited a smart contract running on the Ethereum Network to
syphon approximately $60 million of Ether held by The DAO, a distributed
autonomous organization, into a segregated account. In response to the exploit,
most participants in the Ethereum community elected to adopt a “fork” that
effectively reversed the exploit. However, a minority of users continued to
develop the original blockchain, referred to as “Ethereum Classic” with the
digital asset on that blockchain now referred to as ETC. ETC now trades on
several Digital Asset Trading Platforms. A fork may also occur as a result of an
unintentional or unanticipated software flaw in the various versions of
otherwise compatible software that users run. Such a fork could lead to users
and validators abandoning the digital asset with the flawed software. It is
possible, however, that a substantial number of users and validators could adopt
an incompatible version of the digital asset while resisting community-led
efforts to merge the two chains. This could result in a permanent fork, as in
the case of Ethereum and Ethereum Classic.
Furthermore,
a hard fork can lead to new security concerns. For example, when the Ethereum
and Ethereum Classic networks, two other digital asset networks, split in July
2016, replay attacks, in which transactions from one network were rebroadcast to
nefarious effect on the other network, plagued Ethereum trading platforms
through at least October 2016. An Ethereum trading platform announced in July
2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that
time, as a result of replay attacks. Similar replay attack concerns occurred in
connection with the Bitcoin Cash and Bitcoin Satoshi’s Vision networks split in
November 2018. Another possible result of a hard fork is an inherent decrease in
the level of security due to significant amounts of validating power remaining
on one network or migrating instead to the new forked network. After a hard
fork, it may become easier for an individual validator or validating pool’s
validating power to exceed 50% of the validating power of a digital asset
network that retained or attracted less validating power, thereby making digital
asset networks that rely on proof-of-stake more susceptible to
attack.
Digital
asset networks and related protocols may also be cloned. Unlike a
fork
of
a digital asset network, which modifies an existing blockchain, and results in
two competing digital asset networks, each with the same genesis block, a
“clone” is a copy of a protocol’s codebase, but results in an entirely new
blockchain and new genesis block. Tokens are created solely from the new “clone”
network and, in contrast to forks, holders of tokens of the existing network
that was cloned do not receive any tokens of the new
network.
A “clone” results in a competing network that has characteristics substantially
similar to the network it was based on, subject to any changes as determined by
the developer(s) that initiated the clone.
A
hard fork may adversely affect the price of SUI at the time of announcement or
adoption. For example, the announcement of a hard fork could lead to increased
demand for the pre-fork digital asset, in anticipation that ownership of the
pre-fork digital asset would entitle holders to a new digital asset following
the fork. The increased demand for the pre-fork digital asset may cause the
price of the digital asset to rise. After the hard fork, it is possible the
aggregate price of the two versions of the digital asset running in parallel
would be less than the price of the digital asset immediately prior to the fork.
Furthermore, while the Trust would be entitled to both versions of the digital
asset running in parallel, the Sponsor will, as permitted by the terms of the
Trust Agreement, determine which version of the digital asset is generally
accepted as the Sui Network and should therefore be considered the appropriate
network for the Trust’s purposes, and there is no guarantee that the Sponsor
will choose the digital asset that is ultimately the most valuable fork. Either
of these events could therefore adversely impact the value of the Shares. As an
illustrative example of a digital asset hard fork, following the DAO hack in
July 2016, holders of Ether voted on-chain to reverse the hack, effectively
causing a hard fork. For the days following the vote, the price of Ether rose
from $11.65 on July 15, 2016 to $14.66 on July 21, 2016, the day after the first
Ethereum Classic block was mined. A clone may also adversely affect the price of
SUI at the time of announcement or adoption. For example, on November 6, 2016,
Rhett Creighton, a Zcash developer, cloned the Zcash network to launch Zclassic,
a substantially identical version of the Zcash network that eliminated the
Founders’ Reward. For the days following the date the first Zclassic block was
mined, the price of ZEC fell from $504.57 on November 5, 2016 to $236.01 on
November 7, 2016 in the midst of a broader sell off of ZEC beginning immediately
after the Zcash network launch on October 28, 2016. A clone may also adversely
affect the price of SUI at the time of announcement or adoption.
A
future fork in or clone of the Sui Network could adversely affect the value of
the Shares or the ability of the Trust to operate.
In
the event of a hard fork of the Sui Network, the Sponsor will, if permitted by
the terms of the Trust Agreement, use its discretion to determine which network
should be considered the appropriate network for the Trust’s purposes, and in
doing so may adversely affect the value of the Shares.
In
the event of a hard fork of the Sui Network, the Sponsor will, as permitted by
the terms of the Trust Agreement, use its discretion to determine, in good
faith, which digital asset network, among a group of incompatible forks of the
Sui Network, is generally accepted as the Sui Network and should therefore be
considered the appropriate digital asset network for the Trust’s purposes. The
Sponsor will base its determination on a variety of then relevant factors,
including, but not limited to, the Sponsor’s beliefs regarding expectations of
the core developers of SUI, users, services, businesses, validators and other
constituencies, as well as the actual continued acceptance of, validating power
on, and community engagement with, the Sui Network. There is no guarantee that
the Sponsor will choose the digital asset network or digital asset that is
ultimately the most valuable fork, and the Sponsor’s decision may adversely
affect the value of the Shares as a result. The Sponsor may also disagree with
shareholders, security vendors and the Index Provider on what is generally
accepted as SUI and should therefore be considered “SUI” for the Trust’s
purposes, which may also adversely affect the value of the Shares as a
result.
In
the event of a hard fork of the Sui Network, the Custodian’s operations may be
interrupted or subject to additional security risks that could disrupt the
Trust’s ability to process creations and redemptions of Shares or otherwise
threaten the security of the Trust’s SUI holdings.
In
the event of a hard fork of the Sui Network, the Custodian may temporarily halt
the ability of customers (including the Trust) to deposit, withdraw or transfer
SUI on the Custodian’s platform. Such a delay may be intended to permit the
Custodian to assess the resulting versions of the Sui Network, to determine how
best to securely “split” the SUI from the forked asset, and to prevent malicious
users from conducting “replay attacks” (i.e., broadcasting transactions on both
versions of the forked networks to put Custodian assets at risk). As a result,
the Trust is likely to suspend creations and redemptions during a period in
which the Custodian’s operations are halted.
In
addition, any losses experienced by the Custodian due to a hard fork, including
due to replay attacks or technological errors in assessing the fork, could have
a materially adverse impact on an investment in the Shares.
Any
name change and any associated rebranding initiative by the core developers of
SUI may not be favorably received by the digital asset community, which could
negatively impact the value of SUI and the value of the Shares.
From
time to time, digital assets may undergo name changes and associated rebranding
initiatives. For example, Bitcoin Cash may sometimes be referred to as Bitcoin
ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such
as Bitcoin Satoshi’s Vision, and in the third quarter of 2018, the team behind
ZEN rebranded and changed the name of ZenCash to “Horizen.” We cannot predict
the impact of any name change and any associated rebranding initiative on SUI.
After a name change and an associated rebranding initiative, a digital asset may
not be able to achieve or maintain brand name recognition or status that is
comparable to the recognition and status previously enjoyed by such digital
asset. The failure of any name change and any associated
rebranding
initiative by a digital asset may result in such digital asset not realizing
some or all of the anticipated benefits contemplated by the name change and
associated rebranding initiative, and could negatively impact the value of SUI
and the value of the Shares.
If
the Sui Network is used to facilitate illicit activities, businesses that
facilitate transactions in SUI could be at increased risk of criminal or civil
lawsuits, or of having services cut off, which could negatively affect the price
of SUI and the value of the Shares.
Digital
asset networks have in the past been, and may continue to be, used to facilitate
illicit activities. If the Sui Network is used to facilitate illicit activities,
businesses that facilitate transactions in SUI may be at increased risk of
potential criminal or civil lawsuits, or of having banking or other services cut
off, if there is a concern that certain smart contracts on the Sui Network could
interfere with the performance of anti-money laundering duties and economic
sanctions checks. There is also a risk that Digital Asset Trading Platforms may
remove SUI from their platforms as a result of these concerns. Other service
providers of such businesses may also cut off services if there is a concern
that the Sui Network is being used to facilitate crime. Any of the
aforementioned occurrences could increase regulatory scrutiny of the Sui Network
and/ or adversely affect the price of SUI, the attractiveness of the Sui Network
and an investment in the Shares of the Trust.
When
the Trust and the Sponsor, acting on behalf of the Trust, sell or deliver, as
applicable, SUI or, subject to NYSE Arca obtaining regulatory approval from the
SEC, Incidental Rights and/or IR Virtual Currency, they generally do not
transact directly with counterparties other than the Authorized Participant, a
Liquidity Provider or other similarly eligible financial institutions that are
subject to federal and state licensing requirements and maintain practices and
policies designed to comply with AML and KYC regulations. When an Authorized
Participant or a Liquidity Provider sources SUI
in connection with the creation of the Shares or facilitates transactions in
SUI
at the direction of the Trust or the Sponsor, it directly faces its counterparty
and, in all instances, the Authorized Participant or Liquidity Provider, as
applicable, follow policies and procedures designed to ensure that it knows the
identity of its counterparty. The Authorized Participant is a registered
broker-dealer and therefore subject to AML and countering the financing of
terrorism obligations under the Bank Secrecy Act as administered by FinCEN and
further overseen by the SEC and FINRA. In addition, one or more Liquidity
Providers may be a virtual currency entity licensed by the NYDFS, which
additionally may subject it to AML obligations.
In
accordance with its regulatory obligations, the Authorized Participant, or the
Liquidity Provider, conducts customer due diligence and enhanced due diligence
on its counterparties, which enables it to determine each counterparty’s AML and
other risks and assign an appropriate risk rating.
As
part of its counterparty onboarding process, each of the Authorized Participant
and the Liquidity Provider uses third-party services to screen prospective
counterparties against various watch lists, including the Specially Designated
Nationals List of the Treasury Department Office of Foreign Assets Control
(“OFAC”) and countries and territories identified as non-cooperative by the
Financial Action Task Force. If the Sponsor, the Trust, the Authorized
Participant or the Liquidity Provider were nevertheless to transact with such a
sanctioned entity, the Sponsor, the Trust, the Authorized Participant and the
Liquidity Provider would be at increased risk of potential criminal or civil
lawsuits.
Risk
Factors Related to the Digital Asset Markets
Recent
developments in the digital asset economy have led to extreme volatility and
disruption in digital asset markets, a loss of confidence in participants of the
digital asset ecosystem, significant negative publicity surrounding digital
assets broadly and market-wide declines in liquidity.
In
the past and through the date of this prospectus, digital asset prices have
experienced significant fluctuations, leading to volatility and disruption in
the digital asset markets and financial difficulties for several prominent
industry participants, including Digital Asset Trading Platforms, hedge funds
and lending platforms. For example, in the first half of 2022, digital asset
lenders Celsius Network LLC and Voyager Digital Ltd. and digital asset hedge
fund Three Arrows Capital each entered into insolvency proceedings. This
resulted in a loss of confidence in participants in the digital asset ecosystem,
negative publicity surrounding digital assets more broadly and market-wide
declines in digital asset trading prices and liquidity.
Thereafter,
in November 2022, FTX, the third largest Digital Asset Trading Platform by
volume at the time, halted customer withdrawals amid rumors of the company’s
liquidity issues and likely insolvency. Shortly thereafter, FTX’s CEO resigned
and FTX and several affiliates of FTX filed for bankruptcy. The U.S. Department
of Justice subsequently brought criminal charges, including charges of fraud,
violations of federal securities laws, money laundering, and campaign finance
offenses, against FTX’s former CEO and others. In November 2023, FTX’s former
CEO was convicted of fraud and money laundering. Similar charges related to
violations of anti-money laundering laws were brought in November 2023 against
Binance and its former CEO. In addition, several other entities in the digital
asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as
BlockFi Inc. and Genesis Global Capital, LLC (“Genesis Capital”), a subsidiary
of Genesis Global Holdco, LLC (“Genesis Holdco”). The SEC also brought charges
against Genesis Capital and Gemini Trust Company, LLC (“Gemini”) in January 2023
for their alleged unregistered offer and sale of securities to retail investors.
In October 2023, the New York Attorney General (“NYAG”) brought charges against
Gemini, Genesis Capital, Genesis Asia Pacific PTE. LTD. (“Genesis Asia
Pacific”), Genesis Holdco, (together with Genesis Capital and Genesis Asia
Pacific, the “Genesis Entities”), Genesis Capital’s former CEO, DCG, and DCG’s
CEO alleging violations of the New York Penal Law, the New York General Business
Law and the New York Executive Law. In February 2024, the NYAG amended its
complaint to expand the charges against Gemini, the Genesis Entities, Genesis
Capital’s former CEO, DCG, and DCG’s CEO to include harm to additional
investors. Also in February 2024, the Genesis Entities entered into a settlement
agreement with the NYAG to resolve the NYAG’s allegations against the Genesis
Entities, which settlement was subsequently approved by the Bankruptcy Court of
the Southern District of New York.
Furthermore,
Genesis Holdco, together with certain of its subsidiaries, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
January 2023. While Genesis Holdco is not a service provider to the Trust, it is
a wholly owned subsidiary of DCG, and is an affiliate of the Trust and the
Sponsor.
These
events have also led to significant negative publicity around digital asset
market participants including DCG, Genesis and DCG’s other affiliated entities.
This publicity could negatively impact the reputation of the Sponsor and have an
adverse effect on the trading price and/or the value of the Shares. Moreover,
sales of a significant number of Shares of the Trust as a result of these events
could have a negative impact on the trading price of the Shares.
These
events led to a substantial increase in regulatory and enforcement scrutiny of
the industry as a whole and of Digital Asset Trading Platforms in particular,
including from the Department of Justice, the SEC, the CFTC, the White House and
Congress. For example, in June 2023, the SEC brought charges against Binance
(the “Binance Complaint”) and Coinbase (the “Coinbase Complaint”), two of the
largest Digital Asset Trading Platforms, alleging that they solicited U.S.
investors to buy, sell, and trade “crypto asset securities” through their
unregistered trading platforms and operated unregistered securities exchanges,
brokerages and clearing agencies. Binance subsequently announced that it would
be suspending USD deposits and withdrawals on Binance.US and that it plans to
delist its USD trading pairs. In addition, in November 2023, the SEC brought
similar charges against Kraken (the “Kraken Complaint”), alleging that it
operated as an unregistered securities exchange, brokerage and clearing agency.
The Binance Complaint, the Coinbase Complaint and the Kraken Complaint have led,
and may in the future lead, to further volatility in digital asset prices.
Between
February 2025 and May 2025, the SEC entered into court-approved joint
stipulations to dismiss each of the Binance Complaint, Coinbase Complaint and
the Kraken Complaint. The
SEC has terminated its investigation or enforcement action into many other
digital asset market participants as well.
In
January 2025, the SEC launched a Crypto Task Force dedicated to developing a
comprehensive and clear regulatory framework for digital assets led by
Commissioner Hester Peirce. Subsequently, Commissioner Peirce announced a list
of specific priorities to further that initiative, which included pursuing final
rules related to a digital asset’s security status, a revised path to registered
offerings and listings for digital asset-based investment vehicles, and clarity
regarding digital asset custody, lending and staking.
Digital
asset markets have also been negatively impacted by the failure of entities
perceived to be integral to the digital asset ecosystem. For example, in March
2023, state banking regulators placed Silicon Valley Bank and Signature Bank
into FDIC receiverships. Also, in March 2023, Silvergate Bank announced plans to
wind down and liquidate its operations. Because these banks were perceived to be
the banks most open to providing services for the digital asset ecosystem in the
United States, their failures may impact the willingness of banks (based on
regulatory pressure or otherwise) to provide banking services to digital asset
market participants. In addition, because these banks were perceived to be the
banks most open to providing services for the digital asset ecosystem, their
failure has caused a number of companies that provide digital asset-related
services to be unable to find banks that are willing to provide them with such
banking services. The inability to access banking services could negatively
impact digital asset market participants and therefore the value of digital
assets, including SUI, and thus the Shares. In addition, although these events
did not have an impact directly on the Trust or the Sponsor when these bank
failures occurred, it is possible that a future closing of a bank with which the
Trust or the Sponsor has a financial relationship could subject the Trust or the
Sponsor to adverse conditions and pose challenges in finding an alternative
suitable bank to provide the Trust or the Sponsor with bank accounts and banking
services. Events such as these that impact the wider digital asset ecosystem are
continuing to develop and change at a rapid pace and it is not possible to
predict at this time all of the risks that they may pose to the Sponsor, the
Trust, their affiliates and/or the Trust’s third-party service providers, or on
the digital asset industry as a whole.
Continued
disruption and instability in the digital asset markets as these events develop,
including declines in the trading prices and liquidity of SUI, or the failure of
service providers to the Trust, could have a material adverse effect on the
value of the Shares and the Shares could lose all or substantially all of their
value.
The
value of the Shares relates directly to the value of SUI, the value of which may
be highly volatile and subject to fluctuations due to a number of
factors.
The
value of the Shares relates directly to the value of the SUI held by the Trust
and fluctuations in the price of SUI could adversely affect the value of the
Shares. The market price of SUI may be highly volatile, and subject to a number
of factors, including:
•
an
increase in the global SUI supply that is publicly available for trading;
•
manipulative
trading activity on Digital Asset Trading Platforms, which, in many cases, are
largely unregulated;
•
the
adoption of SUI as a medium of exchange, store-of-value or other consumptive
asset and the maintenance and development of the open-source software protocol
of the Sui Network;
•
forks
in the Sui Network;
•
investors’
expectations with respect to interest rates, the rates of inflation of fiat
currencies or SUI, and Digital Asset Trading Platform rates;
•
consumer
preferences and perceptions of SUI specifically and digital assets generally;
•
fiat
currency withdrawal and deposit policies on Digital Asset Trading Platforms;
•
the
liquidity of Digital Asset Markets and any increase or decrease in trading
volume on Digital Asset Markets;
•
investment
and trading activities of large investors that invest directly or indirectly in
SUI;
•
a
“short squeeze” resulting from speculation on the price of SUI, if aggregate
short exposure exceeds the number of Shares available for
purchase;
•
an
active derivatives market for SUI or for digital assets
generally;
•
a
final determination that SUI is a security or changes in SUI’s status under the
federal securities laws;
•
monetary
policies of governments, trade restrictions, currency devaluations and
revaluations and regulatory measures or enforcement actions, if any, that
restrict the use of SUI as a form of payment or the purchase of SUI on the
Digital Asset Markets;
•
global
or regional political, economic or financial conditions, events and situations,
such as the novel coronavirus outbreak;
•
fees
associated with processing a SUI transaction and the speed at which transactions
are settled on the Sui Network;
•
interruptions
in service from or closures or failures of major Digital Asset Trading
Platforms;
•
decreased
confidence in Digital Asset Trading Platforms due to the largely unregulated
nature and lack of transparency surrounding the operations of Digital Asset
Trading Platforms;
•
increased
competition from other forms of digital assets or payment services;
and
•
the
Trust’s own acquisitions or dispositions of SUI, since there is no limit on the
amount of SUI that the Trust may acquire.
In
addition, there is no assurance that SUI will maintain its value in the long or
intermediate term. In the event that the price of SUI declines, the Sponsor
expects the value of the Shares to decline proportionately. The value of SUI as
represented by the Index Price or by the Trust’s principal market may also be
subject to momentum pricing due to speculation regarding future appreciation in
value, leading to greater volatility that could adversely affect the value of
the Shares. Momentum pricing typically is associated with growth stocks and
other assets whose valuation, as determined by the investing public, accounts
for future appreciation in value, if any. The Sponsor believes that momentum
pricing of SUI has resulted, and may continue to result, in speculation
regarding future appreciation in the value of SUI, inflating and making the
Index Price more volatile. As a result, SUI may be more likely to fluctuate in
value due to changing investor confidence, which could impact future
appreciation or depreciation in the Index Price and could adversely affect the
value of the Shares.
Due
to the largely unregulated nature and lack of transparency surrounding the
operations of Digital Asset Trading Platforms, they may experience fraud, market
manipulation, business failures, security failures or operational problems,
which may adversely affect the value of SUI and, consequently, the value of the
Shares.
Digital
Asset Trading Platforms are relatively new and, in many ways, are not subject
to, or may not comply with, regulation in relevant jurisdictions in a manner
similar to other regulated trading platforms, such as national securities
exchanges or designated contract markets. While many prominent Digital Asset
Trading Platforms provide the public with significant information regarding
their on-chain activities, ownership structure, management teams, corporate
practices, cybersecurity practices and regulatory compliance, many other Digital
Asset Trading Platforms do not provide this information. Furthermore, while
Digital Asset Trading Platforms are and may continue to be subject to federal
and state licensing requirements in the United States, Digital Asset Trading
Platforms do not currently appear to be subject to 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 Digital Asset Trading Platforms, including prominent trading
platforms that handle a significant volume of SUI
trading.
Many
Digital Asset Trading Platforms, both in the United States and abroad, are
unlicensed, not subject to, or not in compliance with, regulation in relevant
jurisdictions, or operate without extensive supervision by governmental
authorities. In particular, those located outside the United States may be
subject to significantly less stringent regulatory and compliance requirements
in their local jurisdictions and may take the position that they are not subject
to laws and regulations that would apply to a national securities exchange or
designated contract market in the United States, or may, as a practical matter,
be beyond the ambit of U.S. regulators. As a result, trading activity on or
reported by these Digital Asset Trading Platforms is generally significantly
less regulated than trading activity on or reported by regulated U.S. securities
and commodities markets, and may reflect behavior that would be prohibited in
regulated U.S. trading venues. For example, in 2022 one report claimed that
trading volumes on Digital Asset Trading Platforms were inflated by over 70% due
to false or non-economic trades, with specific focus on unlicensed trading
platforms located outside of the United States. Such reports may indicate that
the Digital Asset Trading Platform Market is significantly smaller than expected
and that the U.S. makes up a significantly larger percentage of the Digital
Asset Trading Platform Market than is commonly understood, or that a much larger
portion of digital asset market activity takes place on decentralized finance
platforms than is commonly understood. Nonetheless, any actual or perceived
false trading in the Digital Asset Trading Platform Market, and any other
fraudulent or manipulative acts and practices, could adversely affect the value
of SUI
and/or negatively affect the market perception of SUI,
which could in turn adversely impact the value of the Shares.
The
SEC has also identified possible sources of fraud and manipulation in the
Digital Asset Markets generally, including, among others (1) “wash-trading”; (2)
persons with a dominant position in a digital asset manipulating pricing in such
digital asset; (3) hacking of the underlying digital asset network and trading
platforms; (4) malicious control of the underlying digital asset network; (5)
trading based on material, non-public information (for example, plans of market
participants to significantly increase or decrease their holdings in a digital
asset, new sources of demand for a digital asset) or based on the dissemination
of false and misleading information; (6) manipulative activity involving
purported “stablecoins,” including Tether; and (7) fraud and manipulation at
Digital Asset Markets. The use or presence of such acts and practices in the
Digital Asset Markets could, for example, falsely inflate the volume of
SUI
present in the Digital Asset Markets or cause distortions in the price of
SUI,
among other things that could adversely affect the Trust or cause losses to
shareholders. Moreover, 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 Markets, or
may not exist at all. Many Digital Asset Markets also 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 SUI
on Digital Asset Markets may be subject to larger and/or more frequent sudden
declines than assets traded on more traditional exchanges.
In
addition, over the past several years, some Digital Asset Trading Platforms have
been closed, been subject to criminal and civil litigation and have entered into
bankruptcy proceedings due to fraud and manipulative activity, business failure
and/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. In some instances, customers are made whole only in dollar
terms as of the Digital Asset Trading Platform’s date of failure, rather than on
a digital asset basis, meaning customers may still lose out on any price
increase in digital assets.
While
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. For example, in February 2025,
hackers reportedly compromised a transaction from Bybit’s multisignature cold
wallets, enabling the hackers to steal over $1.5 billion of ETH from Bybit.
Shortcomings or ultimate failures of larger Digital Asset Trading Platforms are
more likely to have contagion effects on the digital asset ecosystem, and
therefore may also be more likely to be targets of regulatory enforcement
action. For example, in November 2022, FTX, another of the world’s largest
Digital Asset Trading Platforms, filed for bankruptcy protection and
subsequently halted customer withdrawals as well as trading on its FTX.US
platform. Fraud, security failures and operational problems all played a role in
FTX’s issues and downfall. Moreover, Digital Asset Trading Platforms have been a
subject of enhanced regulatory and enforcement scrutiny, and Digital Asset
Markets have experienced continued instability, following the failure of FTX. In
particular, in June 2023, the SEC brought the Binance Complaint and Coinbase
Complaint, alleging that Binance and Coinbase operated unregistered securities
exchanges, brokerages and clearing agencies. In addition, in November 2023, the
SEC brought the Kraken Complaint, alleging that Kraken operated as an
unregistered securities exchange, brokerage and clearing agency. Between
February 2025 and May 2025, the SEC entered into court-approved joint
stipulations to dismiss each of the Binance Complaint, Coinbase Complaint and
the Kraken Complaint. The SEC has terminated its investigation or enforcement
action into many other digital asset market participants as well.
Negative
perception, a lack of stability and standardized regulation in the Digital Asset
Markets and/or the closure or temporary shutdown of Digital Asset Trading
Platforms due to fraud, business failure, security breaches or government
mandated regulation, and associated losses by customers, may reduce confidence
in the Sui Network and result in greater volatility in the prices of
SUI.
Furthermore, the closure or temporary shutdown of a Digital Asset Trading
Platform used in calculating the Index Price may result in a loss of confidence
in the Trust’s ability to determine its NAV on a daily basis. These potential
consequences of such a Digital Asset Trading Platform’s failure could adversely
affect the value of the Shares.
Digital
Asset Trading Platforms may be exposed to front-running.
Digital
Asset Trading Platforms may be susceptible to “front-running,” which refers to
the process when someone uses technology or market advantage to get prior
knowledge of upcoming transactions. Front-running is a frequent activity on
centralized as well as decentralized trading 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 introduced these transactions. The objective of a front runner
is to buy tokens at a low price and later sell them at a higher price while
simultaneously exiting the position. To the extent that front-running occurs, it
may result in investor frustrations and concerns as to the price integrity of
Digital Asset Trading Platforms and digital assets more generally.
Digital
Asset Trading Platforms may be exposed to wash-trading.
Digital
Asset Trading Platforms 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 non-economic reasons, such as a desire for increased visibility on popular
websites that monitor markets for digital assets so as to improve a trading
platform’s attractiveness to investors who look for maximum liquidity, or it may
be motivated by the ability to attract listing fees from token issuers who seek
the most liquid and high-volume trading platforms on which to list their tokens.
Results of wash-trading may include unexpected obstacles to trade and erroneous
investment decisions based on false information.
Even
in the United States, there have been allegations of wash-trading even on
regulated venues. Any actual or perceived false trading on Digital Asset Trading
Platforms, and any other fraudulent or manipulative acts and practices, could
adversely affect the value of SUI
and/or negatively affect the market perception of SUI.
To
the extent that wash-trading either occurs or appears to occur in Digital Asset
Trading Platforms, investors may develop negative perceptions about SUI
and the digital assets industry more broadly, which could adversely impact the
price of SUI
and,
therefore,
the price of the Shares. Wash-trading also may place more legitimate Digital
Asset Trading Platforms at a relative competitive disadvantage.
The
lack of active trading markets for the Shares may result in losses on investors’
investments at the time of disposition of Shares.
Although
the Shares are qualified for public trading on OTCQX and are expected to be
publicly listed and traded on the NYSE Arca, there can be no guarantee that an
active trading market for the Trust will continue to develop or be maintained.
If shareholders need to sell their Shares at a time when no active market for
them exists, the price shareholders receive for their Shares, assuming they are
able to sell them, likely will be lower than the price that shareholders would
receive if an active market did exist and, accordingly, a shareholder may suffer
losses.
Possible
illiquid markets may exacerbate losses or increase the variability between the
Trust’s NAV and its market price.
SUI
is a novel asset with a limited trading history. Therefore, the markets for
SUI
may be less liquid and more volatile than other markets for more established
products, such as futures contracts for traditional physical commodities. It may
be difficult to execute a SUI
trade at a specific price when there is a relatively small volume of buy and
sell orders in the SUI
market. A market disruption can also make it more difficult to liquidate a
position or find a suitable counterparty at a reasonable cost.
Market
illiquidity may cause losses for the Trust. The large size of the positions that
the Trust may acquire could increase the risk of illiquidity, by both making the
positions more difficult to liquidate and increasing the losses incurred while
trying to do so, should the Trust need to liquidate its SUI.
Any type of disruption or illiquidity will potentially be exacerbated due to the
fact that the Trust will only invest in SUI,
which is highly concentrated.
As
of the date of this prospectus, the total market value of the SUI
circulating supply is approximately $6.2 billion, comprised of approximately 3.7
billion SUI.
On average over the last 30 days, over any given 24-hour period, the reported
global SUI
trading volume was approximately
$420.3 million.
The
Index has a limited history and a failure of the Index Price could adversely
affect the value of the Shares.
The
Index has a limited history and the Index Price is a composite reference rate
calculated using trading price data from various Digital Asset Trading Platforms
chosen by the Index Provider. The Digital Asset Trading Platforms chosen by the
Index Provider have also changed over time. The Index Provider may remove or add
Digital Asset Trading Platforms to the Index in the future at its discretion.
For more information on the inclusion criteria for Digital Asset Trading
Platforms in the Index, see “Business—Overview of the Sui Industry and
Market—The Index and the Index Price.”
Although
the Index is designed to accurately capture the market price of SUI, third
parties may be able to purchase and sell SUI on public or private markets not
included among the constituent Digital Asset Trading Platforms of the Index, and
such transactions may take place at prices materially higher or lower than the
Index Price. Moreover, there may be variances in the prices of SUI on the
various Digital Asset Trading Platforms, including as a result of differences in
fee structures or administrative procedures on different Digital Asset Trading
Platforms. For example, based on data provided by the Index Provider, on any
given day during the twelve months ended September 30, 2025, the maximum
differential between the 4:00 p.m., New York time spot price of any single
Digital Asset Trading Platform included in the Index and the Index Price was
2.49% and the average of the maximum differentials of the 4:00 p.m., New York
time, spot price of each Digital Asset Trading Platform included in the Index
and the Index Price was 2.33%. During this same period, the average differential
between the 4:00 p.m., New York time, spot prices of all the Digital Asset
Trading Platforms included in the Index and the Index Price was 0.001%. All
Digital Asset Trading Platforms that were included in the Index throughout the
period were considered in this analysis. To the extent such prices differ
materially from the Index Price, investors may lose confidence in the Shares’
ability to track the market price of SUI, which could adversely affect the value
of the Shares.
The
Index Price used to calculate the value of the Trust’s SUI may be volatile, and
purchasing and selling activity in the Digital Asset Markets associated with
Basket creations and redemptions may affect the Index Price and Share trading
prices, adversely affecting the value of the Shares.
The
price of SUI on public Digital Asset Trading Platforms has a very limited
history, and during this history, SUI prices on the Digital Asset Markets more
generally, and on Digital Asset Trading Platforms individually, have been
volatile and subject to influence by many factors, including operational
interruptions. While the Index is designed to limit exposure to the interruption
of individual Digital Asset Trading Platforms, the Index Price, and the price of
SUI generally, remain subject to volatility experienced by Digital Asset Trading
Platforms, and such volatility could adversely affect the value of the Shares.
For example, since the commencement of the Trust’s operations, the Index Price
ranged from $0.53 to $5.23, with the straight average being $2.95 through
September 30, 2025. In addition, during the twelve months ended September 30,
2025, the Index Price ranged from $1.67 to $5.23. The Sponsor has not observed a
material difference between the Index Price and average prices from the
constituent Digital Asset Trading Platforms
individually
or as a group. The price of SUI more generally has experienced volatility
similar to the Index Price during these periods. See “Business—Overview of the
Sui Industry and Market—Historical NAV and SUI Prices.”
Furthermore,
because the number of Digital Asset Trading Platforms is limited, the Index will
necessarily be comprised of a limited number of Digital Asset Trading Platforms.
If a Digital Asset Trading Platform were subjected to regulatory, volatility or
other pricing issues, the Index Provider would have limited ability to remove
such Digital Asset Trading Platform from the Index, which could skew the price
of SUI as represented by the Index. Trading on a limited number of Digital Asset
Trading Platforms may result in less favorable prices and decreased liquidity of
SUI and, therefore, could have an adverse effect on the value of the
Shares.
Purchasing
activity associated with acquiring SUI required for the creation of Baskets may
increase the market price of SUI on the Digital Asset Markets, which will result
in higher prices for the Shares. Alternatively, selling activity associated with
sales of SUI withdrawn from the Trust in connection with the redemption of
Baskets may decrease the market price of SUI on the Digital Asset Markets, which
will result in lower prices for the Shares. Increases or decreases in the market
price of SUI may also occur as a result of the purchasing or selling activity of
other market participants. Other market participants may attempt to benefit from
an increase or decrease in the market price of SUI that may result from
increased purchasing or selling activity of SUI connected with the creation or
redemption of Baskets. Consequently, the market price of SUI may decline
immediately after Baskets are created. Decreases in the market price of SUI may
also occur as a result of sales in Secondary Markets by other market
participants. If the Index Price declines, the value of the Shares will
generally also decline.
Competition
from the emergence or growth of other digital assets could have a negative
impact on the price of SUI and adversely affect the value of the
Shares.
As
of September
30, 2025,
SUI was the fifteenth largest digital asset by market capitalization, as tracked
by CoinMarketCap.com. As of September 30, 2025, the digital assets tracked by
CoinMarketCap.com had a total market capitalization of approximately $3,632.7
billion (including the approximately $11.6 billion market cap of SUI), as
calculated using market prices and total available supply of each digital asset,
excluding stablecoins and tokens pegged to other assets. SUI faces competition
from a wide range of digital assets, including Bitcoin and Ether. Many
consortiums and financial institutions are also researching and investing
resources into private or permissioned blockchain platforms rather than open
platforms like the Sui Network. In addition, SUI is supported by fewer trading
platforms than more established digital assets, such as Bitcoin and Ether, which
could impact its liquidity. In addition, the Sui Network is in direct
competition with other smart contract platforms, such as the Ethereum, Polkadot,
Avalanche and Cardano networks. Competition from the emergence or growth of
alternative digital assets or other smart contract platforms could have a
negative impact on the demand for, and price of, SUI, and thereby adversely
affect the value of the Shares.
Investors
may also invest in SUI through means other than the Shares, including through
direct investments in SUI and other financial vehicles, including securities
backed by or linked to SUI and digital asset financial vehicles similar to the
Trust. In particular, the Trust and the Sponsor face competition with respect to
the creation of competing exchange-traded spot SUI products, among other digital
asset vehicles, several of which have applications pending before the SEC or
that have already received SEC approval. The SEC and CFTC have also issued a
joint staff statement providing the respective staffs’ view, that current law
does not prohibit SEC-or CFTC-registered exchanges from facilitating trading of
certain spot crypto asset products, which may expose the Trust to additional
types of competition. Whether the Trust is successful in maintaining its scale
and achieving its intended competitive position may be impacted by a range of
factors, including the Trust’s timing in entering the market relative to
competing spot SUI exchange-traded products, its fee structure relative to those
competing products and potentially new platforms for investing in SUI. The
Trust’s competitors may offer a more liquid secondary market for their shares,
and/or may charge a substantially lower fee than the Sponsor’s Fee or expense
ratio now or in the future. If the Trust fails to continue to maintain or grow
sufficient scale due to competition, the Sponsor may have difficulty raising
sufficient revenue to cover the costs associated with maintaining the Trust and
such shortfalls could impact the Sponsor’s ability to properly invest in robust
ongoing operations and controls of the Trust to minimize the risk of operating
events, errors, or other forms of losses to the shareholders. Furthermore, the
Trust may fail to continue to attract adequate liquidity in the secondary market
due to such competition, resulting in a small number of Authorized Participants
willing to make a market in the Shares, which in turn could result in the Shares
trading at a significant premium or discount for extended periods. Likewise,
market and financial conditions, and other conditions beyond the Sponsor’s
control, may make it more attractive to gain exposure to SUI through other
vehicles, rather than the Trust.
In
addition, to the extent digital asset financial vehicles other than the Trust
tracking the price of SUI
are formed and represent a significant proportion of the demand for SUI, large
purchases or redemptions of the securities of these digital asset financial
vehicles, or private funds holding SUI, could negatively affect the Index Price,
the NAV, the NAV per Share, the value of the Shares, the Principal Market NAV
and the Principal Market NAV per Share. Accordingly, there can be no assurance
that the Trust will be able to maintain its scale and achieve its intended
competitive positioning relative to competitors, which could adversely affect
the performance of the Trust and the value of the Shares.
Congestion
or delay on the Sui Network may delay purchases or sales of SUI by the
Trust.
Increased
transaction volume could result in delays in the recording of transactions due
to network congestion. Moreover, unforeseen system failures, disruptions in
operations, or poor connectivity may also result in delays in the recording of
transactions on the Sui Network.
Any
such delays could affect an Authorized Participant’s ability to buy or sell SUI
at an advantageous price resulting in decreased confidence in the Sui Network.
Over the longer term, delays in confirming transactions could reduce the
attractiveness to merchants and other commercial parties as a means of payment.
As a result, the Sui Network and the value of the Trust would be adversely
affected.
The
SEC has approved generic listing standards for commodity-based trust shares and
may approve other applications under Rule 19b-4 of the Exchange Act to list
competing digital assets as exchange-traded products, which could reduce demand
for, and the price of, SUI and adversely impact the value of the
Shares.
To
date, the SEC has approved applications under Rule 19b-4 of the Exchange Act to
list spot digital asset exchange-traded products which hold Bitcoin and Ether as
well as generic listing standards for commodity-based trust shares holding
digital assets. To the extent competing digital asset exchange-traded products,
other than those which hold SUI,
come to represent a significant proportion of the demand for digital assets
generally, demand for, and the price of, SUI
could be reduced. Such reduced demand could in turn negatively affect the Index
Price, the NAV, the NAV per Share, the value of the Shares, the Principal Market
NAV and the Principal Market NAV per Share. Accordingly, there can be no
assurance that the Trust will be able to maintain its scale and achieve its
intended competitive positioning relative to competitors, which could adversely
affect the performance of the Trust and the value of the Shares.
Competition
from central bank digital currencies (“CBDCs”) and emerging payments initiatives
involving financial institutions could adversely affect the price of SUI and
other digital assets.
Central
banks in various countries have introduced digital forms of legal tender
(“CBDCs”). China’s CBDC project, known as Digital Currency Electronic Payment,
has reportedly been tested in a live pilot program conducted in multiple cities
in China. Central banks representing at least 130 countries have published
retail or wholesale CBDC work ranging from research to pilot projects. Whether
or not they incorporate blockchain or similar technology, CBDCs, as legal tender
in the issuing jurisdiction, could have an advantage in competing with, or
replace, SUI
and other cryptocurrencies as a medium of exchange or store of value. Central
banks and other governmental entities have also announced cooperative
initiatives and consortia with private sector entities, with the goal of
leveraging blockchain and other technology to reduce friction in cross-border
and interbank payments and settlement, and commercial banks and other financial
institutions have also recently announced a number of initiatives of their own
to incorporate new technologies, including blockchain and similar technologies,
into their payments and settlement activities, which could compete with, or
reduce the demand for, SUI.
As a result of any of the foregoing factors, the price of SUI
could decrease, which could adversely affect an investment in the
Trust.
Prices
of SUI may be affected due to stablecoins (including Tether and USDC), the
activities of stablecoin issuers and their regulatory treatment.
While
the Trust does not invest in stablecoins, it may nonetheless be exposed to these
and other risks that stablecoins pose for the market for SUI
and other digital assets. Stablecoins are digital assets designed to have a
stable value over time as compared to typically volatile digital assets, and are
typically marketed as being pegged to the value of a referenced asset, normally
a fiat currency, such as the U.S. dollar. Although the prices of stablecoins are
intended to be stable compared to their referenced asset, in many cases their
prices fluctuate, sometimes significantly. This volatility has in the past
impacted the prices of certain digital assets, and has at times caused certain
stablecoins to lose their “peg” to the underlying fiat currency. Stablecoins are
a relatively new phenomenon, and it is impossible to know all of the risks that
they could pose to participants in the digital asset markets. In addition, some
have argued that some stablecoins, particularly Tether, are improperly issued
without sufficient backing in a way that could cause artificial rather than
genuine demand for digital assets, raising their prices. Regulators have also
charged stablecoin issuers with violations of law or otherwise required certain
stablecoin issuers to cease certain operations. For example, on February 17,
2021 the New York Attorney General entered into an agreement with Tether’s
operators, requiring them to cease any further trading activity with New York
persons and pay $18.5 million in penalties for false and misleading statements
made regarding the assets backing Tether. On October 15, 2021, the CFTC
announced a settlement with Tether’s operators in which they agreed to pay $42.5
million in fines to settle charges that, among others, Tether’s claims that it
maintained sufficient U.S. dollar reserves to back every Tether stablecoin in
circulation with the “equivalent amount of corresponding fiat currency” held by
Tether were untrue.
USDC
is a reserve-backed stablecoin issued by Circle Internet Financial that is
commonly used as a method of payment in digital asset markets, including the
SUI
market. The issuer of USDC uses the Circle Reserve Fund to hold cash, U.S.
Treasury bills, notes and other obligations issued or guaranteed as to principal
and interest by the U.S. Treasury, and repurchase agreements secured by
such
obligations
or cash, which serve as reserves backing USDC stablecoins. While USDC is
designed to maintain a stable value at 1 U.S. dollar at all times, on March 10,
2023, the value of USDC fell below $1.00 (and remained below for multiple days)
after Circle Internet Financial disclosed that $3.3 billion of the USDC reserves
were held at Silicon Valley Bank, which had entered FDIC receivership earlier
that day. Popular stablecoins are reliant on the U.S. banking system and U.S.
treasuries, and the failure of either to function normally could impede the
function of stablecoins or lead to outsized redemption requests, and therefore
could adversely affect the value of the Shares.
Given
the role that stablecoins play in global digital asset markets, their
fundamental liquidity can have a dramatic impact on the broader digital asset
market, including the market for SUI.
Because a large portion of the digital asset market still depends on stablecoins
such as Tether and USDC, there is a risk that a disorderly de-pegging or a run
on Tether or USDC could lead to dramatic market volatility in, and/or materially
and adversely affect the prices of, digital assets more broadly.
Volatility
in stablecoins, operational issues with stablecoins (for example, technical
issues that prevent settlement), concerns about the sufficiency of any reserves
that support stablecoins, or regulatory concerns about stablecoin issuers or
intermediaries, such as Bitcoin spot markets, that support stablecoins, could
impact individuals’ willingness to trade on trading venues that rely on
stablecoins and could impact the price of SUI,
and in turn, an investment in the Shares.
Risk
Factors Related to the Trust and the Shares
The
Trust relies on third-party service providers to perform certain functions
essential to the affairs of the Trust and the replacement of such service
providers could pose a challenge to the safekeeping of the Trust’s SUI and to
the operations of the Trust.
The
Trust relies on the Custodian and the Prime Broker (together, the “Custodial
Entities”), the Authorized Participants and other third-party service providers
to perform certain functions essential to managing the affairs of the Trust. In
addition, Liquidity Providers are relied upon to facilitate the purchase and
sale of SUI
in connection with creations and redemptions of Shares in cash (“Cash Orders”),
and the Transfer Agent and Grayscale Investments Sponsors, LLC (in such
capacity, the “Liquidity Engager”) are relied upon to facilitate such Cash
Orders. Any disruptions to a service provider’s business operations, resulting
from business failures, financial instability, security failures, government
mandated regulation or operational problems, could have an adverse impact on the
Trust’s ability to access critical services and be disruptive to the operations
of the Trust and require the Sponsor or the Liquidity Engager, as the case may
be, to replace such service provider. Moreover, the Sponsor could decide to
replace a service provider to the Trust, or the Liquidity Engager may decide to
replace a Liquidity Provider, for other reasons.
If
the Sponsor decides, or is required, to replace Coinbase Custody Trust Company,
LLC as the custodian of the Trust’s SUI
or
Coinbase, Inc. as the prime broker controlling and securing the Trust’s
Settlement Balance, transfer of the respective maintenance responsibilities of
the Vault Balance or the Settlement Balance to another party or parties will
likely be complex and could subject the Trust’s SUI
to the risk of loss during the transfer, which could have a negative impact on
the performance of the Shares or result in loss of the Trust’s
assets.
Moreover,
the legal rights of customers with respect to digital assets held on their
behalf by a third-party custodian, such as the Custodial Entities, in insolvency
proceedings are currently uncertain. The Prime Broker Agreement contains an
agreement by the parties to treat the digital assets credited to the Trust’s
Vault Balance and Settlement Balance as financial assets under Article 8 in
addition to stating that the Custodian will serve as fiduciary and custodian on
the Trust’s behalf with respect to the Trust’s SUI
held in the Vault Balance, and that any SUI
credited to the Settlement Balance will be treated as custodial
assets.
The
Custodial Entities’ parent, Coinbase Global, Inc. (“Coinbase Global”), has also
stated in public securities filings that in light of the inclusion of provisions
relating to Article 8 in its custody and prime broker client agreements, it
believes that a court would not treat custodied digital assets as part of its
general estate in the event the Custodial Entities were to experience
insolvency. However, 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. Moreover, the Custodian and the Prime Broker are potentially
subject to different insolvency regimes and there is no assurance that the
digital assets credited to the Trust’s Settlement Balance would be treated
similarly to those credited to the Trust’s Vault Balance in an insolvency,
notwithstanding the rights and obligations conferred under the Prime Broker
Agreement or Coinbase Global’s views regarding the treatment of such assets
under Article 8. In the event that the Custodian or the Prime Broker and/or
Coinbase Global became subject to insolvency proceedings and a court were to
rule that the custodied digital assets were part of the Custodian’s the Prime
Broker’s and/or Coinbase Global’s general estate and not the property of the
Trust, then the Trust would be treated as a general unsecured creditor in such
insolvency proceedings and the Trust would be subject to the loss of all or a
significant portion of its assets.
In
addition, the Custodian is a fiduciary under § 100 of the New York Banking Law
and a qualified custodian for purposes of Rule 206(4)-2(d)(6) under the
Investment Advisers Act and is licensed to custody the Trust’s SUI
in trust on the Trust’s behalf. However, the SEC has released proposed
amendments to Rule 206(4)-2 that, if enacted as proposed, would amend the
definition of a “qualified custodian” under Rule 206(4)-2(d)(6). Executive
officers of the Custodian’s parent company have made public statements
indicating that the Custodian will remain a qualified custodian under the
proposed SEC rule, if enacted as currently proposed. However, there can be no
assurance that the Custodian would continue to qualify as a “qualified
custodian” under a final rule.
To
the extent that Sponsor is not able to find a suitable party willing to serve as
custodian, the Sponsor may be required to terminate the Trust and liquidate the
Trust’s SUI.
In addition, to the extent that the Sponsor finds a suitable party and must
enter into a modified or separate custody agreement that is less favorable for
the Trust or Sponsor and/or transfer the Trust’s assets in a relatively short
time period, the safekeeping of the Trust’s SUI
may be adversely affected, which may in turn adversely affect value of the
Shares. Likewise, if the Sponsor is required to replace any other service
provider, they may not be able to find a party willing to serve in such capacity
in a timely manner or at all. If the Sponsor decides, or is required, to replace
an Authorized Participant and/or if the Liquidity Engager decides, or is
required, to replace a Liquidity Provider, this could negatively impact the
Trust’s ability to create new Shares, which would impact the Shares’ liquidity
and could have
a negative impact on the value of the Shares.
The
amount of the Trust’s assets represented by each Share will decline over time as
the Trust pays the Sponsor’s Fee and Additional Trust Expenses, and as a result,
the value of the Shares may decrease over time.
The
Sponsor’s Fee accrues daily in U.S. dollars at an annual rate based on the NAV
Fee Basis Amount, which is based on the NAV of the Trust, and is paid to the
Sponsor in SUI.
See “Business—Expenses; Sales of SUI—Disposition
of SUI”
and “Business—Expenses; Sales of SUI—Hypothetical
Expense Example.” As a result, the amount of Trust’s assets represented by each
Share declines as the Trust pays the Sponsor’s Fee (or sells SUI
in order to raise cash to pay any Additional Trust Expenses), which may cause
the Shares to decrease in value over time or dampen any increase in
value.
The
value of the Shares may be influenced by a variety of factors unrelated to the
value of SUI.
The
value of the Shares may be influenced by a variety of factors unrelated to the
price of SUI
and the Digital Asset Trading Platforms included in the Index that may have an
adverse effect on the value of the Shares. These factors include the following
factors:
•
Unanticipated
problems or issues with respect to the mechanics of the Trust’s operations and
the trading of the Shares may arise, in particular due to the fact that the
mechanisms and procedures governing the creation and offering of the Shares and
storage of SUI are relatively novel;
•
The
Trust could experience difficulties in operating and maintaining its technical
infrastructure, including in connection with expansions or updates to such
infrastructure, which are likely to be complex and could lead to unanticipated
delays, unforeseen expenses and security vulnerabilities;
•
The
Trust could experience unforeseen issues relating to the performance and
effectiveness of the security procedures used to protect the Vault Balance, or
the security procedures may not protect against all errors, software flaws or
other vulnerabilities in the Trust’s technical infrastructure, which could
result in theft, loss or damage of its assets; or
•
Although
the Sui Network does not have any privacy enhancing features at this time, if
any such features are introduced to the Sui Network in the future, service
providers may decide to terminate their relationships with the Trust due to
concerns that the introduction of privacy enhancing features to the Sui Network
may increase the potential for SUI to be used to facilitate crime, exposing such
service providers to potential reputational harm.
Any
of these factors could affect the value of the Shares, either directly or
indirectly through their effect on the Trust’s assets.
Shareholders
do not have the protections associated with ownership of shares in an investment
company registered under the Investment Company Act or the protections afforded
by the CEA.
The
Investment Company Act is designed to protect investors by preventing insiders
from managing investment companies to their benefit and to the detriment of
public investors, such as: the issuance of securities having inequitable or
discriminatory provisions; the management of investment companies by
irresponsible persons; the use of unsound or misleading methods of computing
earnings and asset value; changes in the character of investment companies
without the consent of investors; and investment companies from engaging in
excessive leveraging. To accomplish these ends, the Investment Company Act
requires the safekeeping and proper valuation of fund assets, restricts greatly
transactions with affiliates, limits leveraging, and imposes governance
requirements as a check on fund management.
The
Trust is not a registered investment company under the Investment Company Act,
and the Sponsor believes that the Trust is not required to register under such
act. Consequently, shareholders do not have the regulatory protections provided
to investors in investment companies.
The
Trust will not hold or trade in commodity interests regulated by the CEA, as
administered by the CFTC. Furthermore, the Sponsor believes that the Trust is
not a commodity pool for purposes of the CEA, and that neither the Sponsor nor
the Trustee is subject to regulation by the CFTC as a commodity pool operator or
a commodity trading adviser in connection with the operation of the Trust.
Consequently, shareholders will not have the regulatory protections provided to
investors in CEA-regulated instruments or commodity pools.
As
the Sponsor and its management have limited history of operating investment
vehicles like the Trust, their experience may be inadequate or unsuitable to
manage the Trust.
The
past performances of the Sponsor’s management in other investment vehicles,
including their experiences in the digital asset and venture capital industries,
are no indication of their ability to manage an investment vehicle such as the
Trust. If the experience of the Sponsor and its management is inadequate or
unsuitable to manage an investment vehicle such as the Trust, the operations of
the Trust may be adversely affected.
Furthermore,
the Sponsor is currently engaged in the management of other investment vehicles
which could divert their attention and resources. If the Sponsor were to
experience difficulties in the management of such other investment vehicles that
damaged the Sponsor or its reputation, it could have an adverse impact on the
Sponsor’s ability to continue to serve as Sponsor for the Trust.
Security
threats to the Trust’s Vault Balance or Settlement Balance could result in the
halting of Trust operations, including the creation and redemption of Baskets,
and a loss of Trust assets or damage to the reputation of the Trust, each of
which could result in a reduction in the value of the Shares.
Security
breaches, computer malware and computer hacking attacks have been a prevalent
concern in relation to digital assets. The Sponsor believes that the Trust’s
SUI
held in the Vault Balance, as well as the Trust’s SUI
held temporarily in the Settlement Balance, will be an appealing target to
hackers or malware distributors seeking to destroy, damage or steal the Trust’s
SUI
and will only become more appealing as the Trust’s assets grow. To the extent
that the Trust, the Sponsor or the Custodial Entities are unable to identify and
mitigate or stop new security threats or otherwise adapt to technological
changes in the digital asset industry, the Trust’s SUI
may be subject to theft, loss, destruction or other attack.
The
Sponsor believes that the security procedures in place for the Trust, including,
but not limited to, offline storage, or cold storage, for a substantial portion
of the Trust’s SUI,
multiple encrypted private key “shards”, usernames, passwords and 2-step
verification, are reasonably designed to safeguard the Trust’s SUI.
Nevertheless, the security procedures cannot guarantee the prevention of any
loss due to a security breach, software defect or act of God that may be borne
by the Trust. Additionally, because a portion of the Trust’s SUI
from time to time will be held in hot storage, such SUI
will be more vulnerable to a potential hack or other cyberattack that could lead
to a loss of Trust assets.
The
security procedures and operational infrastructure may be breached due to the
actions of outside parties, error or malfeasance of an employee of the Sponsor,
a Custodial Entity, or otherwise, and, as a result, an unauthorized party may
obtain access to an Account, the relevant private keys (and therefore
SUI)
or other data of the Trust. Additionally, outside parties may attempt to
fraudulently induce employees of the Sponsor or a Custodial Entity to disclose
sensitive information in order to gain access to the Trust’s infrastructure. As
the techniques used to obtain unauthorized access, disable or degrade service,
or sabotage systems change frequently, or may be designed to remain dormant
until a predetermined event and often are not recognized until launched against
a target, the Sponsor and the Custodial Entities may be unable to anticipate
these techniques or implement adequate preventative measures. Moreover, the
Custodial Entities will not be liable for any claims or losses arising out of or
relating to the acts and/or omissions of any unauthorized third parties, except
to the extent such losses are caused by a Custodial Entity’s negligence, fraud
or willful misconduct.
An
actual or perceived breach of the accounts associated with the Trust’s Vault
Balance and Settlement Balance (the “Accounts”) could harm the Trust’s
operations, result in loss of the Trust’s assets, damage the Trust’s reputation
and negatively affect the market perception of the effectiveness of the Trust,
all of which could in turn reduce demand for the Shares, resulting in a
reduction in the value of the Shares. The Trust may also cease operations, the
occurrence of which could similarly result in a reduction in the value of the
Shares.
SUI
transactions are irrevocable and stolen or incorrectly transferred SUI may be
irretrievable. As a result, any incorrectly executed SUI transactions could
adversely affect the value of the Shares.
SUI
transactions are typically not reversible without the consent and active
participation of the recipient of the transaction. Once a transaction has been
verified and recorded in a block that is added to the Blockchain, an incorrect
transfer or theft of SUI
generally will not be reversible and the Trust may not be capable of seeking
compensation for any such transfer or theft. Although the Trust’s transfers of
SUI
will regularly be made to or from the Vault Balance, it is possible that,
through computer or human error, or through theft or criminal action, the
Trust’s SUI
could be transferred from the Trust’s Vault Balance in incorrect amounts or to
unauthorized third parties, or to uncontrolled accounts.
Such
events have occurred in connection with digital assets in the past. To the
extent that the Trust is unable to seek a corrective transaction with such third
party or is incapable of identifying the third party which has received the
Trust’s SUI
through error or theft, the Trust will be unable to revert or otherwise recover
incorrectly transferred SUI.
The Trust will also be unable to convert or recover its SUI
transferred to uncontrolled accounts. To the extent that the Trust is unable to
seek redress for such error or theft, such loss could adversely affect the value
of the Shares.
The
lack of full insurance and shareholders’ limited rights of legal recourse
against the Trust, Trustee, Sponsor, Transfer Agent and Custodial Entities
expose the Trust and its shareholders to the risk of loss of the Trust’s SUI for
which no person or entity is liable.
The
Trust is not a banking institution or otherwise a member of the FDIC or
Securities Investor Protection Corporation (“SIPC”) and, therefore, deposits
held with or assets held by the Trust are not subject to the protections enjoyed
by depositors with FDIC or SIPC member institutions. In addition, neither the
Trust nor the Sponsor insure the Trust’s SUI.
While
the Custodian is required under the Prime Broker Agreement to maintain insurance
coverage that is commercially reasonable for the custodial services it provides,
and the Custodial Entities have advised the Sponsor that they maintain insurance
at commercially reasonable amounts for the digital assets custodied on behalf of
clients, including the Trust’s SUI,
resulting from theft, shareholders cannot be assured that the Custodian or the
Prime Broker will maintain adequate insurance or that such coverage will cover
losses with respect to the Trust’s SUI.
Moreover, while the Custodian maintains certain capital reserve requirements
depending on the assets under custody and to the extent required by applicable
law, and such capital reserves may provide additional means to cover client
asset losses, the Sponsor does not know the amount of such capital reserves, and
neither the Trust nor the Sponsor have access to such information. The Trust
cannot be assured that the Custodial Entities will maintain capital reserves
sufficient to cover losses with respect to the Trust’s digital assets.
Furthermore, Coinbase has represented in securities filings that the total value
of crypto assets in its possession and control is significantly greater than the
total value of insurance coverage that would compensate Coinbase in the event of
theft or other loss of funds.
Furthermore,
the Custodial Entities’ aggregate maximum liability with respect to breach of
their obligations under the Prime Broker Agreement will not exceed the greater
of: (i) the value of the SUI
or cash involved in the event, including but not limited to transaction(s) or
deliveries(s), giving rise to such liability at the time of the event giving
rise to such liability; (ii) the aggregate amount of fees paid by the Trust to
the Custodial Entities in respect of the Custodial and Prime Broker Services in
the 12-month period prior to the event giving rise to such liability; or (iii)
five million U.S. dollars. The Custodian’s total liability under the Prime
Broker Agreement will not exceed the greater of: (i) the aggregate amount of
fees paid by the Trust to the Custodian in respect of the custodial services in
the 12-month period prior to the event giving rise to such liability; or (ii)
the value of the SUI
on deposit in the Vault Balance at the time of the events giving rise to the
liability occurred, the value of which will be determined in accordance with the
Prime Broker Agreement.
In
addition, the Custodian’s maximum liability in respect of each cold storage
address that holds SUI
is limited to the “Cold Storage Threshold” of $100 million. The Sponsor monitors
the value of SUI
deposited in cold storage addresses for whether the Cold Storage Threshold has
been met by determining the U.S. dollar value of SUI
deposited in each cold storage address on business days. Although the Cold
Storage Threshold has never been met for a given cold storage address, to the
extent it is met the Trust would not have a claim against the Custodian with
respect to the digital assets held in such address to the extent the value
exceeds the Cold Storage Threshold. The Custodial Entities and the Trust are not
liable to each other for any special, incidental, indirect, punitive, or
consequential damages, whether or not the other party had been advised of such
losses or knew or should have known of the possibility of such
damages.
The
shareholders’ recourse against the Sponsor and the Trust’s other service
providers for the services they provide to the Trust, including those relating
to the provision of instructions relating to the movement of SUI,
is limited. Consequently, a loss may be suffered with respect to the Trust’s
SUI
that is not covered by insurance and for which no person is liable in damages.
As a result, the recourse of the Trust or the shareholders, under New York law,
is limited.
The
Trust may be required, or the Sponsor may deem it appropriate, to terminate and
liquidate at a time that is disadvantageous to shareholders.
Pursuant
to the terms of the Trust Agreement, the Trust is required to dissolve under
certain circumstances. In addition, the Sponsor may, in its sole discretion,
dissolve the Trust for a number of reasons, including if the Sponsor determines,
in its sole discretion, that it is desirable or advisable for any reason to
discontinue the affairs of the Trust. For example, the Sponsor expects that it
may be advisable to discontinue the affairs of the Trust if a federal court
upholds an allegation that SUI
is a security under the federal securities laws, among other reasons. See
“Business—Description of the Trust Agreement—Termination of the
Trust.”
If
the Trust is required to terminate and liquidate, or the Sponsor determines in
accordance with the terms of the Trust Agreement that it is appropriate to
terminate and liquidate the Trust, such termination and liquidation could occur
at a time that is disadvantageous to shareholders, such as when the Actual
Exchange Rate of SUI
is lower than the Index Price was at the time when shareholders purchased their
Shares. In such a case, when the Trust’s SUI
are sold as part of its liquidation, the resulting proceeds distributed to
shareholders will be less than if the Actual Exchange Rate were higher at the
time of sale. See “Business—Description of the Trust Agreement—Termination of
the Trust” for more information about the termination of the Trust, including
when the termination of the Trust may be triggered by events outside the direct
control of the Sponsor, the Trustee or the shareholders.
The
Trust Agreement includes provisions that limit shareholders’ voting rights and
restrict shareholders’ right to bring a derivative action.
Under
the Trust Agreement, shareholders have limited voting rights and the Trust will
not have regular shareholder meetings. Shareholders take no part in the
management or control of the Trust. Accordingly, shareholders do not have the
right to authorize actions, appoint service providers or take other actions as
may be taken by shareholders of other trusts or companies where shares carry
such rights. The shareholders’ limited voting rights give almost all control
under the Trust Agreement to the Sponsor and the Trustee. The Sponsor may take
actions in the operation of the Trust that may be adverse to the interests of
shareholders and may adversely affect the value of the Shares.
Moreover,
pursuant to the terms of the Trust Agreement, shareholders’ statutory right
under Delaware law to bring a derivative action (i.e., to initiate a lawsuit in
the name of the Trust in order to assert a claim belonging to the Trust against
a fiduciary of the Trust or against a third party when the Trust’s management
has refused to do so) is restricted. Under Delaware law, a shareholder may bring
a derivative action if the shareholder is a shareholder at the time the action
is brought and either (i) was a shareholder at the time of the transaction at
issue or (ii) acquired the status of shareholder by operation of law or the
Trust’s governing instrument from a person who was a shareholder at the time of
the transaction at issue. Additionally, Section 3816(e) of the Delaware
Statutory Trust Act specifically provides that a “beneficial owner’s right to
bring a derivative action may be subject to such additional standards and
restrictions, if any, as are set forth in the governing instrument of the
statutory trust, including, without limitation, the requirement that beneficial
owners owning a specified beneficial interest in the statutory trust join in the
bringing of the derivative action.” In addition to the requirements of
applicable law and in accordance with Section 3816(e), the Trust Agreement
provides that no shareholder will have the right, power or authority to bring or
maintain a derivative action, suit or other proceeding on behalf of the Trust
unless two or more shareholders who (i) are not “Affiliates” (as defined in the
Trust Agreement and below) of one another and (ii) collectively hold at least
10.0% of the outstanding Shares join in the bringing or maintaining of such
action, suit or other proceeding. This provision applies to any derivative
actions brought in the name of the Trust other than claims under the federal
securities laws and the rules and regulations thereunder.
Due
to this additional requirement, a shareholder attempting to bring or maintain a
derivative action in the name of the Trust will be required to locate other
shareholders with which it is not affiliated and that have sufficient Shares to
meet the 10.0% threshold based on the number of Shares outstanding on the date
the claim is brought and thereafter throughout the duration of the action, suit
or proceeding. This may be difficult and may result in increased costs to a
shareholder attempting to seek redress in the name of the Trust in court.
Moreover, if shareholders bringing a derivative action, suit or proceeding
pursuant to this provision of the Trust Agreement do not hold 10.0% of the
outstanding Shares on the date such an action, suit or proceeding is brought, or
such shareholders are unable to maintain Share ownership meeting the 10.0%
threshold throughout the duration of the action, suit or proceeding, such
shareholders’ derivative action may be subject to dismissal. As a result, the
Trust Agreement limits the likelihood that a shareholder will be able to
successfully assert a derivative action in the name of the Trust, even if such
shareholder believes that he or she has a valid derivative action, suit or other
proceeding to bring on behalf of the Trust. See “Business—Description of the
Trust Agreement—The Sponsor— Fiduciary and Regulatory Duties of the Sponsor” for
more detail.
The
Sponsor is solely responsible for determining the value of the NAV and NAV per
Share and any errors, discontinuance or changes in such valuation calculations
may have an adverse effect on the value of the Shares.
The
Sponsor will determine the Trust’s NAV and NAV per Share on a daily basis as
soon as practicable after 4:00 p.m., New York time, on each business day. The
Sponsor’s determination is made utilizing data from the operations of the Trust
and the Index Price, calculated at 4:00 p.m., New York time, on such day. If the
Sponsor determines in good faith that the Index does not reflect an accurate SUI
price, then the Sponsor will employ an alternative method to determine the Index
Price under the cascading set of rules set forth in “Business—Overview of the
Sui Industry and Market—The Index and the Index Price—Determination of the Index
Price When Index Price is Unavailable.” In the context of applying such rules,
the Sponsor may determine in good faith that the alternative method applied does
not reflect an accurate SUI price and apply the next alternative method under
the cascading set of rules. If the Sponsor determines after employing all of the
alternative methods that the Index Price does not reflect an accurate SUI price,
the Sponsor will use its best judgment to determine a good faith estimate of the
Index Price. There are no predefined criteria to make a good faith assessment in
these scenarios and such decisions will be made by the Sponsor in its sole
discretion. The Sponsor may calculate the Index Price in a manner that
ultimately inaccurately reflects the price of SUI. To the extent that the NAV,
NAV per Share or the Index Price are incorrectly calculated, the Sponsor may not
be liable for any error and such misreporting of valuation data could adversely
affect the value of the Shares and investors could suffer a substantial loss on
their investment in the Trust. Moreover, the terms of the Trust Agreement do not
prohibit the Sponsor from changing the Index Price used to calculate the NAV and
NAV per Share of the Trust. Any such change in the Index Price could affect the
value of the Shares and investors could suffer a substantial loss on their
investment in the Trust.
Extraordinary
expenses resulting from unanticipated events may become payable by the Trust,
adversely affecting the value of the Shares.
In
consideration for the Sponsor’s Fee, the Sponsor has contractually assumed all
ordinary-course operational and periodic expenses of the Trust. See
“Business—Expenses; Sales of SUI.” Extraordinary expenses incurred by the Trust,
such as taxes and governmental charges; expenses and costs of any extraordinary
services performed by the Sponsor (or any other service provider) on behalf of
the Trust to protect the Trust or the interests of shareholders; or
extraordinary legal fees and expenses are not assumed by the Sponsor and are
borne by the Trust. The Sponsor will cause the Trust to either (i) sell SUI held
by the Trust or (ii) deliver SUI in-kind to the Sponsor to pay Trust expenses
not assumed by the Sponsor on an as-needed basis. Accordingly, the Trust may be
required to sell or otherwise dispose of SUI at a time when the trading prices
for those assets are depressed.
The
sale or other disposition of assets of the Trust in order to pay extraordinary
expenses could have a negative impact on the value of the Shares for several
reasons. These include the following factors:
•
The
Trust is not actively managed and no attempt will be made to protect against or
to take advantage of fluctuations in the prices of SUI.
Consequently, if the Trust incurs expenses in U.S. dollars, the Trust’s
SUI
may be sold at a time when the values of the disposed assets are low, resulting
in a negative impact on the value of the Shares.
•
Because
the Trust does not generate any income, every time that the Trust pays expenses,
it will deliver SUI
to the Sponsor or sell SUI.
Any sales of the Trust’s assets in connection with the payment of expenses will
decrease the amount of the 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 SUI
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 “Material U.S. Federal Income
Tax Consequences.”
The
Trust’s delivery or sale of SUI 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 SUI by the Trust to pay the Sponsor’s Fee or other
expenses and each sale of SUI 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 “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 SUI. However, third parties may assert
intellectual property rights claims relating to the operation of the Trust and
the mechanics instituted for the investment in, holding of and transfer of SUI.
Regardless of the merit of an intellectual property or other legal action, any
legal expenses to defend or payments to settle such claims would be
extraordinary expenses that would be borne by the Trust through the sale or
transfer of its SUI. Additionally, a meritorious intellectual property rights
claim could prevent the Trust from operating and force the Sponsor to terminate
the Trust and liquidate its SUI. As a result, an intellectual property rights
claim against the Trust could adversely affect the value of the
Shares.
Pandemics,
epidemics and other natural and man-made disasters could negatively impact the
value of the Trust’s holdings and/or significantly disrupt its
affairs.
Pandemics,
epidemics and other natural and man-made disasters could negatively impact
demand for digital assets, including SUI, and disrupt the operations of many
businesses, including the businesses of the Trust’s service providers. For
example, the COVID-19 pandemic had serious adverse effects on the economies and
financial markets of many countries, resulting in increased volatility and
uncertainty in economies and financial markets of many countries and in the
Digital Asset Markets. Moreover, governmental authorities and regulators
throughout the world have in the past responded to major economic disruptions,
including as a result of the COVID-19 pandemic, with a variety of fiscal and
monetary policy changes, such as quantitative easing, new monetary programs and
lower interest rates. An unexpected or quick reversal of any such policies, or
the ineffectiveness of such policies, could increase volatility in economies and
financial market generally, and could specifically increase volatility in the
Digital Asset Markets, which could adversely affect the value of SUI and the
value of the Shares.
In
addition, pandemics, epidemics and other natural and man-made disasters could
disrupt the operations of many businesses. For example, in response to the
COVID-19 pandemic, many governments imposed travel restrictions and prolonged,
closed international borders and enhanced health screenings at ports of entry
and elsewhere, which disrupted businesses around the world. While the Sponsor
and the Trust were not materially impacted by these events, any disruptions to
the Sponsor’s, the Trust’s or the Trust’s service providers’ business operations
resulting from business restrictions, quarantines or restrictions on the ability
of personnel to perform their jobs as a result of any future pandemic, epidemic
or other disaster could have an adverse impact on the Trust’s ability to access
critical services and could be disruptive to the affairs of the
Trust.
The
limited ability to facilitate in-kind creations and redemptions of Shares could
have adverse consequences for the Trust.
Authorized
Participants must be registered broker-dealers. Registered broker-dealers are
subject to various requirements of the federal securities laws and rules,
including financial responsibility rules such as the customer protection rule,
the net capital rule and recordkeeping requirements. Although the SEC recently
approved orders to permit in-kind creations and redemptions by authorized
participants for certain spot digital asset ETP shares, there has yet to be
definitive regulatory guidance on the specific details of how registered
broker-dealers can comply with SEC rules with regard to transacting in or
holding spot SUI. In particular, registered broker-dealers participating in the
in-kind creation or redemption of Shares for SUI will need to ensure that they
can demonstrate compliance with applicable financial responsibility
rules.
While
compliance with such requirements would be the broker-dealer’s responsibility, a
national securities exchange is required to enforce compliance by its member
broker-dealers with applicable federal securities law and rules. Only certain
Authorized Participants, at present, have the ability to also, through their
affiliates, support in-kind creation and redemption activity pursuant to the
terms of their participant agreements with the Trust. As of the date of this
prospectus, has executed an agreement providing it with the ability to conduct
creations and redemptions in-kind for SUI in addition to conducting creations
and redemptions for cash. The Sponsor may engage additional Authorized
Participants who are unaffiliated with the Trust in the future, and such
Authorized Participants may be able to conduct creations and redemptions
in-kind, in cash, or both.
Even
with the approval of in-kind creations and redemptions, the Trust’s limited
ability to facilitate in-kind creations and redemptions could result in the
exchange-traded product arbitrage mechanism failing to function as efficiently
as it otherwise would, leading to the potential for the Shares to trade at
premiums or discounts to the NAV per Share, and such premiums or discounts could
be substantial. Furthermore, if Cash Orders are unavailable, either due to the
Sponsor’s decision to reject or suspend such orders or otherwise, Authorized
Participants may be limited in their ability to redeem or create Shares, in
which case the arbitrage mechanism may not function as efficiently. This could
result in impaired liquidity for the Shares, wider bid/ask spreads in secondary
trading of the Shares and greater costs to investors and other market
participants. In addition, the Trust’s limited ability to facilitate in-kind
creations and redemptions, and resulting relative reliance on cash creations and
redemptions, could cause the Sponsor to halt or suspend the creation of
redemption of Shares during times of market volatility or turmoil, among other
consequences.
Further,
there can be no assurance that additional broker-dealers would be willing to
serve as Authorized Participants with respect to the in-kind creation and
redemption of Shares. Any of these factors could adversely affect the
performance of the Trust and the value of the Shares.
Shareholders
will not receive the benefits of any forks or airdrops.
The
Sui Network operates using open-source protocols, meaning that any user can
download the software, modify it and then propose that the users and validators
of SUI adopt the modification. When a modification is introduced and a
substantial majority of users and validators consent to the modification, the
change is implemented and the network remains uninterrupted. However, if less
than a substantial majority of users and validators consent to the proposed
modification, and the modification is not compatible with the software prior to
its modification, the consequence would be what is known as a “hard fork” of the
Sui Network, with one group running the pre-modified software and the other
running the modified software. The effect of such a fork would be the existence
of two versions of SUI running in parallel, yet lacking interchangeability. In
addition to forks, a digital asset may become subject to a similar occurrence
known as an “airdrop.” In an airdrop, the promoters of a new digital asset
announce to holders of another digital asset that such holders will be entitled
to claim a certain amount of the new digital asset, generally for free, based on
the fact that they hold such other digital asset. We refer to the right to
receive any benefits arising from a fork, airdrop or similar event as an
“Incidental Right” and any such virtual currency acquired through an Incidental
Right as “IR Virtual Currency.”
With
respect to any fork, airdrop or similar event, the Sponsor will cause the Trust
to irrevocably abandon the Incidental Rights and any IR Virtual Currency
associated with such event. As such, shareholders will not receive the benefits
of any forks, and the Trust is not able to participate in any
airdrop.
In
the event the Sponsor seeks to change the Trust’s policy with respect to
Incidental Rights or IR Virtual Currency, an application would need to be filed
with the SEC by NYSE Arca seeking approval to amend its listing rules to permit
the Trust to distribute the Incidental Rights or IR Virtual Currency in-kind to
an agent of the shareholders for resale by such agent. However, there can be no
assurance as to whether or when the Sponsor would make such a decision, or when
NYSE Arca will seek or obtain this approval, if at all.
Even
if such regulatory approval is sought and obtained, shareholders may not receive
the benefits of any forks, the Trust may not choose, or be able, to participate
in an airdrop, and the timing of receiving any benefits from a fork, airdrop or
similar event is uncertain. Any inability to recognize the economic benefit of a
hard fork or airdrop could adversely affect the value of the Shares.
Coinbase
Global serves as the SUI custodian and prime execution agent for several
competing exchange-traded SUI products, which could adversely affect the Trust’s
operations and ultimately the value of the Shares.
The
Prime Broker and Custodian are both affiliates of Coinbase Global. As of the
date hereof, Coinbase Global is the largest publicly traded digital asset
company in the world by market capitalization and is also the largest digital
asset custodian in the world by assets under custody. By virtue of its leading
market position and capabilities, and the relatively limited number of
institutionally-capable providers of digital asset brokerage and custody
services, Coinbase Global serves as the SUI custodian and prime execution agent
for several competing exchange-traded SUI products. Therefore, Coinbase Global
plays a critical role in supporting the U.S. spot SUI exchange-traded product
ecosystem, and its size and market share create the risk that Coinbase Global
may fail to properly resource its operations to adequately support all such
products that use its services, which could harm the Trust, the shareholders and
the value of the Shares. If Coinbase Global were to favor the interests of
certain products over others, it could result in inadequate attention or
comparatively unfavorable commercial terms to less favored products, which could
adversely affect the Trust’s operations and ultimately the value of the
Shares.
Certain
of the Authorized Participants engaged by the Trust may serve in a similar
capacity for competing exchange-traded SUI products if approved, which could
adversely affect the arbitrage mechanism, the Trust’s operations, the
performance of the Trust and ultimately the value of the Shares.
Certain
of the Authorized Participants engaged by the Trust may serve in a similar
capacity for competing exchange-traded SUI products, if approved. As a result,
the Authorized Participants may be unable to adequately support all of the
exchange-traded SUI products that use their respective services. This risk may
also be exacerbated as a consequence of the price and volatility of SUI, as well
as the amount of SUI that is required to create or redeem Shares of the Trust.
Moreover, the Authorized Participants may choose to facilitate creations and
redemptions for competing products rather than for the Trust, including as a
result of, among other things, how effectively the arbitrage mechanism of the
Trust functions, the liquidity for the Shares, the bid/ask spreads in secondary
trading of the Shares and the costs associated with creating and redeeming
Shares of the Trust, in each case relative to competing products. In addition,
given the relatively limited number of market participants that could serve as
Authorized Participants of the Trust, the Trust may not be able to engage other
providers to serve as Authorized Participants. If any or all of the Authorized
Participants were to cease to act in their capacity as Authorized Participants
of the Trust, or if any of the Authorized Participants were to favor creating
and redeeming shares of competing products over those of the Trust, the Trust
may receive inadequate attention or be subject to comparatively unfavorable
commercial terms, which could adversely affect the arbitrage mechanism, the
Trust’s operations, the performance of the Trust and ultimately the value of the
Shares. See also “—Risks Related to the Offering—Competition from the emergence
or growth of other digital assets could have a negative impact on the price of
SUI and adversely affect the value of the Shares.”
Shareholders
that are not Authorized Participants may only purchase or sell their Shares in
secondary trading markets, and the conditions associated with trading in
secondary markets may adversely affect investors’ investment in the
Shares.
Only
Authorized Participants may purchase or redeem Baskets. All other investors that
desire to purchase or sell Shares must do so through NYSE Arca or in other
markets, if any, in which the Shares may be traded. Shares may trade at a
premium or discount to the NAV per Share.
The
Sponsor may implement restatements, amendments or supplements to the Trust
Agreement that may not necessarily align with shareholder interests.
There
can be no assurance that the Sponsor will implement restatements, amendments or
supplements that align with the interests of shareholders. To the extent
shareholders do not agree with future amendments to the Trust Agreement,
shareholders will not have any ability to consent or object to such amendments,
and the shareholders’ sole recourse will be to divest or, through an Authorized
Participant, redeem their Shares prior to the effective date of such
amendments.
The
Sponsor may implement restatements, amendments or supplements to the Trust
Agreement that may increase risk to the Trust’s intended tax
treatment.
It
is possible that, in the future, the Sponsor will implement restatements,
amendments, or supplements to the Trust Agreement that could adversely affect
the intended tax treatment of the Trust as a grantor trust for U.S. federal
income tax purposes, including on the receipt of an opinion of counsel to the
effect that doing so should not cause the Trust to fail to qualify as a grantor
trust for those purposes. There can be no assurance that the IRS or any court
will agree with any such position, or that the Trust will not cease to qualify
as a grantor trust as a result of any such restatement, amendment or
supplement.
Risk
Factors Related to the Regulation of Digital Assets, the Trust and the
Shares
The
SEC has previously taken the view that SUI is a “security,” and a final
determination that SUI or any other digital asset is a “security” may adversely
affect the value of SUI and the value of the Shares, and result in potentially
extraordinary, nonrecurring expenses to, or termination of, the
Trust.
Depending
on its characteristics, a digital asset may be considered a “security” under the
federal securities laws. The test for determining whether a particular digital
asset is a “security” is complex and difficult to apply, and the outcome is
difficult to predict. Public, though non-binding, statements by senior officials
at the SEC have indicated that the SEC did not consider Bitcoin or Ether to be
securities, and does not currently consider Bitcoin to be a security. In
addition, the SEC, by action through delegated authority approving the exchange
rule filings to list shares of trusts holding Ether as commodity-based ETPs,
appears to have implicitly taken the view that Ether is not a security. The SEC
staff has also provided informal assurances via no-action letter to a handful of
promoters that their digital assets are not securities. On the other hand, the
SEC under former SEC Chair Gensler’s leadership brought enforcement actions
against the issuers and promoters of several other digital assets on the basis
that the digital assets in question are securities. More recently, the SEC under
former SEC Chair Gensler’s leadership brought enforcement actions against
Digital Asset
Trading
Platforms for allegedly operating unregistered securities exchanges on the basis
that certain of the digital assets traded on their platforms are
securities.
Whether
a digital asset is a security, or offers and sales of a digital asset are
securities transactions, under the federal securities laws depends on whether it
is included in the lists of instruments making up the definition of “security”
in such laws. Digital assets as such do not appear in any of these lists,
although each list includes the terms “investment contract” and “note,” and the
SEC has typically analyzed whether a particular digital asset is a security or
the offer and sale of a digital asset is a securities transaction by reference
to whether it meets the tests developed by the federal courts interpreting these
terms, known as the Howey
and Reves
tests, respectively. For many digital assets, whether or not the Howey
or Reves
tests are met is difficult to resolve definitively, and substantial legal
arguments can often be made both in favor of and against a particular digital
asset qualifying as a security or a particular offer and sale of a digital asset
qualifying as a securities transaction under one or both of the Howey
and Reves
tests. Adding to the complexity, the SEC staff has indicated that the security
status of a particular digital asset can change over time as the relevant facts
evolve, though recent arguments advanced in ongoing litigation may suggest that
the SEC no longer believes the status of a digital asset can change over
time.
As
part of determining whether SUI is a security or a transaction in SUI by the
Sponsor is a securities transaction, for purposes of the federal securities
laws, the Sponsor takes into account a number of factors, including the various
definitions of “security” under the federal securities laws and federal court
decisions interpreting elements of these definitions, such as the U.S. Supreme
Court’s decisions in the Howey
and Reves
cases and their progeny, as well as reports, orders, press releases, public
statements and speeches by the SEC, its commissioners and its staff providing
guidance on when a digital asset may be a security or when an offer and sale of
a digital asset may be a securities transaction for purposes of the federal
securities laws. Finally, the Sponsor discusses the security status of SUI and
the Sponsor’s transactions in SUI with external counsel, and has received a
memorandum regarding the status of SUI under the federal securities laws from
external counsel. Through this process the Sponsor believes that it is applying
the proper legal standards in determining that SUI is not a security in light of
the uncertainties inherent in the Howey
and Reves
tests. However, such policies and procedures are risk-based judgments made by
the Sponsor and not a legal standard or determination binding on any regulatory
body or court. The Sponsor has been contacted by staff from the SEC’s Division
of Enforcement with respect to securities law compliance matters involving SUI
and has responded to the SEC staff. The Sponsor subsequently received a
termination notice from the SEC staff with respect to this inquiry.
In
light of the uncertainties and the fact-based nature of the analysis, the
Sponsor acknowledges that the SEC, at least under former Chair Gensler’s
leadership, has taken the position that SUI is a security and the Sponsor’s
conclusion, even if reasonable under the circumstances, would not preclude legal
or regulatory action based on the presence of a security.
As
is the case with SUI, analyses from counsel typically review the often-complex
facts surrounding a particular digital asset’s underlying technology, creation,
use case and usage development, distribution and secondary-market trading
characteristics as well as contributions of and marketing or promotional efforts
by the individuals or organizations who appear to be involved in these
activities, among other relevant facts, usually drawing on publicly available
information. This information, usually found on the internet, often includes
both information that originated with or is attributed to such individuals or
organizations, as well as information from third-party sources and databases
that may or may not have a connection to such individuals or organizations, and
the availability and nature of such information can change over time. The
Sponsor and counsel often have no independent means of verifying the accuracy or
completeness of such information, and therefore of necessity usually must assume
that such information is materially accurate and complete for purposes of the
Howey
and Reves
analyses. After having gathered this information, counsel typically analyzes it
in light of the Howey
and Reves
tests, in order to inform a judgment as to whether or not a federal court would
conclude that the digital asset, or transactions in the digital asset, in
question is or is not a security, or are or are not securities transactions,
respectively, for purposes of the federal securities laws. Often, certain
factors appear to support a conclusion that the digital asset in question, or
transactions in the digital asset, is a security, or are or are not securities
transactions, respectively, while other factors appear to support the opposite
conclusion, and in such a case counsel endeavors to weigh the importance and
relevance of the competing factors.
This
analytical process is further complicated by the fact that, at present, federal
judicial case law applying the relevant tests to digital assets is limited and
in some situations inconsistent, with no federal appellate court having
considered the question on the merits, as well as the fact that because each
digital asset presents its own unique set of relevant facts, it is not always
possible to directly analogize the analysis of one digital asset to another.
Because of this factual complexity and the current lack of a well-developed body
of federal case law applying the relevant tests to a variety of different fact
patterns, the Sponsor has not in the past received, and currently does not
expect that it would be able to receive, “opinions” of counsel stating that a
particular digital asset , or transactions in the digital asset, is or is not a
security, or are or are not securities transactions, respectively, for federal
securities law purposes. The Sponsor understands that as a matter of practice,
counsel is generally able to render a legal “opinion” only when the relevant
facts are substantially ascertainable and the applicable law is both
well-developed and settled. As a result, given the relative novelty of digital
assets, the challenges inherent in fact-gathering for particular digital assets,
and the fact that federal courts have only recently been tasked with
adjudicating the applicability of federal securities law to digital assets, the
Sponsor understands that at
present
counsel is generally not in a position to render a legal “opinion” on the
securities law status of SUI or any other particular digital asset.
If
the Sponsor determines that SUI or transactions in SUI are a security or
securities transactions, respectively, under the federal securities laws,
whether that determination is initially made by the Sponsor itself, or because a
federal court upholds an allegation that SUI is a security, the Sponsor does not
intend to permit the Trust to continue holding SUI in a way that would violate
the federal securities laws (and therefore would either dissolve the Trust or
potentially seek to operate the Trust in a manner that complies with the federal
securities laws, including the Investment Company Act). Because the legal tests
for determining whether a digital asset or transactions in the digital asset,
are or are not a security or securities transactions, respectively, often leave
room for interpretation, for so long as the Sponsor believes there to be good
faith grounds to conclude that the Trust’s SUI is not a security, the Sponsor
does not intend to dissolve the Trust on the basis that SUI could at some future
point be finally determined to be a security.
Any
enforcement action by the SEC or a state securities regulator asserting that SUI
or transactions in SUI are a security, or securities transactions, respectively,
or a court decision to that effect, would be expected to have an immediate
material adverse impact on the trading value of SUI, as well as the Shares. This
is because the business models behind most digital assets are incompatible with
regulations applying to transactions in securities. If a digital asset or
transactions in that digital asset are determined to be a security or securities
transactions, respectively, it is likely to become difficult or impossible for
the digital asset to be traded, cleared or custodied in the United States
through the same channels used by non-security digital assets, which in addition
to materially and adversely affecting the trading value of the digital asset is
likely to significantly impact its liquidity and market participants’ ability to
convert the digital asset into U.S. dollars. Any assertion that a digital asset
or transactions in that digital asset are a security or securities transactions,
respectively, by the SEC or another regulatory authority may have similar
effects.
For
example, in 2020, the SEC filed a complaint against the issuer of XRP, Ripple
Labs, Inc., and two of its executives, alleging that they raised more than $1.3
billion through XRP sales that should have been registered under the federal
securities laws, but were not. In the years prior to the SEC’s action, XRP’s
market capitalization at times reached over $140 billion. However, in the weeks
following the SEC’s complaint, XRP’s market capitalization fell to less than $10
billion, which was less than half of its market capitalization in the days prior
to the complaint.
Subsequently,
in July 2023, the District Court for the Southern District of New York held that
while XRP is not a “security”, certain sales of XRP to certain buyers (but not
other types of sales to other buyers) amounted to “investment contracts” under
the Howey
test. The District Court entered a final judgment in the case on August 7,
2024.
Likewise,
in the days following the announcement of SEC enforcement actions against
certain digital asset issuers and trading platforms, the prices of various
digital assets declined significantly and may continue to decline if or as such
cases advance through the federal court system. Furthermore, the decisions in
cases involving digital assets have resulted in seemingly inconsistent views of
different district court judges, including one that explicitly disagreed with
the analysis underlying the decision regarding XRP, which underscore the
continuing uncertainty around which digital assets or transactions in digital
assets are securities and what the correct analysis is to determine each digital
asset’s status. For example, the conflicting district court opinions and
analyses demonstrate that factors such as how long a digital asset has been in
existence, how widely held it is, how large its market capitalization is, the
manner in which it is offered, sold or promoted and whether it has actual use in
commercial transactions, ultimately may have limited to no bearing on whether
the SEC, a state securities regulator or any particular court will find it to be
a security.
In
addition, if SUI is determined to be a security by a federal court or
transactions in SUI are determined to be securities transactions by a federal
court, the Trust could be considered an unregistered “investment company” under
the Investment Company Act, which could necessitate the Trust’s liquidation. In
this case, the Trust and the Sponsor may be deemed to have participated in an
illegal offering of investment company securities and there is no guarantee that
the Sponsor will be able to register the Trust under the Investment Company Act
at such time or take such other actions as may be necessary to ensure the
Trust’s activities comply with applicable law, which could force the Sponsor to
liquidate the Trust.
Moreover,
whether or not the Sponsor or the Trust were subject to additional regulatory
requirements as a result of any determination that the Trust’s assets include
securities or the Trust’s transactions in digital assets constitute securities
transactions, the Sponsor may nevertheless decide to terminate the Trust, in
order, if possible, to liquidate the Trust’s assets while a liquid market still
exists. For example, in response to the SEC’s action against the issuer of the
digital asset XRP, certain significant market participants announced they would
no longer support XRP and announced measures, including the delisting of XRP
from major Digital Asset Trading Platforms, resulting in the Sponsor’s
conclusion that it was likely to be increasingly difficult for U.S. investors,
including Grayscale XRP Trust (XRP), an affiliate of the Trust, to convert XRP
into U.S. dollars. The Sponsor subsequently dissolved Grayscale XRP Trust (XRP)
and liquidated its assets. The Sponsor has since established a new investment
vehicle that holds XRP, Grayscale XRP Trust. If the SEC or a federal court were
to determine that SUI is a security or transactions in SUI are securities
transactions, it is likely that the value of the Shares of the Trust would
decline significantly. Furthermore, if a federal court upholds an allegation
that
SUI
is a security or transactions in SUI are securities transactions, the Trust
itself may be terminated and, if practical, its assets liquidated.
Regulatory
changes or actions by the U.S. Congress or any U.S. federal or state agencies
may affect the value of the Shares or restrict the use of SUI, validating
activity or the operation of the Sui Network or the Digital Asset Markets in a
manner that adversely affects the value of the Shares.
As
digital assets have grown in both popularity and market size, the U.S. Congress
and a number of U.S. federal and state agencies (including FinCEN, OFAC, SEC,
CFTC, FINRA, the Consumer Financial Protection Bureau (“CFPB”), the Department
of Justice, the Department of Homeland Security, the Federal Bureau of
Investigation, the IRS, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Federal Reserve and state financial
institution and securities regulators) have been examining the operations of
digital asset networks, digital asset users and the Digital Asset Markets, with
particular focus on the extent to which digital assets can be used to launder
the proceeds of illegal activities, evade sanctions or fund criminal or
terrorist enterprises and the safety and soundness of trading platforms and
other service providers that hold or custody digital assets for users. Many of
these state and federal agencies have issued consumer advisories regarding the
risks posed by digital assets to investors. Ongoing and future regulatory
actions with respect to digital assets generally or SUI in particular may alter,
perhaps to a materially adverse extent, the nature of an investment in the
Shares or the ability of the Trust to continue to operate.
On
January 23, 2025, President Trump issued an executive order titled
“Strengthening American Leadership in Digital Financial Technology” aimed at
supporting “the responsible growth and use of digital assets, blockchain
technology, and related technologies across all sectors of the economy.” The
Executive Order also established an interagency working group that is tasked
with “proposing a Federal regulatory framework governing the issuance and
operation of digital assets” in the United States. Pursuant to this Executive
Order, the working group released a report in July 2025 outlining the
administration's recommendations to Congress and various agencies reflecting the
administration’s “pro-innovation mindset toward digital assets and blockchain
technologies.” In particular, the report recommends that Congress enact
legislation regarding self custody of digital assets, clarifying the
applicability of Bank Secrecy Act obligations with respect to digital asset
service providers, granting the CFTC authority to regulate spot markets in
non-security digital assets, prohibiting the adoption of a CBDC, and clarifying
tax laws as relevant to digital assets. In addition, the report recommends that
agencies reevaluate existing guidance on digital asset activities, use existing
authorities to enable the trading of digital assets at the federal level,
embrace DeFi, launch or relaunch crypto innovation efforts, and promote U.S.
private sector leadership in the responsible development of cross-border
payments and financial markets technologies, among others.
There
have also been several bills introduced in Congress that propose to establish
additional regulation and oversight of the digital asset markets. For example,
the CLARITY Act was passed by the House of Representatives in July 2025, which
would, if enacted, regulate digital asset markets and digital asset trading
platforms in the United States. In addition, also in July 2025, the Guiding and
Establishing National Innovation for U.S. Stablecoins Act of 2025 (the “GENIUS
Act”) became the first federal law specifically regulating the issuance, custody
and other stablecoin-related matters in the United States. It is difficult to
predict whether, or when, the CLARITY Act or another Bill that would regulate
digital asset markets and digital asset trading platforms may become law or what
any such Bill may entail.
It
is difficult to predict whether, or when, any of these developments will lead to
Congress granting additional authorities to the SEC or other regulators, what
the nature of such additional authorities might be, how additional legislation
and/or regulatory oversight might impact the ability of Digital Asset Markets to
function or how any new regulations or changes to existing regulations might
impact the value of digital assets generally and SUI held by the Trust
specifically. The consequences of increased federal regulation of digital assets
and digital asset activities could have a material adverse effect on the Trust
and the Shares.
Law
enforcement agencies have often relied on the transparency of blockchains to
facilitate investigations. However, certain privacy-enhancing features have
been, or are expected to be, introduced to a number of digital asset networks.
If the Sui Network were to adopt any of these features, these features may
provide law enforcement agencies with less visibility into transaction-level
data. Europol, the European Union’s law enforcement agency, released a report in
October 2017 noting the increased use of privacy-enhancing digital assets like
Zcash and Monero in criminal activity on the internet. In August 2022, OFAC
banned all U.S. citizens from using Tornado Cash, a digital asset protocol
designed to obfuscate blockchain transactions, by adding certain Ethereum wallet
addresses associated with the protocol to its Specially Designated Nationals and
Blocked Persons List. A large portion of Ethereum validators globally, as well
as notable industry participants such as Centre, the issuer of the USDC
stablecoin, have reportedly complied with the sanctions and blacklisted the
sanctioned addresses from interacting with their networks. In August 2025, a
co-founder of Tornado Cash was convicted of conspiracy to operate an unlicensed
money transmitting business, but a mistrial was declared with respect to charges
of conspiracy to commit money laundering and conspiracy to violate U.S.
sanctions. In October 2023, FinCEN issued a notice of proposed rulemaking that
identified convertible virtual currency (CVC) mixing as a class of transactions
of primary money laundering concern and proposed requiring covered financial
institutions to implement certain recordkeeping and reporting requirements on
transactions that covered financial institutions know, suspect, or have reason
to suspect involve CVC mixing within or involving jurisdictions outside the
United States. In April 2024, the DOJ arrested and charged the developers of
the
Samourai
Wallet mixing service with conspiracy to commit money laundering and conspiracy
to operate an unlicensed money transmitting business. In May 2024, a co-founder
of Tornado Cash was sentenced to more than five years imprisonment in the
Netherlands for developing Tornado Cash on the basis that he had helped launder
more than $2 billion worth of digital assets through Tornado Cash. In October
2023, FinCEN issued a notice of proposed rulemaking that identified convertible
virtual currency (CVC) mixing as a class of transactions of primary money
laundering concern and proposed requiring covered financial institutions to
implement certain recordkeeping and reporting requirements on transactions that
covered financial institutions know, suspect, or have reason to suspect involve
CVC mixing within or involving jurisdictions outside the United States. In April
2024, the DOJ arrested and charged the developers of the Samourai Wallet mixing
service with conspiracy to commit money laundering and conspiracy to operate an
unlicensed money transmitting business. In May 2024, a co-founder of Tornado
Cash was sentenced to more than five years imprisonment in the Netherlands for
developing Tornado Cash on the basis that he had helped launder more than $2
billion worth of digital assets through Tornado Cash. In August 2025, a
co-founder of Tornado Cash was convicted of conspiracy to operate an unlicensed
money transmitting business, but a mistrial was declared with respect to charges
of conspiracy to commit money laundering and conspiracy to violate U.S.
sanctions. Future additional regulatory action with respect to privacy-enhancing
digital assets is possible.
SUI’s
initial manner of sale closely resembles that of certain digital assets found to
be securities, and a determination that SUI is a “security” may adversely affect
the value of SUI and an investment in the Shares, and result in potentially
extraordinary, nonrecurring expenses to, or termination of, the
Trust.
Through
enforcement actions and other statements, the SEC and its staff have taken the
position that a digital asset’s initial manner of sale may be a key factor in
determining whether that digital asset was a security, at least at the time of
the digital asset’s delivery as part of that sale. This has meant that many
blockchain startups that have offered digital assets to the public in the form
of initial coin offerings, also known as ICOs, have been found to have engaged
in illegal unregistered distributions of securities. One variant of an ICO
involves a digital asset being sold through a Simple Agreement for Future
Tokens, or a SAFT. Under a SAFT, a purchaser agrees to contribute funds to
enable the development of a digital asset network in exchange for an agreement
by the developer to deliver digital assets in the future, once the network
becomes operational. The legal theory behind the SAFT is that, while the SAFT
itself may be an “investment contract” and thus a “security” under the federal
securities laws (and is therefore typically offered in reliance on an exemption
from registration), the tokens themselves should not be securities at the time
of their delivery because at that time the network will be operational and the
tokens will have real consumptive uses, rather than representing an investment
to fund the initial development work.
The
SEC has cast doubt on the legal argument underpinning the SAFT structure, and
has litigated in federal court at least two significant enforcement actions
involving digital assets sold under SAFTs, arguing in each case that the digital
assets sold under the SAFTs, and not just the SAFTs themselves, were securities.
In March 2020, the SEC obtained a preliminary injunction barring Telegram Group,
Inc. from conducting an unregistered distribution of digital assets known as
Grams, on the grounds that Grams were securities under the federal securities
laws, notwithstanding the fact that they had been sold under a SAFT. Telegram
Group ultimately agreed to return $1.2 billion to investors and to pay a $18.5
million civil penalty. Similarly, in September 2020 the SEC won a motion for
summary judgment against Kik Interactive, Inc., persuading the court that Kik
Interactive’s sale of digital assets, called Kin, through a SAFT structure
should be integrated with Kik Interactive’s separate public sale of Kin (which
the court held to be illegal), as the sales were conducted using the same
marketing efforts, involved the same asset, and were conducted very close in
time to one another. Kik Interactive ultimately agreed to pay a $5 million civil
penalty. The SEC in December 2020 filed a complaint against the issuer of XRP,
Ripple Labs, Inc., and two of its executives, alleging that Ripple Labs and its
executives raised over $1.3 billion through XRP sales that should have been
registered under the federal securities laws, but were not. Multiple digital
assets the SEC alleged to be securities in the Coinbase, Binance and Kraken
Complaints were first sold to the public in similar circumstances or ICOs.
Subsequently, in July 2023, the District Court for the Southern District of New
York held that while XRP is not a security, certain sales of XRP to certain
buyers amounted to “investment contracts” under the Howey
test. For a discussion of the evolution of the SEC’s complaint against Ripple
Labs, see “Risk Factors—Risk Factors Related to the Regulation of Digital
Assets, the Trust and the Shares—The SEC has previously taken the view that SUI
is a “security,” and a final determination that SUI or any other digital asset
is a “security” may adversely affect the value of SUI and the value of the
Shares, and result in potentially extraordinary, nonrecurring expenses to, or
termination of, the Trust.”
If
SUI is determined to be a “security” or transactions in SUI are determined to be
securities transactions under federal or state securities laws by the SEC or a
state regulatory agency, or in a proceeding in a court of law or otherwise, it
will have material adverse consequences for SUI and an investment in the Shares.
If SUI or transactions in SUI are determined to be a security or a securities
transaction, it is likely to become difficult or impossible for SUI to be
traded, cleared or custodied in the United States through the same channels used
by non-security digital assets, which could in turn materially and adversely
affect the trading value, liquidity, market participants’ ability to convert SUI
into U.S. dollars and general acceptance of SUI and cause users to migrate to
other digital assets. As such, any determination that SUI or transactions in
that digital asset are a security under federal or state securities laws may
adversely affect the value of SUI and, as a result, an investment in the
Shares.
Changes
in SEC policy could adversely impact the value of the Shares.
The
effect of any future regulatory change on the Trust or the digital assets held
by the Trust is impossible to predict, but such change could be substantial and
adverse to the Trust and the value of the Shares. If the SEC were to approve any
ETF other than ours in the future, such an ETF may be perceived to be a superior
investment product offering exposure to digital assets compared to the Trust
because the value of the shares issued by such an ETF may more closely track the
ETF’s net asset value than do Shares of the Trust, and investors may therefore
favor investments in such ETFs over investments in the Trust. Any weakening in
demand for the Shares compared to digital asset ETF shares could cause the value
of the Shares to decline.
Regulatory
changes or other events in foreign jurisdictions may affect the value of the
Shares or restrict the use of one or more digital assets, validating activity or
the operation of their networks or the Digital Asset Trading Platform Market in
a manner that adversely affects the value of the Shares.
Various
foreign jurisdictions have, and may continue to adopt laws, regulations or
directives that affect the digital asset network, the Digital Asset Markets, and
their users, particularly Digital Asset Trading Platforms and service providers
that fall within such jurisdictions’ regulatory scope. For example, if foreign
jurisdictions in addition to China were to ban or otherwise restrict validating
activity, including by regulating or limiting manufacturers’ ability to produce
or sell semiconductors or hard drives in connection with validating, it would
have a material adverse effect on digital asset networks (including the Sui
Network), the Digital Asset Market, and as a result, impact the value of the
Shares.
A
number of foreign jurisdictions have recently taken regulatory action aimed at
digital asset activities. China has made transacting in cryptocurrencies illegal
for Chinese citizens in mainland China, and additional restrictions may follow.
Both China and South Korea have banned initial coin offerings entirely and
regulators in other jurisdictions, including Canada, Singapore and Hong Kong,
have opined that initial coin offerings may constitute securities offerings
subject to local securities regulations. The United Kingdom’s Financial Conduct
Authority published final rules in October 2020 banning the sale of derivatives
and exchange-traded notes that reference certain types of digital assets,
contending that they are “ill-suited” to retail investors citing extreme
volatility, valuation challenges and association with financial crime. A new
law, the Financial Services and Markets Act 2023 (“FSMA”), received royal assent
in June 2023. The FSMA brings digital asset activities within the scope of
existing laws governing financial institutions, markets and assets. In addition,
the Parliament of the European Union approved the text of the Markets in
Crypto-Assets Regulation (“MiCA”) in April 2023, establishing a regulatory
framework for digital asset services across the European Union. Certain parts of
MiCA became effective as of June 2024 and the remainder became effective as of
December 2024. MiCA is intended to serve as a comprehensive regulation of
digital asset markets and imposes various obligations on digital asset issuers
and service providers. The main aims of MiCA are industry regulation, consumer
protection, prevention of market abuse and upholding the integrity of digital
asset markets. See “Business—Overview of the Sui
Industry and Market—Government Oversight.”
Foreign
laws, regulations or directives may conflict with those of the United States and
may negatively impact the acceptance of one or more digital assets by users,
merchants and service providers outside the United States and may therefore
impede the growth or sustainability of the digital asset economy in the European
Union, China, Japan, Russia and the United States and globally, or otherwise
negatively affect the value of SUI.
Moreover, other events, such as the interruption in telecommunications or
internet services, cyber-related terrorist acts, civil disturbances, war or
other catastrophes, could also negatively affect the digital asset economy in
one or more jurisdictions. For example, Russia’s invasion of Ukraine on February
24, 2022 led to volatility in digital asset prices, with an initial steep
decline followed by a sharp rebound in prices. The effect of any future
regulatory change or other events on the Trust or SUI
is impossible to predict, and such change could be substantial and adverse to
the Trust and the value of the Shares.
If
regulators subject an Authorized Participant, the Trust or the Sponsor to
regulation as a money service business or money transmitter, this could result
in extraordinary expenses to the Authorized Participant, the Trust or the
Sponsor and also result in decreased liquidity for the Shares.
To
the extent that the activities of any Authorized Participant, the Trust or the
Sponsor cause it to be deemed a “money services business” under the regulations
promulgated by FinCEN, such Authorized Participant, the Trust or the Sponsor may
be required to comply with FinCEN regulations, including those that would
mandate the Authorized Participant, the Trust or the Sponsor to implement
anti-money laundering programs, make certain reports to FinCEN and maintain
certain records. Similarly, the activities of an Authorized Participant, the
Trust or the Sponsor may require it to be licensed as a money transmitter or as
a digital asset business, such as under the NYDFS’ BitLicense regulations or
California’s Digital Financial Assets Law, once effective.
Such
additional regulatory obligations may cause the Authorized Participant, the
Trust or the Sponsor to incur extraordinary expenses. If the Authorized
Participant, the Trust or the Sponsor decided to seek the required licenses,
there is no guarantee that they will timely receive them. An Authorized
Participant may instead decide to terminate its role as Authorized Participant
of the Trust, or the Sponsor may decide to discontinue and wind up the Trust. An
Authorized Participant’s decision to cease acting as such may
decrease
the liquidity of the Shares, which could adversely affect the value of the
Shares, and termination of the Trust in response to the changed regulatory
circumstances may be at a time that is disadvantageous to the
shareholders.
Additionally,
to the extent an Authorized Participant, the Trust or the Sponsor is found to
have operated without appropriate state or federal licenses, or registration, it
may be subject to investigation, administrative or court proceedings, and civil
or criminal monetary fines and penalties, all of which would harm the reputation
of the Trust or the Sponsor, decrease the liquidity, and have a material adverse
effect on the price of, the Shares.
Statutory
or regulatory changes or interpretations could obligate the Trust or the Sponsor
to register and comply with new regulations, resulting in potentially
extraordinary, nonrecurring expenses to the Trust.
Current
and future legislation, CFTC and SEC rulemaking and other regulatory
developments may impact the manner in which SUI
is treated. In particular, SUI
may be classified by the CFTC as a “commodity interest” under the CEA or may be
classified by the SEC as a “security” under U.S. federal securities laws. It is
possible that a new Administration and Congress in the United States creates a
new classification for digital assets. For example, the current draft of the
Clarity Act would add “digital commodities” to the list of assets that are
commodity interests under the CEA. The Sponsor and the Trust cannot be certain
as to how future regulatory developments will impact the treatment of
SUI
under the law. In the face of such developments, the required registrations and
compliance steps may result in extraordinary, nonrecurring expenses to the
Trust. If the Sponsor decides to terminate the Trust in response to the changed
regulatory circumstances, the Trust may be dissolved or liquidated at a time
that is disadvantageous to shareholders.
To
the extent that SUI
is deemed to fall within the definition of a “commodity interest” under the CEA,
due to the passage of the Clarity Act or otherwise, the Trust and the Sponsor
may be subject to additional regulation under the CEA and CFTC regulations. The
Sponsor may be required to register as a commodity pool operator or commodity
trading adviser with the CFTC and become a member of the National Futures
Association and may be subject to additional regulatory requirements with
respect to the Trust, including disclosure and reporting requirements. These
additional requirements may result in extraordinary, recurring and/or
nonrecurring expenses of the Trust, thereby materially and adversely impacting
the Shares. If the Sponsor determines not to comply with such additional
regulatory and registration requirements, the Sponsor will terminate the Trust.
Any such termination could result in the liquidation of the Trust’s SUI
at a time that is disadvantageous to shareholders.
To
the extent that SUI
is determined to be a security under U.S. federal securities laws, the Trust and
the Sponsor may be subject to additional requirements under the Investment
Company Act and the Sponsor may be required to register as an investment adviser
under the Investment Advisers Act. Such additional registration may result in
extraordinary, recurring and/or non-recurring expenses of the Trust, thereby
materially and adversely impacting the Shares. If the Sponsor determines not to
comply with such additional regulatory and registration requirements, the
Sponsor will terminate the Trust. Any such termination could result in the
liquidation of the Trust’s SUI
at a time that is disadvantageous to shareholders.
The
treatment of the Trust for U.S. federal income tax purposes is
uncertain.
The
Sponsor intends to take the position that the Trust is properly treated as a
grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a
grantor trust, the Trust will not be subject to U.S. federal income tax. Rather,
if the Trust is a grantor trust, each beneficial owner of Shares will be treated
as directly owning its pro rata share of the Trust’s assets and a pro rata
portion of the Trust’s income, gains, losses and deductions will “flow through”
to each beneficial owner of Shares.
If
the Staking Condition is satisfied and the Trust engages in Staking activity,
the Sponsor intends to continue to take the position that the Trust is properly
treated as a grantor trust for U.S. federal income tax purposes and that any
Staking activity undertaken by the Trust in compliance with the opinion, ruling
or other guidance relied upon to satisfy the Staking Condition will not prevent
the Trust from continuing to qualify as a grantor trust for such purposes.
However, due to the uncertainty regarding the ability of a grantor trust to
engage in Staking activities, there can be no assurance that the Internal
Revenue Service (“IRS”) or any court would agree with this position (or with any
opinion of counsel delivered to the Sponsor in support thereof). Accordingly, if
the Trust satisfies the Staking Condition and engages in Staking activity, the
Trust might cease to qualify as a grantor trust for U.S. federal income tax
purposes.
The
Trust has taken certain positions with respect to the tax consequences of
Incidental Rights and its receipt of IR Virtual Currency. If the IRS were to
disagree with, and successfully challenge, any of these positions the Trust
might not qualify as a grantor trust. In addition, the Pre-Creation/Redemption
Abandonment Notices (as defined herein) provide that the Trust will irrevocably
abandon, effective immediately prior to each Creation Time or Redemption Time,
all Incidental Rights or IR Virtual Currency to which it would otherwise be
entitled as of such time and with respect to which it has not taken any
Affirmative Action at or prior to such time. The Sponsor has committed to cause
the Trust to irrevocably abandon any Incidental Rights and IR Virtual Currency
to which the Trust may become entitled in the future. There can be no complete
assurance that these abandonments will be treated as
effective
for U.S. federal income tax purposes. If the Trust were treated as owning any
asset other than SUI as of any date on which it creates or redeems Shares, it
might cease to qualify as a grantor trust for U.S. federal income tax
purposes.
In
addition, at this time the Trust is permitted to create or redeem Shares
pursuant to In-Kind Orders and Cash Orders. In general, investment vehicles
intended to be treated as grantor trusts for U.S. federal income tax purposes
historically have created additional trust interests only in kind, and there is
no authority directly addressing whether a grantor trust may create or redeem
trust interests under procedures similar to those that govern Cash Orders.
Accordingly, there can be no complete assurance that the creation or redemption
of Shares under the procedures governing Cash Orders will not cause the Trust to
fail to qualify as a grantor trust for U.S. federal income tax
purposes.
Moreover,
because of the evolving nature of digital assets, it is not possible to predict
potential future developments that may arise with respect to digital assets,
including forks, airdrops and other similar occurrences. Assuming that the Trust
is currently a grantor trust for U.S. federal income tax purposes, certain
future developments could render it impossible, or impracticable, for the Trust
to continue to be treated as a grantor trust for such purposes.
If
the Trust is not properly classified as a grantor trust, the Trust might be
classified as a partnership for U.S. federal income tax purposes. However, due
to the uncertain treatment of digital assets for U.S. federal income tax
purposes (as discussed below in “Material U.S. Federal Income Tax
Consequences—Uncertainty Regarding the U.S. Federal Income Tax Treatment of
Digital Assets”), there can be no assurance in this regard. If the Trust were
classified as a partnership for U.S. federal income tax purposes, the tax
consequences of owning Shares generally would not be materially different from
the tax consequences described herein, although there might be certain
differences, including with respect to timing of the recognition of taxable
income or loss. In addition, tax information reports provided to beneficial
owners of Shares would be made in a different form. Moreover, it is possible, in
that case, that a portion of the Trust’s income would be considered to be
“effectively connected” with the conduct of a trade or business in the United
States and, accordingly, a non-U.S. person owning Shares could be subject to
U.S. federal income tax on a net income basis with respect to that “effectively
connected” income and be required to file a U.S. tax return. If the Staking
Condition were satisfied and none of the Trust’s Staking income were considered
to be “effectively connected” income, a non-U.S. person owning Shares likely
would be subject to withholding on its pro rata portion of U.S.-source income
from the Trust’s Staking activities as described below in “—Shareholders may be
subject to withholding tax on income derived from forks, airdrops and similar
occurrences and, if the Staking Condition is satisfied, Native Staking
Consideration received as staking rewards.” Tax-exempt Shareholders may also
recognize “unrelated business taxable income” (“UBTI”) from the Trust’s Staking
activities if the Trust is not treated as a corporation for U.S. federal income
tax purposes.
If
the Trust were not classified as either a grantor trust or a partnership for
U.S. federal income tax purposes, it would be classified as a corporation for
such purposes. In that event, the Trust would be subject to entity-level U.S.
federal income tax (currently at the rate of 21%) on its net taxable income and
certain distributions made by the Trust to shareholders would be treated as
taxable dividends to the extent of the Trust’s current and accumulated earnings
and profits. Any such dividend distributed to a beneficial owner of Shares that
is a non-U.S. person for U.S. federal income tax purposes would be subject to
U.S. federal withholding tax at a rate of 30% (or such lower rate as provided in
an applicable tax treaty). As a result, the taxation of the Trust as a
corporation could materially reduce the after-tax return on an investment in
Shares, and substantially reduce the value of the Shares, and result in a
material divergence between NAV and the value of the Trust’s SUI.
The
treatment of digital assets for U.S. federal income tax purposes is
uncertain.
As
discussed in the section entitled “Material U.S. Federal Income Tax
Consequences—Uncertainty Regarding the U.S. Federal Income Tax Treatment of
Digital Assets,” assuming that the Trust is properly treated as a grantor trust
for U.S. federal income tax purposes, each beneficial owner of Shares will be
treated for U.S. federal income tax purposes as the owner of an undivided
interest in the SUI (and, if applicable, any Incidental Rights, IR Virtual
Currency and/or, if the Staking Condition is satisfied, any Staking
Consideration) held in the Trust. Due to the new and evolving nature of digital
assets and the absence of comprehensive guidance with respect to digital assets,
many significant aspects of the U.S. federal income tax treatment of digital
assets are uncertain.
In
2014, the IRS released a notice (the “Notice”) discussing certain aspects of
“convertible virtual currency” (that is, digital assets that have an equivalent
value in fiat currency or that act as substitutes for fiat currency) for U.S.
federal income tax purposes and, in particular, stating that such digital assets
(i) are “property” (ii) are not currency” for purposes of the rules relating to
foreign currency gain or loss and (iii) may be held as a capital asset. In 2019,
the IRS released a revenue ruling and a set of “Frequently Asked Questions” (the
“Ruling & FAQs”) that provide some additional guidance, including guidance
to the effect that, under certain circumstances, hard forks of digital assets
are taxable events giving rise to ordinary income and guidance with respect to
the determination of the tax basis of digital assets. Moreover, in 2023, the IRS
released a revenue ruling that provided guidance on digital asset staking,
including guidance to the effect that staking rewards will, under certain
circumstances, be treated as giving rise to taxable income (the “2023 Staking
Guidance”). Further, the IRS recently issued a revenue procedure providing a
staking safe harbor for certain grantor trust vehicles whose beneficial
interests are listed and traded on a national securities exchange (the “2025
Revenue Procedure”). However, the Notice, the Ruling & FAQs, the 2023
Staking Guidance and the 2025 Revenue Procedure do not address other significant
aspects of the U.S. federal income tax treatment of digital assets. For example,
for a non-U.S. Holder (as defined
below),
there currently is no guidance directly addressing whether or in what
circumstances engaging in certain activities to generate yield on digital
assets, including Staking, could give rise to income that is effectively
connected with a trade or business in the United States. Similarly, for a U.S.
tax-exempt shareholder, there currently is no guidance directly addressing
whether or in what circumstances such activities could give to rise to UBTI.
Moreover, although the Ruling & FAQs address the treatment of hard forks,
there continues to be uncertainty with respect to the timing and amount of the
income inclusions.
There
can be no assurance that the IRS will not alter its position with respect to
digital assets in the future or that a court would uphold the treatment set
forth in the Notice, the Ruling & FAQs, the 2023 Staking Guidance and the
2025 Revenue Procedure. It is also unclear what additional guidance on the
treatment of digital assets for U.S. federal income tax purposes may be issued
in the future. Any such alteration of the current IRS positions or additional
guidance could result in adverse tax consequences for shareholders and could
have an adverse effect on the value of SUI. Future developments that may arise
with respect to digital assets may increase the uncertainty with respect to the
treatment of digital assets for U.S. federal income tax purposes. For example,
the Notice addresses only digital assets that are “convertible virtual
currency,” and it is conceivable that, as a result of a fork, airdrop or similar
occurrence, the Trust could hold certain types of digital assets that are not
within the scope of the Notice in the event the Sponsor seeks to change the
Trust’s policy with respect to Incidental Rights or IR Virtual Currency, subject
to NYSE Arca obtaining regulatory approval from the SEC.
Shareholders
are urged to consult their tax advisers regarding the tax consequences of owning
and disposing of Shares and digital assets in general.
Future
developments regarding the treatment of digital assets for U.S. federal income
tax purposes could adversely affect the value of the Shares.
As
discussed above, many significant aspects of the U.S. federal income tax
treatment of digital assets, such as SUI, are uncertain, and it is unclear what
guidance on the treatment of digital assets for U.S. federal income tax purposes
may be issued in the future. It is possible that any such guidance would have an
adverse effect on the prices of digital assets, including on the price of SUI in
the Digital Asset Markets, and therefore may have an adverse effect on the value
of the Shares.
Because
of the evolving nature of digital assets, it is not possible to predict
potential future developments that may arise with respect to digital assets,
including forks, airdrops and similar occurrences or staking. Such developments
may increase the uncertainty with respect to the treatment of digital assets for
U.S. federal income tax purposes. Moreover, certain future developments could
render it impossible, or impracticable, for the Trust to continue to be treated
as a grantor trust for U.S. federal income tax purposes.
Future
developments in the treatment of digital assets for tax purposes other than U.S.
federal income tax purposes could adversely affect the value of the
Shares.
The
taxing authorities of certain states, including New York, (i) have announced
that they will follow the Notice with respect to the treatment of digital assets
for state income tax purposes and/or (ii) have issued guidance exempting the
purchase and/or sale of digital assets for fiat currency from state sales tax.
However, it is unclear what further guidance on the treatment of digital assets
for state tax purposes may be issued in the future.
The
treatment of digital assets for tax purposes by non-U.S. jurisdictions may
differ from the treatment of digital assets for U.S. federal, state or local tax
purposes. It is possible, for example, that a non-U.S. jurisdiction would impose
sales tax or value-added tax on purchases and sales of digital assets for fiat
currency. If a foreign jurisdiction with a significant share of the market of
SUI users imposes onerous tax burdens on digital asset users, or imposes sales
or value-added tax on purchases and sales of digital assets for fiat currency,
such actions could result in decreased demand for SUI in such
jurisdiction.
Any
future guidance on the treatment of digital assets for state, local or non-U.S.
tax purposes could increase the expenses of the Trust and could have an adverse
effect on the prices of digital assets, including on the price of SUI in the
Digital Asset Markets. As a result, any such future guidance could have an
adverse effect on the value of the Shares.
The
tax treatment of SUI and transactions involving SUI for state and local tax
purposes is not settled.
Because
SUI is a new technological innovation, the tax treatment of SUI for state and
local tax purposes, including, without limitation state and local income and
sales and use taxes, is not settled. It is uncertain what guidance, if any, on
the treatment of SUI for state and local tax purposes may be issued in the
future. A state or local government authority’s treatment of SUI may have
negative consequences, including the imposition of a greater tax burden on
investors in SUI or the imposition of a greater cost on the acquisition and
disposition of SUI generally. Any such treatment may have a negative effect on
prices of SUI and may adversely affect the value of the Shares.
A
U.S. tax-exempt shareholder may recognize “unrelated business taxable income” as
a consequence of an investment in Shares.
Under
the guidance provided in the Ruling & FAQs, hard forks, airdrops and similar
occurrences with respect to digital assets will under certain circumstances be
treated as taxable events giving rise to ordinary income. Moreover, as
separately provided by the IRS in the 2023 Staking Guidance, staking rewards
will, under certain circumstances, be treated as giving rise to taxable income.
In the absence of guidance to the contrary, it is possible that any such income
recognized by a U.S. tax-exempt shareholder would constitute UBTI. A tax-exempt
shareholder should consult its tax adviser regarding whether such shareholder
may recognize UBTI as a consequence of an investment in Shares. See “Material
U.S. Federal Income Tax Consequences.”
Shareholders
may be subject to withholding tax on income derived from forks, airdrops and
similar occurrences and, if the Staking Condition is satisfied, Native Staking
Consideration received as staking rewards.
The
Ruling & FAQs do not address whether income recognized by a non-U.S. person
as a result of a fork, airdrop or similar occurrence or staking could be subject
to the 30% withholding tax imposed on U.S.-source “fixed or determinable annual
or periodical” income. Non-U.S. Holders (as defined under “Material U.S. Federal
Income Tax Consequences—Tax Consequences to Non-U.S. Holders”) should be aware
that, in the absence of guidance, a withholding agent (including a brokerage
through which a Non-U.S. Holder holds Shares) may withhold 30% of any such
income recognized by a non-U.S. Holder in respect of its Shares, including by
deducting such withheld amounts from proceeds that such non-U.S. Holder would
otherwise be entitled to receive in connection with a distribution of Incidental
Rights, IR Virtual Currency or, if the Staking Condition is satisfied, Native
Staking Consideration received as staking rewards. See “Material U.S. Federal
Income Tax Consequences.”
In
addition, the Trust may enter into Staking Arrangements with Staking Providers
organized in, or that have operations in, a non-U.S. jurisdiction. Non-U.S.
jurisdictions may seek to impose withholding tax on Native Staking Consideration
received by the Trust as staking rewards, which may negatively affect a
shareholder’s investment in the Trust.
Risk
Factors Related to Staking
The
Trust will not be permitted to engage in Staking unless (and, then, only to the
extent that) the Staking Condition is satisfied in addition to the Trust
satisfying any additional requirements that may arise in connection with the
satisfaction of the Staking Condition, which could negatively affect the value
of the Shares.
The
Trust currently is prohibited from engaging in Staking, and there can be no
assurance that the Trust will be permitted to engage in Staking in the future.
The Trust Agreement provides that the Trust may engage in Staking, but only if
(and, then, only to the extent that) the Staking Condition has been satisfied.
As of the date of this prospectus, the Staking Condition has not been met for
the Trust, and there can be no assurance as to whether or when the Staking
Condition will be met for the Trust in the future.
The
Sponsor may decide in its sole discretion not to pursue satisfaction of the
Staking Condition, and there can be no assurance that the Sponsor will cause the
Trust to engage in Staking.
Subject
to the Staking Condition being satisfied and subject to compliance with certain
related requirements, in the future the Trust may stake a portion of its SUI
holdings to receive Native Staking Consideration. However, as long as the
Staking Condition and any related requirements have not been satisfied, the
Trust will not stake any portion of its SUI holdings to receive Native Staking
Consideration. The current inability of the Trust to engage in Staking and
receive such Native Staking Consideration could place the Shares at a
comparative disadvantage relative to an investment in SUI directly or through a
vehicle that is not subject to such a prohibition, which could negatively affect
the value of the Shares.
Staking
introduces a risk of loss of SUI, which could adversely affect the value of the
Shares.
Staking
introduces a risk of loss of SUI.
None of the Trust’s assets, including potentially staked assets, are subject to
the protections enjoyed by depositors or customers of institutions with FDIC or
Securities Investor Protection Corporation membership.
The
Sui Network may impose penalties (i.e., “slashing”) if a validator commits
malicious acts related to the validation of transactions. Currently on the Sui
Network, slashing generally operates theoretically possible by social consensus,
rather than being automatically applied by the protocol’s code. If two-thirds of
validators determine that a validator should be slashed for low operational
performance, malicious behavior, or poor community membership, that validator's
rewards will be slashed. Slashing on the Sui Network does not slash a
validator's staked SUI.
There
can be no guarantee that slashing penalties and resulting lost opportunity to
receive staking rewards will not occur as a result of the activities of a
Staking Provider. Furthermore, a Staking Provider’s liability to the Trust is
expected to be limited, and a Staking Provider may lack the assets or insurance
in order to support the restitution for of any lost opportunity to receive
staking rewards. While the Staking Arrangements may provide for indemnification
up to a specified cap, slashing insurance or other
reimbursement
programs, there can be no guarantee that the Trust would recover any lost
opportunity to receive staking rewards, if it is subject to penalties imposed by
the Sui Network.
Staked
SUI tokens will be inaccessible for a variable period of time, determined by a
range of factors, which could result in certain liquidity risk to the
Trust.
Under
current Sui Network protocols, staked SUI tokens are permitted to be un-staked
by the holder of the private keys for the withdrawal address of such SUI tokens.
However, as part of the “activating” and “de-activating” or “cooling down”
processes of staking. “Activation” is the funding of a validator to be included
in the active set, thereby allowing the validator to participate in the Sui
Network’s proof-of-stake consensus protocol. “De-activating” is the request to
exit from the active set and no longer participate in the Sui Network’s
proof-of-stake consensus protocol. As part of these “activating” and
“de-activating” processes of staking on the Sui Network, any staked SUI will be
inaccessible for a period of time, denominated in “epochs.” On the Sui Network,
epochs are targeted to last approximately 24 hours, though actual epoch
durations may vary slightly due to validator coordination and other timing
effects inherent in the network’s consensus protocol. De-activation typically
completes when the current epoch ends, which may be up to one full epoch after
the request is submitted. Once the de-activation period ends, the stake becomes
fully inactive and can be withdrawn. As a result, the elapsed time between a
de-activation request and withdrawal availability may differ depending on (i)
when the request is submitted and (ii) the slight variation in epoch
duration.
Subject
to the Staking Condition being satisfied and subject to compliance with certain
related requirements, the Sponsor has sole discretion over whether the Trust
will engage in Staking, and there can be no assurance that the Sponsor will
cause the Trust to engage in Staking. If the Sponsor causes the Trust to engage
in Staking, the Trust will engage in staking with respect to all of the Trust’s
SUI at all times, except (i) as necessary to pay the Sponsor’s Fee and the
Sponsor’s Staking Fee, (ii) as necessary to pay any additional Trust expenses,
(iii) as necessary to satisfy existing and reasonably foreseen potential
redemption requests (assuming the Trust is then permitted to operate an ongoing
redemption program) as determined by the Sponsor, (iv) as necessary to reduce
the SUI obtained by the Trust as Native Staking Consideration to cash for
distribution at regular intervals, (v) as necessary to reduce the SUI obtained
by the Trust as Native Staking Consideration to cash in connection with the
Trust’s liquidation, (vi) as necessary to take protective actions in respect of
vulnerabilities in the source code or cryptography underlying the Sui Network
and/or its proof-of-stake protocol, its staking smart contracts or its validator
client software, (vii) if the Custodian discontinues its arrangements with the
Trust and such discontinuance affects the Trust’s SUI, for so long as is
reasonably necessary to re-establish those arrangements or to establish similar
arrangements with other parties, (viii) if the Custodian discontinues its
arrangements with the Staking Provider and such discontinuance affects the
Trust’s SUI, for so long as is reasonably necessary to re-establish those
arrangements or to establish similar arrangements with other parties, (ix) in
the event of a change in applicable law or regulation, (x) as necessary to
maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a
“contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS
Revenue Procedure 2025-31 or (xii) in accordance with any other exception that
is expressly contemplated by an opinion, ruling or tax guidance that satisfies
the Staking Condition. All SUI received by the Trust in connection with the
creation of new Shares, or as Native Staking Consideration, would also be staked
upon receipt by the Trust, unless one or more of the exceptions described in
clauses (i)-(xii) above applies. If the Trust engages in Staking, the Sponsor
will seek to stake as much of the Trust's SUI as is practicable (i.e., up to
100%) at all times, with the remainder of the Trust's SUI remaining unstaked in
order to address the various exceptions and other considerations described
herein, including the satisfaction of the Staking Condition, and the approximate
percentage of the Trust's SUI that is staked each day will be reported the
following day at 4:00 p.m., New York time, on
etfs.grayscale.com/gsui.
In
the future and subject to the satisfaction of the Staking Condition thereto, the
Sponsor, on behalf of the Trust, may be able to enter into other financing
arrangements or implement other mechanisms to manage SUI liquidity constraints,
including entering into short-term financing arrangements with its Custodian to
provide SUI to the Trust for settlement of trades with the Trust's Liquidity
Provider(s), if necessary. These liquidity risk policies and procedures are
intended to be consistent with NYSE Arca's proposed generic listing standards as
well as recent IRS guidance. However, there can be no assurance that such
arrangements will be available as intended or provide sufficient liquidity to
satisfy redemption requests.
Assuming
that the Trust is then permitted to operate an ongoing redemption program, due
to the time involved in “exiting” the staking process, there is a risk that the
Trust could become unable to timely meet excessive redemption requests in
amounts that are greater than the portion of the Trust’s SUI that remains
un-staked, leading to temporary delays in settlement and, in extreme scenarios,
the temporary unavailability of the Trust’s redemption program. Moreover, any
staked SUI which must be un-staked in order to fulfill a redemption (to the
extent such redemption cannot be fulfilled utilizing the portion of the Trust’s
SUI that has not been staked, or through another mechanism to manage liquidity
in connection with Redemption Orders contemplated by an opinion of a Tax
Advisor, a Tax Ruling or Tax Guidance that satisfies the Staking Condition) will
be un-staked only after the redemption request is approved by the Trust, the
Sponsor executes an un-stake or withdrawal transaction through the Custodian,
and such transaction is processed by the Sui Network. The Staking Provider will
not be able to transfer unstaked SUI or Staking Consideration to another address
on the Sui Network.
Although
the Sponsor anticipates, if the Staking Condition has been satisfied with
respect to such activities, that the Trust may enter into financing arrangements
in order to fulfill redemption requests if the Trust’s unstaked SUI is
insufficient to do so, there can be no assurance that such arrangements will be
available as intended or provide sufficient liquidity to satisfy redemption
requests.
The
Trust will be dependent on third parties to effectively execute the Trust’s
Staking Arrangements.
As
the Sponsor currently anticipates that validation activity in connection with
Staking will be carried out by the third-party Staking Providers, the amount of
Native Staking Consideration that the Trust’s Staking activity will generate
will be dependent on the performance of the Staking Provider, including the
adequacy and reliability of the hardware and software utilized by the Staking
Provider. If the Custodian or the Staking Provider experience service outages or
otherwise are unable to optimally execute validation activity in connection with
the Staking of the Trust’s SUI, the Trust’s Staking Consideration may be
adversely affected.
The
regulatory landscape surrounding Staking is uncertain.
The
regulatory landscape surrounding Staking is highly uncertain, and may expose the
Sponsor, Custodian, third-party Staking Providers and the Trust and its
shareholders to unforeseen regulatory risks or potential enforcement actions.
For example, there is a risk that the Staking Arrangements could constitute an
“investment contract” under the federal securities laws, such that it is a
security, and thus needs to be registered or eligible for an exemption from
registration. In May 2025, staff at the SEC Division of Corporation Finance
issued a statement (the “SEC Staking Statement”) expressing the view that
certain staking activities do not involve the offer and sale of securities
within the meaning of the federal securities laws, and we believe the Staking
Arrangements satisfy the criteria in this guidance. However, the SEC Staking
Statement is not a rule, regulation, guidance, or statement of the Commission,
and has no legal force or effect. There is accordingly a risk that a court could
disagree with the views expressed in the SEC Staking Statement. In that case, or
if SUI were deemed a security, there would also be a risk that a Staking
Provider could be deemed to be acting as a broker-dealer, on the basis that the
Staking Provider is receiving a commission for effecting the staking
transactions and receipt of Staking Consideration.
The
Sponsor is permitted to cause the Trust to engage in Staking only if certain
conditions set forth in the Trust Agreement relating to the qualification of the
Trust as a grantor trust for U.S. federal income tax purposes are satisfied. Due
to the lack of authority regarding the ability of a grantor trust to engage in
activities such as Staking, there can be no assurance whether or when these
conditions will be satisfied or the Trust will be permitted to engage in
Staking.
If
the Staking Condition is satisfied, beneficial owners of Shares could incur tax
liabilities without receiving corresponding distributions from the
Trust.
There
can be no assurance that the Staking Condition will be satisfied or that the
Trust will stake any of its SUI tokens. If the Staking Condition is satisfied
and the Trust engages in staking, Shareholders may suffer adverse tax
consequences. In particular, the IRS has indicated that the receipt of Staking
Consideration gives rise to current, ordinary income for U.S. federal income tax
purposes. Assuming that the Trust is properly treated as a grantor trust for
U.S. federal income tax purposes, beneficial owners of Shares will be required
to take their ratable share of any such income into account in determining their
own tax liability, regardless of whether the Trust makes any corresponding
distributions. Shareholders should therefore expect that, if the Staking
Condition is satisfied, other sources of funds may be needed to satisfy any
associated tax liability. Moreover, if the Staking Condition were satisfied and
the Trust were to sell SUI to fund cash distributions in respect of that tax
liability, a Shareholder generally would be treated as having sold its pro rata
share of those SUI for their fair market value at that time (which, in the case
of SUI sold by the Trust, generally will be equal to the cash proceeds received
by the Trust in respect thereof), and the Shareholder generally would recognize
gain or loss on such sale as described in the section entitled “Material U.S.
Federal Income Tax Consequences.”
Risk
Factors Related to Potential Conflicts of Interest
Potential
conflicts of interest may arise among the Sponsor or its affiliates and the
Trust. The Sponsor and its affiliates have no fiduciary duties to the Trust and
its shareholders other than as provided in the Trust Agreement, which may permit
them to favor their own interests to the detriment of the Trust and its
shareholders.
The
Sponsor will manage the affairs of the Trust. Conflicts of interest may arise
among the Sponsor and its affiliates, on the one hand, and the Trust and its
shareholders, on the other hand. As a result of these conflicts, the Sponsor may
favor its own interests and the interests of its affiliates over the Trust and
its shareholders. These potential conflicts include, among others, the
following:
•
The
Sponsor has no fiduciary duties to, and is allowed to take into account the
interests of parties other than, the Trust and its shareholders in resolving
conflicts of interest, provided the Sponsor does not act in bad
faith;
•
The
Trust has agreed to indemnify the Sponsor and its affiliates pursuant to the
Trust Agreement;
•
The
Sponsor is responsible for allocating its own limited resources among different
clients and potential future business ventures, to each of which it owes
fiduciary duties;
•
The
Sponsor and its staff also service affiliates of the Sponsor, including several
other digital asset investment vehicles, and their respective clients and cannot
devote all of its, or their, respective time or resources to the management of
the affairs of the Trust;
•
The
Sponsor, its affiliates and their respective officers and employees are not
prohibited from engaging in other businesses or activities, including those that
might be in direct competition with the Trust;
•
Affiliates
of the Sponsor have substantial direct investments in SUI that they are
permitted to manage taking into account their own interests without regard to
the interests of the Trust or its shareholders, and any increases, decreases or
other changes in such investments could affect the Index Price and, in turn, the
value of the Shares;
•
There
is an absence of arm’s-length negotiation with respect to certain terms of the
Trust, and, where applicable, there has been no independent due diligence
conducted with respect to the Trust;
•
Several
employees of the Sponsor and the Sponsor’s indirect parent company, DCG, are
FINRA-registered representatives who historically maintained their licenses
through Genesis and currently maintain their licenses through Grayscale
Securities;
•
DCG
is (i) the sole equity holder and indirect parent company of the Sponsor; and
(ii) a minority interest holder in Kraken, one of the Digital Asset Trading
Platforms included in the Index, representing less than 1.0% of its
equity;
•
DCG
has investments in a large number of digital assets and companies involved in
the digital asset ecosystem, including trading platforms and custodians. DCG’s
positions on changes that should be adopted in the Sui Network could be adverse
to positions that would benefit the Trust or its shareholders. Additionally,
before or after a hard fork on the Sui Network, DCG’s position regarding which
fork among a group of incompatible forks of the Sui Network should be considered
the “true” Sui Network could be adverse to positions that would most benefit the
Trust;
•
DCG
has been vocal in the past about its support for digital assets other than SUI.
Any investments in, or public positions taken on, digital assets other than SUI
by DCG, could have an adverse impact on the price of SUI;
•
The
Sponsor decides whether to retain separate counsel, accountants or others to
perform services for the Trust;
•
While
the Index Provider does not currently utilize data from over-the-counter markets
or derivatives platforms, it may decide to include pricing from such markets or
platforms in the future;
•
The
Sponsor may appoint an agent to act on behalf of the shareholders, and such
agent may be the Sponsor or an affiliate of the Sponsor; and
•
The
Sponsor has historically and may again select an Index Provider that is an
affiliate of the Sponsor and the Trust.
By
purchasing the Shares, shareholders agree and consent to the provisions set
forth in the Trust Agreement. See “Business—Description of the Trust
Agreement.”
For
a further discussion of the conflicts of interest among the Sponsor, the
distributor, the marketer, Authorized Participant, Liquidity Providers, the
Trust and others, see “Certain Relationships and Related Party
Transactions.”
DCG
is a minority interest holder in Kraken, which operates one of the Digital Asset
Trading Platforms included in the Index Price.
DCG,
the sole equity holder and indirect parent company of the Sponsor, holds a
minority interest of less than 1.0% in Kraken. The Sponsor values its digital
assets by reference to the Index Price. The Index Price is the price in U.S.
dollars of a SUI
derived from the Digital Asset Trading Platforms that are reflected in the Index
developed by CoinDesk Indices, Inc. as of 4:00 p.m., New York time, on each
business day. Kraken is one of the Digital Asset Trading Platforms included in
the Index.
Although
DCG does not exercise control over Kraken, it is possible that investors could
have concerns that DCG could influence market data provided by this Digital
Asset Trading Platform in a way that benefits DCG, for example by artificially
inflating the values of SUI
in order to increase the Sponsor’s fees. This could make the Trust’s Shares less
attractive to investors than the shares of similar vehicles that do not present
these concerns, adversely affect investor sentiment about the Trust and
negatively affect Share trading prices.
Shareholders
cannot be assured of the Sponsor’s continued services, the discontinuance of
which may be detrimental to the Trust.
Shareholders
cannot be assured that the Sponsor will be willing or able to continue to serve
as sponsor to the Trust for any length of time. If the Sponsor discontinues its
activities on behalf of the Trust and a substitute sponsor is not appointed, the
Trust will terminate and liquidate its SUI.
Appointment
of a substitute sponsor will not guarantee the Trust’s continued operation,
successful or otherwise. Because a substitute sponsor may have no experience
managing a digital asset financial vehicle, a substitute sponsor may not have
the experience, knowledge or expertise required to ensure that the Trust will
operate successfully or continue to operate at all. Therefore, the appointment
of a substitute sponsor may not necessarily be beneficial to the Trust and the
Trust may terminate. See “Certain Relationships and Related Party
Transactions—The Sponsor.”
If
the Custodian resigns or is removed by the Sponsor or otherwise, without
replacement, it would trigger early termination of the Trust.
A
Custodial Entity may terminate the Prime Broker Agreement for Cause (as defined
in “Business— Description of the Prime Broker Agreement—Term; Termination and
Suspension”) at any time or upon one hundred eighty days’ prior written notice
to the Trust, as provided under the Prime Broker Agreement. If the Custodian
resigns or is removed by the Sponsor or otherwise, without replacement, the
Trust will dissolve in accordance with the terms of the Trust
Agreement.
Shareholders
may be adversely affected by the lack of independent advisers representing
investors in the Trust.
The
Sponsor has consulted with counsel, accountants and other advisers regarding the
formation and operation of the Trust. No counsel was appointed to represent
investors in connection with the formation of the Trust or the establishment of
the terms of the Trust Agreement and the Shares. Moreover, no counsel has been
appointed to represent an investor in connection with the offering of the
Shares. Accordingly, an investor should consult his, her or its own legal, tax
and financial advisers regarding the desirability of the value of the Shares.
Lack of such consultation may lead to an undesirable investment decision with
respect to investment in the Shares.
The
Trust is an “emerging growth company” and the reduced disclosure requirements
applicable to emerging growth companies may make the Shares less attractive to
investors.
The
Trust is an “emerging growth company,” as defined in the JOBS Act, and intends
to take advantage of certain exemptions from various reporting requirements that
are applicable to other public companies, including, but not limited to, not
being required to comply with the auditor attestation requirements of Section
404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and exemptions from the
requirement of shareholder approval of any golden parachute payments not
previously approved. The Trust intends to take advantage of these reporting
exemptions until it is no longer an emerging growth company. The Sponsor and the
Trust cannot predict if investors will find the Shares less attractive because
the Trust will rely on these exemptions. The Trust will remain an emerging
growth company for up to five years after its initial public offering, although
it will lose that status sooner if the Trust has more than $1.235 billion of
revenues in a fiscal year, has more than $700 million in market value of Shares
held by non-affiliates as of any June 30 or issues more than $1.0 billion of
non-convertible debt over a rolling three-year period. If some investors find
the Shares less attractive as a result, there may be a less active trading
market for the Shares and the price of the Shares may be more
volatile.
Risk
Factors Related to the Offering
There
may be less liquidity or wider spreads in the market for the Shares as compared
to the shares of other spot SUI exchange-traded products, if and when the
listing of such products has been approved.
Although
the Shares are expected to be publicly listed and traded on the NYSE Arca, as a
new investment vehicle, there can be no guarantee that the trading market for
the Shares will develop as robustly as the trading market for the shares of
other spot SUI
exchange-traded products, if and when the listing of such products has been
approved, or that one will develop at all. To the extent that no active trading
market develops and/or the assets of the Trust do not reach or maintain a viable
size to facilitate robust trading, the liquidity of the Shares may be limited,
which could result in wider bid/ask spreads and negatively impact the value of
the Shares. In addition, if shareholders need to sell their Shares at a time
when no active market for them exists, the price shareholders receive for their
Shares, assuming that shareholders are able to sell them, likely will be lower
than the price that shareholders would receive if an active market did exist
and, accordingly, a shareholder may suffer losses. See “—Risk Factors Related to
the Digital Asset Markets—The lack of active trading markets for the Shares may
result in losses on investors’ investments at the time of disposition of
Shares.”
The
liquidity of the Shares may be affected if Authorized Participants cease to
perform their obligations under the Participant Agreements or the Liquidity
Engager is unable to engage Liquidity Providers.
In
the event that one or more Authorized Participants having substantial interests
in Shares or otherwise responsible for a significant portion of the Shares’
daily trading volume on NYSE Arca terminates its Participant Agreement, the
liquidity of the Shares would likely decrease, which could adversely affect the
value of the Shares. In addition, if the Liquidity Engager is unable to engage
one or more Liquidity Providers to obtain or receive SUI
in connection with Cash Orders, the Trust may have difficulty maintaining the
participation of certain Authorized Participants or engaging additional
Authorized Participants. Under such circumstances, the liquidity of the Shares
would likely decrease, which could adversely affect the value of the
Shares.
The
Shares may trade at a price that is at, above or below the Trust’s NAV per Share
as a result of the non-concurrent trading hours between NYSE Arca and the
Digital Asset Trading Platform Market.
The
Trust’s NAV per Share will fluctuate with changes in the market value of
SUI,
and the Sponsor expects the trading price of the Shares to fluctuate in
accordance with changes in the Trust’s NAV per Share, as well as market supply
and demand. However, the Shares may trade on NYSE Arca at a price that is at,
above or below the Trust’s NAV per Share for a variety of reasons. For example,
NYSE Arca is open for trading in the Shares for a limited period each day, but
the Digital Asset Trading Platform Market is a 24-hour marketplace. During
periods when NYSE Arca is closed but Digital Asset Trading Platforms are open,
significant changes in the price of SUI
on the Digital Asset Trading Platform Market could result in a difference in
performance between the value of SUI
as measured by the Index and the most recent NAV per Share or closing trading
price. For example, if the price of SUI
on the Digital Asset Trading Platform Market, and the value of SUI
as measured by the Index, move significantly in a negative direction after the
close of NYSE Arca, the trading price of the Shares may “gap” down to the full
extent of such negative price shift when NYSE Arca reopens. If the price of
SUI
on the Digital Asset Trading Platform Market drops significantly during hours
NYSE Arca is closed, shareholders may not be able to sell their Shares until
after the “gap” down has been fully realized, resulting in an inability to
rapidly mitigate losses in a negative market. Even during periods when NYSE Arca
is open, large Digital Asset Trading Platforms (or a substantial number of
smaller Digital Asset Trading Platforms) may be lightly traded or closed for any
number of reasons, which could increase trading spreads and widen any premium or
discount on the Shares.
Shareholders
may suffer a loss on their investment if the Shares trade above or below the
Trust’s NAV per Share.
Historically,
the Shares have traded at a premium to the NAV per Share, which at times has
been substantial. If the Shares trade on NYSE Arca in the future at a premium,
investors who purchase Shares on NYSE Arca will pay more for their Shares than
investors who purchase Shares directly from Authorized Participants. In
contrast, if the Shares trade on NYSE Arca in the future at a discount,
investors who purchase Shares directly from Authorized Participants will pay
more for their Shares than investors who purchase Shares on NYSE Arca. The
premium at which the Shares have traded has fluctuated over time. From November
24, 2025 to December 4, 2025, the maximum premium of the closing price of the
Shares quoted on OTCQX over the value of the Trust’s NAV per Share was 38%, the
average premium was 34%, the maximum discount of the closing price of the Shares
quoted on OTCQX below the value of the Trust’s NAV per Share was 12%, and the
average discount was 9%. The closing price of the Shares, as quoted on OTCQX at
4:00 p.m., New York time, on each business day between November 24, 2025 and
December 4, 2025, has been quoted at a discount on 3 days. As of December 4,
2025, the Trust’s Shares were quoted on OTCQX at a discount of 12% to the
Trust’s NAV per Share. As a result, shareholders who purchase Shares on NYSE
Arca at a premium may suffer a loss on their investment if they sell their
Shares at a time when the premium has decreased from the premium at which they
purchased the Shares even if the NAV per Share remains the same. Likewise,
shareholders that purchase Shares directly from the Trust may suffer a loss on
their investment if they sell their Shares at a time when the Shares are trading
at a discount on NYSE Arca. Furthermore, shareholders may suffer a loss on their
investment even if the NAV per Share increases because the decrease in any
premium or increase in any discount may offset any increase in the NAV per
Share.
The
inability of Authorized Participants and market makers to hedge their SUI
exposure may adversely affect the liquidity of Shares and the value of an
investment in the Shares.
Authorized
Participants and market makers will generally want to hedge their exposure in
connection with Basket purchase and redemption orders. To the extent Authorized
Participants and market makers are unable to hedge their exposure due to market
conditions (e.g., insufficient SUI
liquidity in the market, inability to locate an appropriate hedge counterparty,
extreme volatility in the price of SUI,
wide spreads between prices quoted on different Digital Asset Trading Platforms,
the closing of Digital Asset Trading Platforms due to fraud, failures, security
breaches or otherwise etc.), such conditions may make it difficult to purchase
or redeem Baskets or cause them to not create or redeem Baskets. In addition,
the hedging mechanisms employed by Authorized Participants and market makers to
hedge their exposure to SUI
may not function as intended, which may make it more difficult for them to enter
into such transactions. Such events could negatively impact the market price of
the Shares and the spread at which the Shares trade on the open
market.
Arbitrage
transactions intended to keep the price of the Shares closely linked to the
price of SUI may be problematic if the process for the purchase and redemption
of Baskets encounters difficulties, which may adversely affect an investment in
the Shares.
If
the processes of creation and redemption of Shares (which depend on timely
transfers of SUI
to and by the Custodian) encounter any unanticipated difficulties due to, for
example, the price volatility of SUI,
the insolvency, business failure or interruption, default, failure to perform,
security breach, or other problems affecting the Custodian, the closing of
Digital Asset Trading Platforms to fraud, failures, security breaches or
otherwise, or network outages or congestion, spikes in transaction fees demanded
by validators, or other problems or disruptions affecting the Blockchain, then
potential market participants, such as the Authorized Participants and their
customers, who would otherwise be willing to purchase or redeem Baskets to take
advantage of any arbitrage opportunity arising from discrepancies between the
price of the Shares and the price of the underlying SUI
may not take the risk that, as a result of those difficulties, they may not be
able to realize the profit they expect.
Alternatively,
in the case of a network outage or other problems affecting the Sui Network, the
processing of transactions on the Sui Network may be disrupted, which in turn
may prevent Liquidity Providers from depositing or withdrawing SUI
from their custody accounts, which in turn could affect the creation or
redemption of Baskets. If this is the case, the liquidity of the Shares may
decline and the price of the Shares may fluctuate independently of the price of
SUI
and may fall or otherwise diverge from NAV. Furthermore, in the event that the
market for SUI
should become relatively illiquid and thereby materially restrict opportunities
for arbitraging by delivering SUI
in return for Baskets, the price of the Shares may diverge from the price of
SUI.
Use
of Proceeds
Proceeds
received by the Trust from the issuance and sale of Baskets will consist of SUI
deposited with the Trust in connection with creations. Such SUI will only be (i)
owned by the Trust, (ii) transferred (or converted to U.S. dollars, if
necessary) to pay the Trust’s expenses, (iii) distributed or otherwise disposed
of in connection with the redemption of Baskets, (iv) liquidated in the event
that the Trust terminates or as otherwise required by law or regulation or (v)
used in Staking, only if (and, then, only to the extent that) the Staking
Condition relating to the qualification of the Trust as a grantor trust for U.S.
federal income tax purposes is satisfied and subject to compliance with any
additional requirements that may arise in connection with satisfaction of the
Staking Condition.
Management’s
Discussion
and Analysis of Financial
Condition
and Results of Operations
The
following discussion and analysis of our financial condition and results of
operations should be read together with, and is qualified in its entirety by
reference to, our audited financial statements and related notes included
elsewhere in this prospectus, which have been prepared in accordance with
generally accepted accounting principles in the United States (“GAAP”). The
following discussion may contain forward-looking statements based on assumptions
we believe to be reasonable. Our actual results could differ materially from
those discussed in these forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those discussed
below and elsewhere in this prospectus, particularly in “Risk Factors” and
“Forward-Looking Statements.”
Trust
Overview
The
Trust is a passive entity that is managed and administered by the Sponsor and
does not have any officers, directors or employees. The Trust holds SUI and,
from time to time on a periodic basis, will issue Creation Baskets in exchange
for deposits of SUI (or cash to acquire SUI) and redeem Baskets in exchange for
SUI (or proceeds from the disposition of SUI) from the Trust. As a passive
investment vehicle, the Trust’s investment objective is for the value of the
Shares (based on SUI per Share) to reflect the value of SUI held by the Trust,
including SUI earned as Staking Consideration (to the extent that the Staking
Condition has been satisfied
and Staking is implemented), determined by
reference to the Index Price, less the Trust’s expenses and other liabilities.
While an investment in the Shares is not a direct investment in SUI, the Shares
are designed to provide investors with a cost-effective and convenient way to
gain investment exposure to SUI, including any SUI earned as Staking
Consideration (to the extent that the Staking Condition has been satisfied and
Staking is implemented). To date, the Trust has not met its investment objective
and the Shares quoted on OTCQX have not reflected the value of the SUI held by
the Trust, less the Trust’s expenses and other liabilities, but instead have
traded at both premiums and discounts to such value, which at times has been
substantial. The Trust will not utilize leverage, derivatives or any similar
arrangements in seeking to meet its investment objective. The Trust is not
managed like a business corporation or an active investment vehicle.
Critical
Accounting Policies and Estimates
Investment
Transactions and Revenue Recognition
The
Trust considers investment transactions to be the receipt of SUI by the Trust in
connection with Share creations and the delivery of SUI by the Trust in
connection with Share redemptions or for payment of expenses in SUI. The Trust
records its investment transactions on a trade date basis and changes in fair
value are reflected as net change in unrealized appreciation or depreciation on
investments. Realized gains and losses are calculated using the specific
identification method. Realized gains and losses are recognized in connection
with transactions including settling obligations for the Sponsor’s Fee in
SUI.
Principal
Market and Fair Value Determination
To
determine which market is the Trust’s principal market (or in the absence of a
principal market, the most advantageous market) for purposes of calculating the
Trust’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”),
the Trust follows Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 820-10, which outlines the application of fair
value accounting. ASC 820-10 determines fair value to be the price that would be
received for SUI in a current sale, which assumes an orderly transaction between
market participants on the measurement date. ASC 820-10 requires the Trust to
assume that SUI is sold in its principal market to market participants or, in
the absence of a principal market, the most advantageous market. Market
participants are defined as buyers and sellers in the principal or most
advantageous market that are independent, knowledgeable, and willing and able to
transact.
The
Trust only receives SUI in connection with a creation order from an Authorized
Participant and does not itself transact on any Digital Asset Markets.
Therefore, the Trust looks to market-based volume and level of activity for
Digital Asset Markets. An Authorized Participant or a Liquidity Provider may
transact in a Brokered Market, a Dealer Market, Principal-to-Principal Markets
and Exchange Markets (referred to as “Trading Platform Markets”), each as
defined in the FASB ASC Master Glossary (collectively, “Digital Asset Markets”).
In determining which of the eligible Digital Asset Markets is the Trust’s
principal market, the Trust reviews these criteria in the following
order:
•
First,
the Trust reviews a list of Digital Asset Markets that maintain practices and
policies designed to comply with AML and KYC regulations, and non-Digital Asset
Trading Platform Markets that the Trust reasonably believes are operating in
compliance with applicable law, including federal and state licensing
requirements, based upon information and assurances provided to it by each
market.
•
Second,
the Trust sorts these Digital Asset Markets from high to low by market-based
volume and level of activity of SUI traded on each Digital Asset Market in the
trailing twelve months.
•
Third,
the Trust then reviews pricing fluctuations and the degree of variances in price
on Digital Asset Markets to identify any material notable variances that may
impact the volume or price information of a particular Digital Asset
Market.
•
Fourth,
the Trust then selects a Digital Asset Market as its principal market based on
the highest market-based volume, level of activity and price stability in
comparison to the other Digital Asset Markets on the list. Based on information
reasonably available to the Trust, Trading Platform Markets have the greatest
volume and level of activity for the asset. The Trust therefore looks to
accessible Trading Platform Markets as opposed to the Brokered Market, Dealer
Market and Principal-to-Principal Markets to determine its principal market. As
a result of the aforementioned analysis, a Trading Platform Market has been
selected as the Trust’s principal market.
The
Trust determines its principal market (or in the absence of a principal market
the most advantageous market) annually and conducts a quarterly analysis to
determine (i) if there have been recent changes to each Digital Asset Market’s
trading volume and level of activity in the trailing twelve months, (ii) if any
Digital Asset Markets have developed that the Trust has access to, or (iii) if
recent changes to each Digital Asset Market’s price stability have occurred that
would materially impact the selection of the principal market and necessitate a
change in the Trust’s determination of its principal market.
The
cost basis of SUI received by the Trust in connection with a creation order is
recorded by the Trust at the fair value of SUI at 4:00 p.m., New York time, on
the creation date for financial reporting purposes. The cost basis recorded by
the Trust may differ from proceeds collected by an Authorized Participant from
the sale of the corresponding Shares to investors.
Investment
Company Considerations
The
Trust is an investment company for GAAP purposes and follows accounting and
reporting guidance in accordance with the FASB ASC Topic 946, Financial Services
– Investment Companies. The Trust uses fair value as its method of accounting
for SUI in accordance with its classification as an investment company for
accounting purposes. The Trust is not a registered investment company under the
Investment Company Act of 1940. GAAP requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates and these
differences could be material.
Review
of Financial Results
Financial
Highlights for the Three and Nine Months Ended September 30, 2025 and for the
Period from August 1, 2024 (the commencement of the Trust’s operations) to
September 30, 2024
(All
amounts in the following table and the subsequent paragraphs, except Share, per
Share, SUI and price of SUI amounts, are in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Nine
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Net
realized and unrealized gain (loss) on investment in SUI |
|
$ |
1,378 |
|
|
$ |
1,256 |
|
|
$ |
(2,779 |
) |
|
$ |
1,256 |
|
|
Net
increase (decrease) in net assets resulting from operations |
|
$ |
1,308 |
|
|
$ |
1,252 |
|
|
$ |
(2,974 |
) |
|
$ |
1,252 |
|
|
Net
assets(1) |
|
$ |
10,103 |
|
|
$ |
2,544 |
|
|
$ |
10,103 |
|
|
$ |
2,544 |
|
(1)
Net
assets in the above table and subsequent paragraphs are calculated in accordance
with U.S. GAAP based on the Digital Asset Market price of SUI on the Digital
Asset Trading Platform that the Trust considered its principal market, as of
4:00 p.m., New York time, on the valuation date.
Net
realized and unrealized gain on investment in SUI for the three months ended
September 30, 2025 was $1,378, which includes a realized gain of $19 on the
transfer of SUI to pay the Sponsor’s Fee and net change in unrealized
appreciation on investment in SUI of $1,359. Net realized and unrealized gain on
investment in SUI for the period was driven by SUI price appreciation from $2.82
per SUI as of June 30, 2025, to $3.26 per SUI as of September 30, 2025. Net
increase in net assets resulting from operations was $1,308 for the three months
ended September 30, 2025, which consisted of the net realized and unrealized
gain
on
investment in SUI, less the Sponsor’s Fee of $70. Net assets increased to
$10,103 at September 30, 2025, a 15% increase for the three-month period. The
increase in net assets resulted from the aforementioned SUI price appreciation,
partially offset by the withdrawal of approximately 19,590 SUI to pay the
foregoing Sponsor’s Fee.
Net
realized and unrealized loss on investment in SUI for the nine months ended
September 30, 2025 was ($2,779), which includes a realized gain of $45 on the
transfer of SUI to pay the Sponsor’s Fee and net change in unrealized
appreciation on investment in SUI of ($2,824). Net realized and unrealized loss
on investment in SUI for the period was driven by SUI price depreciation from
$4.17 per SUI as of December 31, 2024, to $3.26 per SUI as of September 30,
2025. Net decrease in net assets resulting from operations was ($2,974) for the
nine months ended September 30, 2025, which consisted of the net realized and
unrealized loss on investment in SUI, plus the Sponsor’s Fee of $195. Net assets
decreased to $10,103 at September 30, 2025, a 20% decrease for the nine-month
period. The decrease in net assets was due to the aforementioned SUI price
depreciation and the withdrawal of approximately 57,917 SUI to pay the foregoing
Sponsor’s Fee, partially offset by the contribution of approximately 127,090 SUI
with a value of $441 to the Trust in connection with Share creations.
Net
realized and unrealized gain on investment in SUI for the period from August 1,
2024 (the commencement of the Trust’s operations) to September 30, 2024 was
$1,256, which includes a realized gain of $1 on the transfer of SUI to pay the
Sponsor’s Fee and net change in unrealized appreciation on investment in SUI of
$1,255. Net realized and unrealized gain on investment in SUI for the period was
driven by SUI price appreciation from $0.69 per SUI as of August 1, 2024 to
$1.81 per SUI as of September 30, 2024. Net increase in net assets resulting
from operations was $1,252 for the period from August 1, 2024 (the commencement
of the Trust's operations) to September 30, 2024, which consisted of the net
realized and unrealized gain on investment in SUI, less the Sponsor’s Fee of $4.
Net assets increased to $2,544 at September 30, 2024. The increase in net assets
was due to the contribution of approximately 1,409,572 SUI with a value of
$1,293 to the Trust in connection with Share creations and the aforementioned
SUI price appreciation, partially offset by the withdrawal of approximately
3,845 SUI to pay the foregoing Sponsor’s Fee.
Financial
Highlights for the Period from August 1, 2024 (the commencement of the Trust’s
operations) to December 31, 2024
(All
amounts in the following table and the subsequent paragraphs, except Share, per
Share, SUI and price of SUI amounts, are in thousands)
|
|
|
|
|
|
|
|
August
1, 2024 (the
Commencement of the Trust’s Operations) to December 31,
2024 |
|
|
Net
realized and unrealized gain on investment in SUI |
|
$ |
4,977 |
|
|
Net
increase in net assets resulting from operations |
|
$ |
4,932 |
|
|
Net
assets(1) |
|
$ |
12,635 |
|
(1)
Net
assets in the above table and subsequent paragraphs are calculated in accordance
with U.S. GAAP based on the Digital Asset Market price of SUI on the Digital
Asset Trading Platform that the Trust considered its principal market, as of
4:00 p.m., New York time, on the valuation date.
Net
realized and unrealized gain on investment in SUI for the period from August 1,
2024 (the commencement of the Trust's operations) to December 31, 2024 was
$4,977, which includes a realized gain of $22 on the transfer of SUI to pay the
Sponsor’s Fee and net change in unrealized appreciation on investment in SUI of
$4,956. Net realized and unrealized gain on investment in SUI for the period was
driven by SUI price appreciation from $0.69 per SUI as of August 1, 2024 to
$4.17 per SUI as of December 31, 2024. Net increase in net assets resulting from
operations was $4,932 for the period from August 1, 2024 (the commencement of
the Trust's operations) to December 31, 2024, which consisted of the net
realized and unrealized gain on investment in SUI, less the Sponsor’s Fee of
$45. Net assets increased to $12,635 at December 31, 2024. The increase in net
assets was due to the contribution of approximately 3,045,980 SUI with a value
of $7,703 to the Trust in connection with Share creations and the aforementioned
SUI price appreciation, partially offset by the withdrawal of approximately
16,103 SUI to pay the foregoing Sponsor’s Fee.
Cash
Resources and Liquidity
The
Trust only receives and holds cash in order to facilitate creations and
redemptions pursuant to Cash Orders, and does not otherwise have or maintain a
cash balance at any time. When selling SUI and, subject to NYSE Arca obtaining
regulatory approval from the SEC, Incidental Rights and/or IR Virtual Currency
in the Digital Asset Market to pay Additional Trust Expenses on behalf of the
Trust, the Sponsor endeavors to sell the exact amount of SUI, Incidental Rights
and/or IR Virtual Currency needed to pay expenses in order to minimize the
Trust’s holdings of assets other than SUI. In addition, upon the consummation or
deemed failure of a Cash Order to create or redeem Baskets, the Trust will
promptly return any excess cash it continues to hold with respect to such Cash
Order to the applicable counterparty. As a consequence, the Sponsor expects that
the Trust will not record any cash flow from its operations and that its cash
balance will be zero at the end of each reporting period. Furthermore, the Trust
is not a party to any off-balance sheet arrangements.
Generally,
the Trust does not intend to hold cash, except in connection with Cash Orders
for creations or redemptions of Baskets. Cash includes non-interest bearing
non-restricted cash with one institution. Cash in a bank deposit account, at
times, may exceed U.S. federally insured limits. The Trust has not experienced
any losses in such accounts and does not believe it is exposed to any
significant credit risk on such bank deposits.
In
exchange for the Sponsor’s Fee, the Sponsor has agreed to assume most of the
expenses incurred by the Trust. As a result, the only ordinary expense of the
Trust expected to be incurred is the Sponsor’s Fee and, if applicable, any
Additional Trust Expenses. The Trust is not aware of any trends, demands,
conditions or events that are reasonably likely to result in material changes to
its liquidity needs.
Selected
Operating Data
Three
and Nine Months Ended September 30, 2025 and for the Period from August 1, 2024
(the commencement of the Trust’s operations) to September 30, 2024
(All
SUI balances are rounded to the nearest whole SUI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Nine
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
SUI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
|
3,118,640 |
|
|
|
- |
|
|
|
3,029,877 |
|
|
|
- |
|
|
Creations |
|
|
- |
|
|
|
1,409,572 |
|
|
|
127,090 |
|
|
|
1,409,572 |
|
|
Sponsor’s
Fee, related party |
|
|
(19,590 |
) |
|
|
(3,845 |
) |
|
|
(57,917 |
) |
|
|
(3,845 |
) |
|
Closing
balance |
|
|
3,099,050 |
|
|
|
1,405,727 |
|
|
|
3,099,050 |
|
|
|
1,405,727 |
|
|
Accrued
but unpaid Sponsor’s Fee, related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Net
closing balance |
|
|
3,099,050 |
|
|
|
1,405,727 |
|
|
|
3,099,050 |
|
|
|
1,405,727 |
|
|
Number
of Shares(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
|
212,700 |
|
|
|
- |
|
|
|
204,100 |
|
|
|
- |
|
|
Creations |
|
|
- |
|
|
|
94,100 |
|
|
|
8,600 |
|
|
|
94,100 |
|
|
Closing
balance |
|
|
212,700 |
|
|
|
94,100 |
|
|
|
212,700 |
|
|
|
94,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of September 30, |
|
|
|
|
2025 |
|
|
2024 |
|
|
Price of
SUI on principal market(1) |
|
$ |
3.26 |
|
|
$ |
1.81 |
|
|
Principal
Market NAV per Share(2) |
|
$ |
47.50 |
|
|
$ |
27.04 |
|
|
Index
Price |
|
$ |
3.23 |
|
|
$ |
1.81 |
|
|
NAV per
Share(3) |
|
$ |
47.06 |
|
|
$ |
27.04 |
|
(1)
The
Trust performed an assessment of the principal market at September 30, 2025 and
2024, and identified the principal market as Coinbase.
(2)
As
of September 30, 2025 and 2024 the Principal Market NAV per Share (rounded to
the nearest penny) was calculated using the fair value of SUI based on the price
provided by Coinbase, the Digital Asset Trading Platform that the Trust
considered its principal market, as of 4:00 p.m., New York time, on the
valuation date.
(3)
The
Trust’s NAV per Share is derived from the Index Price as represented by the
Index as of 4:00 p.m., New York time, on the valuation date. The Trust’s NAV per
Share is calculated using a non-GAAP methodology where the price is derived from
multiple Digital Asset Trading Platforms. See the section entitled “Business
—Valuation of SUI and Determination of NAV” above for a description of the
Trust’s NAV per Share. The Digital Asset Trading Platforms included in the Index
(the “Constituent Trading Platforms”) as of both September 30, 2025 and 2024,
were Coinbase, Crypto.com and Kraken.
For
accounting purposes, the Trust reflects creations and the SUI receivable with
respect to such creations on the date of receipt of a notification of a creation
but does not issue Shares until the requisite amount of SUI is received. For the
periods ended September 30, 2025 and 2024, the Trust did not accept redemption
requests from shareholders. Subject to receipt of regulatory approval from the
SEC and approval by the Sponsor in its sole discretion, the Trust may in the
future operate a redemption program.
As
of September 30, 2025, the Trust had a net closing balance with a value of
$10,009,930, based on the Index Price (non-GAAP methodology). As of September
30, 2025, the Trust had a total market value of $10,102,902, based on the
Digital Asset Market price of SUI on the Trust’s principal market
(Coinbase).
As
of September 30, 2024, the Trust had a net closing balance with a value of
$2,544,366, based on the Index Price (non-GAAP methodology). As of September 30,
2024, the Trust had a total market value of $2,544,365, based on the Digital
Asset Market price of SUI on the Trust’s principal market (Coinbase)
For
the Period from August 1, 2024 (the commencement of the Trust’s operations) to
December 31, 2024 (unaudited)
(All
SUI balances are rounded to the nearest whole SUI)
|
|
|
|
|
|
|
|
August
1, 2024 (the
Commencement of the Trust’s Operations) to December 31,
2024 |
|
|
SUI: |
|
|
|
|
Opening
balance |
|
|
- |
|
|
Creations |
|
|
3,045,980 |
|
|
Sponsor’s
Fee, related party |
|
|
(16,103 |
) |
|
Closing
balance |
|
|
3,029,877 |
|
|
Accrued
but unpaid Sponsor’s Fee, related party |
|
|
- |
|
|
Net
closing balance |
|
|
3,029,877 |
|
|
Number
of Shares(1)(2): |
|
|
|
|
Opening
balance |
|
|
- |
|
|
Creations |
|
|
204,100 |
|
|
Closing
balance |
|
|
204,100 |
|
|
|
|
|
|
|
|
|
As
of December 31, 2024 |
|
|
Price of
SUI on principal market(1) |
|
$ |
4.17 |
|
|
Principal
Market NAV per Share(2) |
|
$ |
61.90 |
|
|
Index
Price |
|
$ |
4.20 |
|
|
NAV per
Share(3) |
|
$ |
62.35 |
|
(1)
The
Trust performed an assessment of the principal market at December 31, 2024, and
identified the principal market as Coinbase.
(2)
As
of December 31, 2024 and 2023, the Principal Market NAV per Share was calculated
using the fair value of SUI based on the price provided by Coinbase, the Digital
Asset Trading Platform that the Trust considered its principal market, as of
4:00 p.m., New York time, on the valuation date.
(3)
The
Trust’s NAV per Share is derived from the Index Price as represented by the
Index as of 4:00 p.m., New York time, on the valuation date. The Trust’s NAV per
Share is calculated using a non-GAAP methodology where the price is derived from
multiple Digital Asset Trading Platforms. See the section entitled
“—Business—Valuation of SUI and Determination of NAV” above for a description of
the Trust’s NAV per Share. The Digital Asset Trading Platforms included in the
Index as of December 31, 2024 were Coinbase, Crypto.com, and Kraken. The Digital
Asset Trading Platforms included in the Index (the “Constituent Trading
Platforms”) as of December 31, 2024 were Coinbase, Crypto.com, and
Kraken.
For
accounting purposes, the Trust reflects creations and the SUI receivable with
respect to such creations on the date of receipt of a notification of a creation
but does not issue Shares until the requisite amount of SUI is received. At this
time, the Trust is not accepting redemption requests from shareholders. Subject
to receipt of regulatory approval from the SEC and approval by the Sponsor in
its sole discretion, the Trust may in the future operate a redemption
program.
As
of December 31, 2024, the Trust had a net closing balance with a value of
$12,725,485, based on the Index Price (non-GAAP methodology). As of December 31,
2024, the Trust had a total market value of $12,634,588, based on the Digital
Asset Market price of SUI on the Trust’s principal market (Coinbase).
Historical
NAV and SUI Prices
As
movements in the price of SUI will directly affect the price of the Shares,
investors should understand recent movements
in the price of SUI. Investors, however, should also be aware that past
movements in the SUI price are not indicators of future movements. Movements may
be influenced by various factors, including, but not limited to, government
regulation, security breaches experienced by service providers, as well as
political and economic uncertainties around the world.
Investing
in the Shares does not insulate the investor from certain risks, including price
volatility. The following chart illustrates the movement in the Trust’s NAV per
Share (non-GAAP) vs the Index Price (non-GAAP) and the Trust’s Principal Market
NAV per Share from August 1, 2024 (the commencement of the Trust’s operations)
to September 30, 2025:
For
more information on the determination of the Trust’s NAV, see “Business
—Valuation of SUI and Determination of NAV.”
The
following table illustrates the movements in the Index Price of SUI, as reported
on the Trust’s principal market, from August 1, 2024 (the commencement of the
Trust’s operations) to September 30, 2025. During such period, the price of SUI
has ranged from $0.53 to $5.23, with the straight average being $2.95 through
September 30, 2025. The
Sponsor has not observed a material difference between the Index Price and
average prices from the Constituent Trading Platforms individually or as a
group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
|
|
|
|
|
|
|
Period |
|
Average |
|
|
Index
Price |
|
|
Date |
|
Index
Price |
|
|
Date |
|
End
of
period |
|
|
Last
business
day |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2024 |
|
$ |
1.02 |
|
|
$ |
1.83 |
|
|
9/29/2024 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
1.81 |
|
|
$ |
1.81 |
|
|
Twelve
months ended September 30, 2025 |
|
$ |
3.28 |
|
|
$ |
5.23 |
|
|
1/4/2025 |
|
$ |
1.67 |
|
|
10/28/2024 |
|
$ |
3.23 |
|
|
$ |
3.23 |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2025 |
|
$ |
2.95 |
|
|
$ |
5.23 |
|
|
1/4/2025 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
3.23 |
|
|
$ |
3.23 |
|
The
following table illustrates the movements in the Digital Asset Market price of
SUI from August 1, 2024 (the commencement of the Trust’s operations) to
September 30, 2025. During such period, the price of SUI has ranged from $0.53
to $5.24, with the straight average being $2.95 through September 30,
2025.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
|
|
|
|
|
|
|
Period |
|
Average |
|
|
Digital
Asset
Market
Price |
|
|
Date |
|
Digital
Asset
Market
Price |
|
|
Date |
|
End
of
period |
|
|
Last
business
day |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2024 |
|
$ |
1.02 |
|
|
$ |
1.83 |
|
|
9/29/2024 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
1.81 |
|
|
$ |
1.81 |
|
|
Twelve
months ended September 30, 2025 |
|
$ |
3.28 |
|
|
$ |
5.24 |
|
|
1/4/2025 |
|
$ |
1.68 |
|
|
10/28/2024 |
|
$ |
3.26 |
|
|
$ |
3.26 |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2025 |
|
$ |
2.95 |
|
|
$ |
5.24 |
|
|
1/4/2025 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
3.26 |
|
|
$ |
3.26 |
|
Quantitative
and Qualitative Disclosures about Market Risk
The
Trust Agreement does not authorize the Trust to borrow for payment of the
Trust’s ordinary expenses. The Trust does not engage in transactions in foreign
currencies which could expose the Trust or holders of Shares to any foreign
currency related market risk. The Trust does not invest in derivative financial
instruments and has no foreign operations or long-term debt
instruments.
Business
Overview
of the Trust and the Shares
Grayscale
Sui Trust (SUI) (the “Trust”) is a Delaware Statutory Trust that was formed on
April 30, 2024 by the filing of the Certificate of Trust with the Delaware
Secretary of State in accordance with the provisions of the Delaware Statutory
Trust Act. Prior to the effectiveness of the registration statement of which
this prospectus forms a part, the name of the Trust was Grayscale Sui Trust
(SUI). In connection with the effectiveness of this registration statement and
the listing of the Shares on NYSE Arca, the Sponsor intends to rename the Trust
as Grayscale Sui Trust ETF by filing a Certificate of Amendment to the
Certificate of Trust with the Delaware Secretary of State in accordance with the
provisions of the DSTA. The Trust’s purpose is to hold “SUI”, which are digital
assets that are created and transmitted through the operations of the
peer-to-peer Sui Network, a decentralized network of computers that operates on
cryptographic protocols. Unlike other digital assets such as Bitcoin, which are
solely created through a progressive process, 10 billion SUI were created in
connection with the launch of the Sui Network. Out of the 10 billion initially
issued SUI, approximately 3,569 million SUI have entered circulation as of
September 30, 2025. As of September 30, 2025, the 24-hour trading volume of SUI
was approximately $1.0 billion. As of September 30, 2025, the aggregate market
value of SUI was $11.6 billion. As of September 30, 2025, SUI was the fifteenth
largest digital asset by market capitalization, as tracked by
CoinMarketCap.com.
As
a passive investment vehicle, the Trust’s investment objective is for the value
of the Shares (based on SUI per Share) to reflect the value of the SUI held by
the Trust, including any SUI earned as Staking Consideration (to the extent that
the Staking Condition has been satisfied and Staking is implemented), determined
by reference to the Index Price, less the Trust’s expenses and other
liabilities. The Trust does not seek to generate returns beyond tracking the
price of SUI and any SUI earned as Staking Consideration (to the extent that the
Staking Condition has been satisfied and Staking is implemented). There can be
no assurance that the Trust will be able to achieve its investment objective.
The Trust will not utilize leverage, derivatives or any similar arrangements in
seeking to meet its investment objective.
From
and after the date of this prospectus, the Trust intends to issue Shares on an
ongoing basis pursuant to this registration statement, intends to rely on an
exemption or other relief from the SEC under Regulation M to operate a
redemption program, and intends to list the Shares on NYSE Arca under the symbol
“GSUI.” The Shares will be distributed by Authorized Participants who will be
able to take advantage of arbitrage opportunities to keep the value of the
Shares closely linked to the Index Price (referred to as the “arbitrage
mechanism”). In particular, upon listing on NYSE Arca, the Sponsor expects there
to be a net creation of Shares if the Shares trade at a premium to NAV per Share
and a net redemption of Shares if the Shares trade at a discount to NAV per
Share, representing the effective functioning of the arbitrage
mechanism.
Thereafter,
it is expected that the Shares will be sold by the Authorized Participants to
the public at varying prices to be determined by reference to, among other
considerations, the price of the SUI represented by each Share and the trading
price of the Shares on NYSE Arca at the time of each sale. There will not be an
“initial” creation of Baskets upon the Trust’s listing on NYSE Arca given that
the Trust already has created Baskets of Shares that will continue to be
outstanding as of such date.
Until
December 31, 2024, Grayscale Investments, LLC was the sponsor of the Trust. As a
result of the Reorganization (as defined herein), on January 1, 2025, Grayscale
Investments Sponsors, LLC (“GSIS”) and Grayscale Operating, LLC (“GSO”),
consolidated subsidiaries of Digital Currency Group, Inc. (“DCG”), became
Co-Sponsors of the Trust. On January 3, 2025 GSO voluntarily withdrew as a
Sponsor of the Trust, and effective May 3, 2025 GSIS is the sole remaining
Sponsor. Prior to May 3, 2025, all references herein to the “Sponsor” shall be
deemed to include both GSIS and GSO as Sponsors unless the context otherwise
requires, and on or after May 3, 2025, all references herein to the “Sponsor”
shall refer only to GSIS. See “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Recent Developments” for more information.
CSC Delaware Trust Company is the trustee (the “Trustee”) of the Trust, The Bank
of New York Mellon is the transfer agent (in such capacity, the “Transfer
Agent”) and the administrator (in such capacity, the “Administrator”) of the
Trust, Continental Stock Transfer & Trust Company is the co-transfer agent
of the Trust (the “Co-Transfer Agent”), Coinbase, Inc. is the prime broker (the
“Prime Broker”) of the Trust and Coinbase Custody Trust Company, LLC is the
custodian (the “Custodian”).
The
Trust issues Shares only in one or more blocks of 10,000 Shares (a block of
10,000 Shares is called a “Basket”) to certain authorized participants
(“Authorized Participants”) from time to time. Baskets are offered in exchange
for SUI (or cash to acquire SUI). Through its redemption program, the Trust will
redeem Shares from Authorized Participants on an ongoing basis. The U.S. dollar
value of a Basket of Shares at 4:00 p.m., New York time, on the trade date of a
creation or redemption order is equal to the Basket Amount, which is the amount
of SUI required to create or redeem a Basket of Shares, multiplied by the “Index
Price,” which is the U.S. dollar value of a SUI derived from the Digital Asset
Trading Platforms that are reflected in, from
the commencement of the Trust’s operations until September 30, 2025,
the CoinDesk SUI Reference Rate Price (the “Index”) at 4:00 p.m., New York time,
on each business day. The Index Price is calculated using non-GAAP methodology
and is not used in the Trust’s financial statements.
Prior
to the listing of the Shares on NYSE Arca, the Sponsor intends to change the
Index to the CoinDesk SUI CCIXber Reference Rate. See “Business—Overview of the
Sui Industry and Market—The Index and the Index Price.”
The
Basket Amount on any trade date is determined by dividing (x) the amount of SUI
owned by the Trust at 4:00 p.m., New York time, on such trade date, after
deducting the amount of SUI representing the U.S. dollar value of accrued but
unpaid fees and expenses of the Trust (converted using the Index Price at such
time, and carried to the eighth decimal place), by (y) the number of Shares
outstanding at such time (with the quotient so obtained calculated to one
one-hundred-millionth of one SUI (i.e., carried to the eighth decimal place)),
and multiplying such quotient by 10,000.
The
Trust will create Baskets of Shares only upon receipt of SUI and will redeem
Shares only by distributing SUI or proceeds from the disposition of SUI. At this
time, Authorized Participants may only submit orders to create or redeem Shares
through transactions that are referred to as “Cash Orders” in this prospectus.
Cash Orders are made through the participation of a Liquidity Provider (as
defined herein) and facilitated by the Transfer Agent, as described in
“Description of Creation and Redemption of Shares.” Authorized Participants must
pay a Variable Fee (as defined herein) in connection with certain Cash
Orders.
The
Shares are neither interests in nor obligations of the Sponsor or the Trustee.
As provided under the Trust Agreement, the Trust’s assets will not be loaned or
pledged, or serve as collateral for any loan, margin, rehypothecation, or other
similar activity to which the Sponsor, the Trust or any of their respective
affiliates are a party.
The
Sponsor maintains an Internet website at etfs.grayscale.com/gsui. Additional
information regarding the Trust may also be found on the SEC’s EDGAR database at
www.sec.gov.
The
contents of the websites referred to above and any websites referred to herein
are not incorporated into this filing or any other report or documents we file
with or furnish to the SEC. Further, our references to the URLs for these
websites are intended to be inactive textual references only.
Investment
Objective
The
Trust’s investment objective is for the value of the Shares (based on SUI per
Share) to reflect the value of the SUI held by the Trust, including SUI earned
as Staking Consideration (to the extent that the Staking Condition is satisfied
and Staking is implemented), determined by reference to the Index Price, less
the Trust’s expenses and other liabilities. There can be no assurance that the
Trust will be able to achieve its investment objective. Although we expect the
arbitrage mechanism to keep the value of the Shares closely linked to the Index
Price, the Shares may trade at a premium or discount to the value of the SUI
held by the Trust, determined by reference to the Index Price, less the Trust’s
expenses and other liabilities, and any such premium or discount may be
significant.
While
an investment in the Shares is not a direct investment in SUI, the Shares are
designed to provide investors with a cost-effective and convenient way to gain
investment exposure to SUI. A substantial direct investment in SUI may require
expensive and sometimes complicated arrangements in connection with the
acquisition, security and safekeeping of the SUI and may involve the payment of
substantial fees to acquire such SUI from third-party facilitators through cash
payments of U.S. dollars. Because the value of the Shares is designed to be
correlated with the value of the SUI held by the Trust, it is important to
understand the investment attributes of, and the market for, SUI. To date, the
Trust has not met its investment objective and the Shares quoted on OTCQX have
not reflected the value of the SUI held by the Trust, less the Trust’s expenses
and other liabilities, but instead have traded at both premiums and discounts to
such value, which at times has been substantial.
The
Trust’s SUI are carried, for financial statement purposes, at fair value as
required by U.S. generally accepted accounting principles (“GAAP”). The Trust
determines the fair value of SUI based on the price provided by the Digital
Asset Market (defined below) that the Trust considers its principal market as of
4:00 p.m., New York time, on the valuation date. The net asset value of the
Trust determined on a GAAP basis is referred to in this prospectus as “NAV.”
“Digital Asset Market” means a “Brokered Market,” “Dealer Market,”
“Principal-to-Principal Market” or “Exchange Market,” as each such term is
defined in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Master Glossary. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Critical Accounting
Policies and Estimates—Principal Market and Fair Value Determination” in this
prospectus for more information on the Trust’s principal market
selection.
The
Trust uses the Index Price to calculate its “NAV,” which is the aggregate value,
expressed in U.S. dollars, of the Trust’s assets (other than U.S. dollars or
other fiat currency), less the U.S. dollar value of the Trust’s expenses and
other liabilities calculated in the manner set forth under “—Valuation of SUI
and Determination of NAV.” “NAV per Share” is calculated by dividing NAV by the
number of Shares then outstanding.
NAV
and NAV per Share are not measures calculated in accordance with GAAP. NAV is
not intended to be a substitute for the Trust’s Principal Market NAV calculated
in accordance with GAAP, and NAV per Share is not intended to be a substitute
for the Trust’s Principal Market NAV per Share calculated in accordance with
GAAP.
Pursuant
to the terms of the Trust Agreement, the Trust is required to dissolve under
certain circumstances. In addition, the Sponsor may, in its sole discretion,
dissolve the Trust for a number of reasons, including if the Sponsor determines,
in its sole discretion, that it is desirable or advisable for any reason to
discontinue the affairs of the Trust. For example, if the Sponsor determines
that SUI is a security under the federal securities laws, whether that
determination is initially made by the Sponsor itself, or because a federal
court upholds an allegation that SUI is a security, the Sponsor does not intend
to permit the Trust to continue holding SUI in a way that would violate the
federal securities laws (and therefore would either dissolve the Trust or
potentially seek to operate the Trust in a manner that complies with the federal
securities laws, including the Investment Company Act of 1940 (the “Investment
Company Act”)). See “—Description of the Trust Agreement—Termination of the
Trust” for additional discussion of the circumstances under which the Trust
could be dissolved. See “Risk Factors—Risk Factors Related to the Trust and the
Shares—The SEC has previously taken the view that SUI is a “security,” and a
final determination that SUI or any other digital asset is a “security” may
adversely affect the value of SUI and the value of the Shares, and result in
potentially extraordinary, nonrecurring expenses to, or termination of, the
Trust.”
Characteristics
of the Shares
The
Shares are intended to offer investors an opportunity to gain exposure to
digital assets through an investment in securities. The logistics of accepting,
transferring and safekeeping of SUI are dealt with by the Sponsor and Custodian,
and the related expenses are built into the value of the Shares. Therefore,
shareholders do not have additional tasks or costs over and above those
generally associated with investing in any other security.
The
Shares have certain other key characteristics, including the
following:
•
Easily
Accessible and Relatively Cost Efficient.
Investors in the Shares can also directly access the Digital Asset Markets. The
Sponsor believes that investors will be able to more effectively implement
strategic and tactical asset allocation strategies that use SUI by using the
Shares instead of directly purchasing and holding SUI,
and for many investors, transaction costs related to the Shares will be lower
than those associated with the direct purchase, storage and safekeeping of
SUI.
•
Market-Traded
and Transparent.
The
Shares are currently quoted on OTCQX under the ticker symbol “GSUI” and
following the effectiveness of the registration statement of which this
prospectus forms a part, the Shares are
expected to be listed on NYSE Arca. The Sponsor believes the listing of the
Shares on NYSE Arca will provide investors with an efficient means to implement
various investment strategies. The Trust will not hold or employ any derivative
securities. Furthermore, the value of the Trust’s assets will be reported each
day on etfs.grayscale.com/gsui.
•
Minimal
Credit Risk.
The Shares represent an interest in actual SUI owned by the Trust. The Trust’s
SUI are not subject to borrowing arrangements with third parties and are subject
to counterparty and minimal credit risk with respect to the Custodian. This
contrasts with the other financial products such as CoinShares exchange-traded
notes, TeraExchange swaps and SUI futures and options traded on the Chicago
Mercantile Exchange and the Intercontinental Exchange through which investors
gain exposure to digital assets through the use of derivatives that are subject
to counterparty and credit risks.
•
Safekeeping
System.
The Custodian has been appointed to control and secure the SUI for the Trust
using offline storage, or cold storage, mechanisms to secure the Trust’s private
key “shards”. The hardware, software, administration and continued technological
development that are used by the Custodian may not be available or
cost-effective for many investors.
The
Trust differentiates itself from many competing digital asset financial vehicles
in the following ways:
•
Custodian.
The Custodian that holds the private key shards associated with the Trust’s SUI
is Coinbase Custody Trust Company, LLC. Other digital asset financial vehicles
that use cold storage may not use a custodian to hold their private
keys.
•
Cold
Storage of Private Keys.
The private key shards associated with the Trust’s SUI are kept in cold storage,
which means that the Trust’s SUI are disconnected and/or deleted entirely from
the internet. See “—Custody of the Trust’s SUI”
for more information relating to the storage and retrieval of the Trust’s
private keys to and from cold storage. Other digital asset financial vehicles
may not utilize cold storage or may utilize less effective cold storage-related
hardware and security protocols.
•
Location
of Private Vaults.
Private key shards associated with the Trust’s SUI are distributed
geographically by the Custodian in secure vaults around the world, including in
the United States. The locations of the secure vaults may change regularly and
are kept confidential by the Custodian for security purposes.
•
Enhanced
Security.
Transfers from the Trust’s Vault Balance require certain security procedures,
including but not limited to, multiple encrypted private key shards, usernames,
passwords and 2-step verification. Multiple private key shards held by the
Custodian must be combined to reconstitute the private key to sign any
transaction in order to transfer the Trust’s SUI.
Private key shards are distributed geographically in secure vaults around the
world, including in the United States. As a result, if any one secure vault is
ever compromised, this event will have no impact on the ability of the Trust to
access its assets, other than a possible delay in operations, while one or more
of the other secure vaults is used instead. These security procedures are
intended to remove single points of failure in the protection of the Trust’s
SUI.
•
Custodian
Audits.
The Custodian has agreed to allow the Trust and the Sponsor to take such steps
as necessary to verify that satisfactory internal control systems and procedures
are in place.
•
Directly
Held SUI.
The Trust directly owns actual SUI held through the Custodian. This may differ
from other digital asset financial vehicles that provide SUI exposure through
other means, such as the use of financial or derivative
instruments.
•
Sponsor’s
Fee.
The Sponsor’s Fee is a competitive factor that may influence the value of the
Shares.
Activities
of the Trust
The
activities of the Trust are limited to (i) issuing Baskets in exchange for SUI
(or cash to acquire SUI) transferred to the Trust as consideration in connection
with the creations, (ii) transferring or selling SUI as necessary to cover the
Sponsor’s Fee, the Sponsor’s Staking Fee and/or any Additional Trust Expenses,
(iii) transferring or disposing of SUI to retire Baskets surrendered for
redemption, (iv) causing the Sponsor to sell SUI on the termination
of
the Trust, (v) making distributions of Incidental Rights and/or IR Virtual
Currency or cash from the sale thereof (subject to NYSE Arca obtaining
regulatory approval from the SEC), as described in “—Incidental Rights and IR
Virtual Currency” below, (vi) engaging in all administrative and security
procedures necessary to accomplish such activities in accordance with the
provisions of the Trust Agreement, the Prime Broker Agreement, the Index License
Agreement, the Participant Agreements and the Liquidity Provider Agreements and
(vii) engage in any form of Staking, but only if (and, then, only to the extent
that) the Staking Condition has been satisfied with respect thereto.
The
Trust may engage in any lawful activity necessary or desirable in order to
facilitate shareholders’ access to Incidental Rights or IR Virtual Currency
(subject to NYSE Arca obtaining regulatory approval from the SEC), provided that
such activities do not conflict with the terms of the Trust Agreement. The Trust
will not be actively managed. It will not engage in any activities designed to
obtain a profit from, or to ameliorate losses caused by changes
in the market prices of SUI.
Incidental
Rights and IR Virtual Currency
The
Sponsor has notified the Prime Broker, the Custodian and Coinbase Credit, on
behalf of the Trust (such notices, together, the “Pre-Creation/Redemption
Abandonment Notices”) that the Trust will abandon, irrevocably and for no direct
or indirect consideration, effective immediately prior to each time at which the
Trust creates or redeems Shares (each such time, a “Creation Time” or
“Redemption Time”, respectively), all Incidental Rights and IR Virtual Currency
to which it would otherwise be entitled as of such time. An abandonment made
pursuant to the Pre-Creation/Redemption Abandonment Notices is referred to
herein as a “Pre-Creation/Redemption Abandonment.” Pursuant to the
Pre-Creation/Redemption Abandonment Notices, a Pre-Creation/Redemption
Abandonment would not apply to any Incidental Right or IR Virtual Currency if
(i) the Trust has taken, or is taking at such time, an “Affirmative Action” to
acquire or abandon such Incidental Right or IR Virtual Currency at any time
prior to the relevant Creation Time or Redemption Time or (ii) such Incidental
Right or IR Virtual Currency has been subject to a previous
Pre-Creation/Redemption Abandonment. An “Affirmative Action” refers to a written
notification from the Sponsor to the Prime Broker, the Custodian or Coinbase
Credit of the Trust’s intention (i) to acquire and/or retain an Incidental Right
and/or IR Virtual Currency or (ii) to abandon, with effect prior to the relevant
Creation Time or Redemption Time, an Incidental Right and/or IR Virtual
Currency.
As
a result of the Pre-Creation/Redemption Abandonment Notices, the Trust has
abandoned, prior to each relevant Creation Time or Redemption Time, any
Incidental Right or IR Virtual Currency that it may have had any right to
receive at such time. The Trust has no right to receive any Incidental Right or
IR Virtual Currency abandoned pursuant to either the Pre-Creation/Redemption
Abandonment Notices or Affirmative Actions. Furthermore, the Prime Broker, the
Custodian and Coinbase Credit have no authority, pursuant to the Prime Broker
Agreement or otherwise, to exercise, obtain or hold, as the case may be, any
such abandoned Incidental Right or IR Virtual Currency on behalf of the Trust or
to transfer any such abandoned Incidental Right or IR Virtual Currency to the
Trust if the Trust terminates its custodial arrangement with the Prime Broker,
the Custodian and Coinbase Credit. In addition, the Sponsor has committed to
cause the Trust not to take any Affirmative Action to acquire any Incidental
Right or IR Virtual Currency
and,
therefore, irrevocably abandon any Incidental Right and IR Virtual Currency to
which the Trust may become entitled in the future.
Because
the Sponsor has committed to causing the Trust to irrevocably abandon all
Incidental Rights and IR Virtual Currency to which the Trust otherwise would
become entitled in the future, and causing the Trust not to take any Affirmative
Actions, the Trust will not receive any direct or indirect consideration for the
Incidental Rights or IR Virtual Currency and thus the value of the Shares will
not reflect the value of the Incidental Rights or IR Virtual Currency. In
addition, in the event the Sponsor seeks to change the Trust’s policy with
respect to Incidental Rights or IR Virtual Currency, an application would need
to be filed with the SEC by NYSE Arca seeking approval to amend its listing
rules to permit the Trust to distribute the Incidental Rights or IR Virtual
Currency in kind to an agent of the shareholders for resale by such agent.
However, there can be no assurance as to whether or when the Sponsor would make
such a decision, or when NYSE Arca will seek or obtain this approval, if at all.
See “Risk Factors—Risks Related to the Trust and the Shares—Shareholders will
not receive the benefits of any forks or airdrops.”
The
Sponsor has controls in place to monitor for material hard forks or airdrops.
The Sponsor will notify investors of any material change to its policy with
respect to Incidental Rights and IR Virtual Currency by filing a current report
on Form 8-K.
Secondary
Market Trading
While
the Trust’s investment objective is for the value of the Shares (based on SUI
per Share) to reflect the value of SUI held by the Trust, including SUI earned
as Staking Consideration (to the extent that the Staking Condition is satisfied
and Staking is implemented), determined by reference to the Index Price, less
the Trust’s expenses and other liabilities, the Shares may trade in the
Secondary Market on NYSE Arca (or on another Secondary Market in the future) at
prices that are lower or higher than the NAV per Share. The amount of the
discount or premium in the trading price relative to the NAV per Share may be
influenced by non-concurrent trading hours and liquidity between NYSE Arca and
larger Digital Asset Trading Platforms. While the Shares are expected to be
listed on NYSE Arca and trade during NYSE Arca’s Core Trading Session from 9:30
a.m. to 4:00 p.m., New York time, liquidity in the Digital Asset Markets may
fluctuate depending upon the volume and availability of larger Digital Asset
Trading Platforms. As a result, during periods in which Digital Asset Market
liquidity is limited or a major Digital Asset Trading Platform is off-line,
trading spreads, and the resulting premium or discount, on the Shares may
widen.
Overview
of the Sui Industry and Market
SUI
is a digital asset that is created and transmitted through the operations of the
peer-to-peer Sui Network, a decentralized network of computers that operates on
cryptographic protocols. No single entity owns or operates the Sui Network, the
infrastructure of which is collectively maintained by a decentralized user base.
The Sui Network allows people to exchange tokens of value, called SUI, which are
recorded on a public transaction ledger known as a blockchain. SUI can be used
to pay for goods and services, including computational power on the Sui Network,
or it can be converted to fiat currencies, such as the U.S. dollar, at rates
determined on Digital Asset Trading Platforms or in individual
end-user-to-end-user transactions under a barter system. Furthermore, the Sui
Network was designed to allow users to write and implement smart contracts—that
is, general-purpose code that executes redundantly across the network and can
instruct the transmission of information and value based on a sophisticated set
of logical conditions. Using smart contracts, users can create markets, store
registries of debts or promises, represent the ownership of property, move funds
in accordance with conditional instructions and create digital assets other than
SUI on the Sui Network. Smart contract operations are executed on the Sui
Network in exchange for payment of SUI. The Sui Network is one of a number of
projects intended to expand blockchain use beyond just a peer-to-peer money
system.
The
Sui Network employs a proof-of-stake model to incentivize SUI holders to
validate transactions. Unlike proof-of-work, in which miners expend
computational resources to compete to validate transactions and are rewarded
coins in proportion to the amount of computational resources expended, in
delegated proof-of-stake, validators risk or “stake” coins to participate in
transaction validation and are rewarded coins in proportion to the amount of
coins staked. Any malicious activity, such as disagreeing with the eventual
consensus or otherwise violating protocol rules, results in the forfeiture or
“slashing” of a potential rewards that court have been earned from such staking.
Proof-of-stake is viewed as more energy efficient and scalable than
proof-of-work and is sometimes referred to as “virtual mining”.
To
achieve consensus among validators, the network historically used a dual-layer
design consisting of “Narwhal,” a data-availability layer, and “Bullshark,” a
consensus protocol. However, in July 2024, the Sui Network introduced the
“Mysticeti” consensus mechanism to replace Bullshark, improving transaction
latency and throughput while continuing to use Narwhal for data dissemination.
This configuration enables the Sui Network to verify and execute many
transactions in parallel, rather than sequentially like in prominent blockchains
like Bitcoin and Ethereum.
Sui
was initially conceived in 2021 by Evan Cheng, Adeniyi Abiodun, Sam Blackshear,
George Danezis, and Kostas Chalkias to continue research initially performed
while the group was employed by Meta Platforms, Inc., in which they collaborated
on a digital
asset
project called Diem (formerly known as Libra). Mysten Labs Inc. (“Mysten”), a
for-profit software company which contributes to the development of the Sui
Network, formed as an outgrowth of the Diem project. The Sui Foundation is an
independent nonprofit entity that supports research and development of
open-source technology related to Sui.
Although
Mysten and the Sui Foundation continue to exert significant influence over the
direction of the development of SUI, the Sui Network is decentralized and does
not require governmental authorities or financial institution intermediaries to
create, transmit or determine the value of SUI.
Smart
Contracts and Development on the Sui Network
Smart
contracts are programs that run on a blockchain that can execute automatically
when certain conditions are met. Smart contracts facilitate the exchange of
anything representative of value, such as money, information, property, or
voting rights. Using smart contracts, users can send or receive digital assets,
create markets, store registries of debts or promises, represent ownership of
property or a company, move funds in accordance with conditional instructions
and create new digital assets. Smart contracts on the Sui Network are written in
the programming language “Sui Move,” unlike smart contracts on the Ethereum
Network that are written in Solidity.
Development
on the Sui Network involves building more complex tools on top of smart
contracts, such as decentralized apps (“DApps”); organizations that are
autonomous, known as decentralized autonomous organizations (“DAOs”); and
entirely new decentralized networks. For example, a company that distributes
charitable donations on behalf of users could hold donated funds in smart
contracts that are paid to charities only if the charity satisfies certain
pre-defined conditions.
In
total, as of September 30, 2025, more than 100 DApps are currently built on the
Sui Network, including DApps in the collectible non-fungible token, gaming,
music streaming, and decentralized finance categories.
Additionally,
the Sui Network has been used for decentralized finance (“DeFi”), or open
finance platforms, which seek to democratize access to financial services, such
as borrowing, lending, custody, trading, derivatives and insurance, by removing
third-party intermediaries. DeFi can allow users to lend and earn interest on
their digital assets, exchange one digital asset for another and create
derivative digital assets such as stablecoins, which are digital assets pegged
to a reserve asset such as fiat currency. As of September 30, 2025,
approximately $2.1 billion was being used as collateral on DeFi platforms using
the Sui Network.
In
addition, the Sui Network and other smart contract platforms have been used for
creating non-fungible tokens, or NFTs. Unlike digital assets native to smart
contract platforms which are fungible and enable the payment of fees for smart
contract execution, NFTs allow for digital ownership of assets that convey
certain rights to other digital or real world assets. This new paradigm allows
users to own rights to other assets through NFTs, which enable users to trade
them with others on the Sui Network. For example, an NFT may convey rights to a
digital asset that exists in an online game or a DApp, and users can trade their
NFT in the DApp or game, and carry them to other digital experiences, creating
an entirely new free-market internet-native economy that can be monetized in the
physical world.
Overview
of the Sui Network’s Operations
In
order to own, transfer or use SUI directly on the Sui Network (as opposed to
through an intermediary, such as a custodian), a person generally must have
internet access to connect to the Sui Network. SUI transactions may be made
directly between end-users without the need for a third-party intermediary. To
prevent the possibility of double-spending SUI, a user must notify the Sui
Network of the transaction by broadcasting the transaction data to its network
peers. The Sui Network provides confirmation against double-spending by
memorializing every transaction on its ledger, which is publicly accessible and
transparent. This memorialization and verification against double-spending is
accomplished through the Sui Network validation process, which adds data,
including recent transaction information, to the Sui Network.
Summary
of a SUI Transaction
Prior
to engaging in SUI transactions directly on the Sui Network, a user generally
must first install on its computer or mobile device a Sui Network software
program that will allow the user to generate a private and public key pair
associated with an address on the Sui Network. The Sui Network software program
and the SUI address also enable the user to connect to the Sui Network and
transfer SUI to, and receive SUI from, other users.
Each
Sui Network address, or wallet, is associated with a unique “public key” and
“private key” pair. To receive SUI, the SUI recipient must provide its public
key to the party initiating the transfer. This activity is analogous to a
recipient for a transaction in U.S. dollars providing a routing address in wire
instructions to the payor so that cash may be wired to the recipient’s account.
The payor approves the transfer to the address provided by the recipient by
“signing” a transaction that consists of the recipient’s public
key
with the private key of the address from where the payor is transferring the
SUI. The recipient, however, does not make public or provide to the sender its
related private key.
Neither
the recipient nor the sender reveal their private keys in a transaction, because
the private key authorizes transfer of the funds in that address to other users.
Therefore, if a user loses his or her private key, the user may permanently lose
access to the SUI contained in the associated address. Likewise, SUI is
irretrievably lost if the private key associated with them is deleted and no
backup has been made. When sending SUI, a user’s Sui Network software program
must validate the transaction with the associated private key. In addition,
since every computation on the Sui Network requires processing power, there is a
transaction fee involved with the transfer that is paid by the payor. The
resulting digitally validated transaction is sent by the user’s Sui Network
software program to the Sui Network validators to allow transaction
confirmation.
Sui
Network validators record and confirm transactions when they validate and add
information to the Sui Blockchain. When a validator validates transactions, it
contributes to the formation of certified data structures—sometimes referred to
as blocks—which include data relating to (i) the verification of newly submitted
and accepted transactions and (ii) references necessary to maintain the
continuity of prior transaction records. Validators become aware of outstanding,
unrecorded transactions through the data packet transmission and distribution
mechanisms discussed above.
Some
SUI transactions are conducted “off-blockchain” and are therefore not recorded
in the Sui Blockchain. These “off-blockchain transactions” involve the transfer
of control over, or ownership of, a specific digital wallet holding SUI or the
reallocation of ownership of certain SUI in a pooled-ownership digital wallet,
such as a digital wallet owned by a Digital Asset Trading Platform. In contrast
to on-blockchain transactions, which are publicly recorded on the Sui
Blockchain, information and data regarding off-blockchain transactions are
generally not publicly available. Therefore, off-blockchain transactions are not
truly Sui transactions in that they do not involve the transfer of transaction
data on the Sui Network and do not reflect a movement of SUI between addresses
recorded in the Sui Blockchain. For these reasons, off-blockchain transactions
are subject to risks as any such transfer of SUI ownership is not protected by
the protocol behind the Sui Network or recorded in, and validated through, the
blockchain mechanism.
Creation
of SUI
Initial
Creation of SUI
Unlike
other digital assets such as Bitcoin, which are solely created through a
progressive mining process, 10 billion SUI were created in connection with the
launch of the Sui Network. Following the launch of the Sui Network, no further
SUI shall be created without modifying the Sui protocol.
The
initial 10 billion SUI were distributed as follows:
•
Private
Sale:
approximately 1.41 billion SUI, or 14.1% of the initial supply, was sold in
private sales to venture capital and other investors conducted between 2021 and
2022.
•
Community
Reserve:
approximately 1.06 billion SUI, or 10.6% of the initial supply, was issued to be
disbursed by the Sui Foundation towards supporting community-run validators and
grants for developers, community ambassadors, and other similar
parties.
•
Community
Access Program:
approximately 613 million SUI, or 6.1% of the initial supply, was offered for
purchase to early contributors of the Sui ecosystem.
•
Staking
Subsidies:
approximately 949 million SUI, or 9.5% of the initial supply, was reserved to be
released to Sui staking participants.
•
Early
Contributors:
approximately 582 million SUI, or 5.8% of the initial supply, was retained by
core developers and contributors to compensate for their early efforts in the
development of the Sui Network.
•
Mysten
Treasury:
approximately 163 million SUI, or 1.6% of the initial supply, was retained by
Mysten to compensate for their early efforts in the development of the Sui
Network.
•
Delayed
Allocation:
approximately 5.22 billion SUI, or 52.2% of the initial supply, was reserved for
allocation after the year 2030.
Modifications
to the SUI Protocol
Historically
the Sui Network’s development has been overseen by the Sui Foundation, Mysten,
and other core developers. The Sui Foundation, Mysten, and core developers are
able to access and alter the Sui Network source code and, as a result, they are
responsible for quasi-official releases of updates and other changes to the Sui
Network’s source code.
For
example, in July 2024, the Sui Network released version 52 of the Sui protocol,
which implemented the Mysticeti consensus mechanism. The Sui Foundation and
Mysten led the development of this implementation.
The
release of updates to the Sui Network’s source code does not guarantee that the
updates will be automatically adopted. Users and nodes must accept any changes
made to the Sui source code by downloading the proposed modification of the Sui
Network’s source code. If a modification is accepted only by a percentage of
users and validators, a division in the Sui Network may occur such that one
network will run the pre-modification source code and the other network will run
the modified source code. Such a division is known as a “fork.” See “Risk
Factors— Risk Factors Related to Digital Assets— A temporary or permanent “fork”
could adversely affect the value of the Shares”. Consequently, as a practical
matter, a modification to the source code becomes part of the Sui Network only
if accepted by validators collectively having at least 83.4% of SUI staked on
the Sui Network.
Core
development of the Sui Network’s source code has increasingly focused on
modifications of the Sui Network’s protocol to increase speed and scalability
and also allow for financial and non-financial next generation uses. The Trust’s
activities will not directly relate to such projects, though such projects may
utilize SUI as tokens for the facilitation of their non-financial uses, thereby
potentially increasing demand for SUI and the utility of the Sui Network as a
whole. Conversely, projects that operate and are built within the Sui Network
may increase the data flow on the Sui Network and could either “bloat” the size
of the Sui Network or slow confirmation times.
SUI
Value
Digital
Asset Trading Platform Valuation
The
value of SUI is determined by the value that various market participants place
on SUI through their transactions. The most common means of determining the
value of a SUI is by surveying one or more Digital Asset Trading Platforms where
SUI is traded publicly and transparently (e.g., Coinbase, Kraken and
Crypto.com). Additionally, there are over-the-counter dealers or market makers
that transact in SUI.
Digital
Asset Trading Platform Public Market Data - SUI Reference Rate Price
On
each online Digital Asset Trading Platform, SUI is traded with publicly
disclosed valuations for each executed trade, measured by one or more fiat
currencies such as the U.S. dollar or euro, or by the widely used cryptocurrency
Bitcoin. Over-the-counter dealers or market makers do not typically disclose
their trade data.
As
of September 30, 2025, the Digital Asset Trading Platforms included in the Index
were Coinbase, Crypto.com and Kraken. As further described below, the Sponsor
and the Trust reasonably believe each of these Digital Asset Trading Platforms
are in material compliance with applicable U.S. federal and state licensing
requirements and maintain practices and policies designed to comply with AML and
KYC regulations.
Coinbase:
A
U.S.-based trading platform that has entities registered as MSBs with FinCEN,
licensed as a virtual currency business under the New York State Department of
Financial Services’ (“NYDFS”) BitLicense, licensed as a money transmitter in
various U.S. states, and chartered as a limited purpose trust company under New
York Banking Law.
Kraken:
A
U.S.-based trading platform that has entities registered as MSBs with FinCEN,
and that is licensed as a money transmitter in various U.S. states, and
chartered as a Special Purpose Depository Institution by the Wyoming Division of
Banking. Kraken does not hold a BitLicense.
Crypto.com:
A
Singapore-based trading platform that has entities registered as MSBs with
FinCEN, and that is licensed as a money transmitter in various U.S. states and
chartered as a non-depository trust company by the New Hampshire Banking
Department. Crypto.com does not hold a BitLicense.
Currently,
there are several Digital Asset Trading Platforms operating worldwide, and
online Digital Asset Trading Platforms represent a substantial percentage of SUI
buying and selling activity and provide the most data with respect to prevailing
valuations of SUI. These trading platforms include established trading platforms
such as the Digital Asset Trading Platforms included in the Index which provide
a number of options for buying and selling SUI.
The
below table reflects the trading volume in SUI and market share of the SUI-U.S.
dollar trading pairs of each of the Digital Asset Trading Platforms included in
the Index as of September 30, 2025 (collectively, “Constituent Trading
Platforms”), using data since the commencement of the Trust’s
operations:
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
Coinbase |
|
|
11,046,621,720 |
|
|
|
83.60 |
% |
|
Kraken |
|
|
1,680,118,155 |
|
|
|
12.72 |
% |
|
Crypto.com |
|
|
292,115,994 |
|
|
|
2.21 |
% |
|
Total
SUI-U.S. dollar trading pair |
|
|
2,687,512,032 |
|
|
|
98.53 |
% |
(1)
Market
share is calculated using trading volume (in SUI) for certain Digital Asset
Trading Platforms including, Coinbase, Crypto.com and Kraken, as well as certain
other large U.S.-dollar denominated Digital Asset Trading Platforms that were
not included in the Index as of September 30, 2025, including Bitfinex, Bitstamp
by Robinhood, CEX.IO (data included through December 2,
2024).
Digital
Asset Trading Platform Public Market Data - CCIXBER
On
each online Digital Asset Trading Platform, SUI is traded with publicly
disclosed valuations for each executed trade, measured by one or more fiat
currencies such as the U.S. dollar or euro, or by the widely used cryptocurrency
Bitcoin. Over-the-counter dealers or market makers do not typically disclose
their trade data.
As
of September 30, 2025, the Digital Asset Trading Platforms included in the Index
were Bitfinex, Bitstamp by Robinhood, Bullish, Bybit, Crypto.com, Kraken, and
OKX. As further described below, the Sponsor and the Trust reasonably believe
each of these Digital Asset Trading Platforms are in material compliance with
applicable U.S. federal and state licensing requirements and maintain practices
and policies designed to comply with AML and KYC regulations.
Bitfinex:
A British Virgin Islands based trading platform. Bitfinex does not hold any
licenses or registrations in the U.S. and is not available to U.S.-based
customers. Bitfinex is categorized by the Index Provider as a “Category 2”
trading platform that meets the Inclusion Criteria but is non-U.S.
licensed.
Bitstamp
by Robinhood:
A U.K.-based trading platform that has U.S. operations and entities registered
as MSB’s with FinCEN, holds a BitLicense, and that is licensed as a money
transmitter in various U.S. states.
Bullish:
A Gibraltar-based trading platform that has entities registered as MSBs with
FinCEN. Bullish is not available to U.S.-based customers. Bullish is categorized
by the Index Provider as a “Category 2” trading platform that meets the
Inclusion Criteria but is non-U.S. licensed.
Bybit:
A United Arab Emirates-based trading platform. Bybit does not hold any licenses
or registrations in the U.S. and is not available to U.S. based customers. Bybit
is categorized by the Index Provider as a “Category 2” trading platform that
meets the Inclusion Criteria but is non-U.S. licensed.
Crypto.com:
A Singapore-based trading platform that has entities registered as MSBs with
FinCEN, and that is licensed as a money transmitter in various U.S. states and
chartered as a non-depository trust company by the New Hampshire Banking
Department. Crypto.com does not hold a BitLicense.
Kraken:
A U.S.-based trading platform that has entities registered as MSBs with FinCEN,
and that is licensed as a money transmitter in various U.S. states and chartered
as a Special Purpose Depository Institution by the Wyoming Division of Banking.
Kraken does not hold a BitLicense.
OKX:
A Seychelles-based trading platform. OKX does not hold any licenses or
registrations in the U.S. and is not available to U.S.-based customers. OKX is
categorized by the Index Provider as a “Category 2” trading platform that meets
the Inclusion Criteria but is non-U.S. licensed.
Currently,
there are several Digital Asset Trading Platforms operating worldwide, and
online Digital Asset Trading Platforms represent a substantial percentage of SUI
buying and selling activity and provide the most data with respect to prevailing
valuations of SUI. These trading platforms include established trading platforms
such as the Digital Asset Trading Platforms included in the Index, which provide
a number of options for buying and selling SUI. The below table reflects the
trading volume in SUI and market share of the SUI-U.S. dollar and SUI-USDC
trading pairs of each of the Digital Asset Trading Platforms included in the
Index as of September 30, 2025 (collectively, “Constituent Trading Platforms”),
using data since January 1, 2024:
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
Kraken |
|
|
1,821,150,990 |
|
|
|
11.61 |
% |
|
Crypto.com |
|
|
347,093,455 |
|
|
|
2.21 |
% |
|
Bitstamp
by Robinhood |
|
|
197,628,513 |
|
|
|
1.26 |
% |
|
Bitfinex |
|
|
60,209,605 |
|
|
|
0.38 |
% |
|
OKX |
|
|
3,699,693 |
|
|
|
0.02 |
% |
|
Total
SUI-U.S. dollar trading pair |
|
|
2,429,782,256 |
|
|
|
15.48 |
% |
|
|
|
|
|
|
|
|
|
|
Digital
Asset Trading Platforms included in the Index as of September 30,
2025 |
|
Volume
(SUI) |
|
|
Market
Share(1) |
|
|
Bybit |
|
|
657,932,927 |
|
|
|
8.53 |
% |
|
OKX |
|
|
88,917,605 |
|
|
|
1.15 |
% |
|
Bullish |
|
|
6,172,941 |
|
|
|
0.08 |
% |
|
Total
SUI-USDC trading pair |
|
|
753,023,473 |
|
|
|
9.76 |
% |
(1)
Market
share is calculated using trading volume (in SUI) for certain Digital Asset
Trading Platforms including, Bitfinex, Bullish, Bybit, Bitstamp by Robinhood,
Crypto.com, Kraken, and OKX, as well as certain other large U.S.-dollar
denominated Digital Asset Trading Platforms that were not included in the Index
as of September 30, 2025, including Coinbase, Binance, Gate.IO, KuCoin, MEXC,
and OKX.
The
domicile, regulation and legal compliance of the Digital Asset Trading Platforms
included in the Index varies. Information regarding each Digital Asset Trading
Platform may be found, where available, on the websites for such Digital Asset
Trading Platforms, among other places.
Although
the Index is designed to accurately capture the market price of SUI, third
parties may be able to purchase and sell SUI on public or private markets not
included among the constituent Digital Asset Trading Platforms of the Index, and
such transactions may take place at prices materially higher or lower than the
Index Price. Moreover, there may be variances in the prices of SUI on the
various Digital Asset Trading Platforms, including as a result of differences in
fee structures or administrative procedures on different Digital Asset Trading
Platforms. For example, based on data provided by the Index Provider, on any
given day during the twelve months ended September 30, 2025, the maximum
differential between the 4:00 p.m., New York time, spot price of any single
Digital Asset Trading Platform included in the Index and the Index Price was
2.49% and the average of the maximum differentials of the 4:00 p.m., New York
time, spot price of each Digital Asset Trading Platform included in the Index
and the Index Price was 2.33%.
During this same period, the average differential between the 4:00 p.m., New
York time, spot prices of all the Digital Asset Trading Platforms included in
the Index and the Index Price was 0.001%.
To
the extent such prices differ materially from the Index Price, investors may
lose confidence in the Shares’ ability to track the market price of
SUI.
The
Index and the Index Price
The
Index is a U.S. dollar-denominated composite reference rate for the price of
SUI. The Index is designed to (1) mitigate the effects of fraud, manipulation
and other anomalous trading activity from impacting the SUI reference rate, (2)
provide a real-time, volume-weighted fair value of SUI and (3) appropriately
handle and adjust for non-market related events.
The
Index Price is determined by the Index Provider through a process in which trade
data is cleansed and compiled in such a manner as to algorithmically reduce the
impact of anomalistic or manipulative trading. This is accomplished by adjusting
the weight of each data input based on price deviation relative to the
observable set, as well as recent and long-term trading volume at each venue
relative to the observable set. The Index Price is calculated using non-GAAP
methodology and is not used in the Trust’s financial statements.
All
references to the NAV and NAV per Share of the Trust in this prospectus prior to
the Trust’s listing on NYSE Arca have been calculated using the Index Price
based on the CoinDesk SUI Reference Rate Price unless otherwise indicated. Prior
to the listing of the Shares on NYSE Arca, the Sponsor intends to change the
Index to the CoinDesk SUI CCIXber Reference Rate.
Constituent
Trading Platform Selection
The
Digital Asset Trading Platforms to be included in the Index are selected by the
Index Provider utilizing a methodology that is guided by the International
Organization of Securities Commissions (“IOSCO”) principles for financial
benchmarks. For a trading platform to become a Constituent Trading Platform, it
must satisfy the criteria listed below (the “Inclusion Criteria”):
•
No
evidence in the past 12 months of trading restrictions on individuals or
entities that would otherwise meet the trading platform’s eligibility
requirements to trade;
•
No
evidence in the past 12 months of undisclosed restrictions on deposits or
withdrawals from user accounts;
•
Real-time
price discovery;
•
Limited
or no capital controls;
•
Transparent
ownership including a publicly-owned ownership entity;
•
Publicly
available language and policies addressing legal and regulatory compliance,
including KYC, AML and other policies designed to comply with relevant
regulations that might apply to it;
•
Offer
programmatic spot trading of the trading pair and reliably publish trade prices
and volumes on a real-time basis through Rest and Websocket
APIs;
•
Is
a centralized spot trading platform ranked BB or higher in the Index Provider’s
latest published Trading Platform Benchmark report; and
•
Is
not classified as an Excluded Trading Platform as defined in the Index
Provider’s Digital Asset Indices Policy Methodology.
All
trading platforms that meet these Inclusion Criteria will be assigned to a
“Trading Platform Category” as defined by the additional criteria below, and at
least one Category 1 Trading Platform must be included in each Index
Price.
•
A
“Category 1 Trading Platform” is a trading platform:
o
Licensed
and/or able to serve investors, retail or professional, in the U.S.;
and
o
That
maintains sufficient USD or USDC liquidity relative to the size of the listed
assets.
•
A
“Category 2 Trading Platform” is a trading platform:
o
Licensed
(including in-principal licensure) and/or able to serve investors, retail or
professional, in one or more of the following jurisdictions: United Kingdom,
European Union, Hong Kong, Singapore; and
o
That
maintains sufficient USD or USDC liquidity relative to the size of the listed
assets.
A
Digital Asset Trading Platform is removed from the Constituent Trading Platforms
when it no longer satisfies the Inclusion Criteria. The Index Provider does not
currently include data from over-the-counter markets or derivatives platforms
among the Constituent Trading Platforms. Over-the-counter data is not currently
included because of the potential for trades to include a significant premium or
discount paid for larger liquidity, which creates an uneven comparison relative
to more active markets. There is also a higher potential for over-the-counter
transactions to not be arms-length, and thus not be representative of a true
market price. SUI derivative markets are also not currently included. While the
Index Provider has no plans to include data from over-the-counter markets or
derivative platforms at this time, the Index Provider will consider IOSCO
principles for financial benchmarks, the management of trading venues of SUI
derivatives and the aforementioned Inclusion Criteria when considering whether
to include over-the-counter or derivative platform data in the
future.
The
Index Provider and the Sponsor have entered into the index license agreement,
dated as of February 1, 2022 (as amended, the “Index License Agreement”),
governing the Sponsor’s use of the Index Price. Pursuant to the terms of the
Index License Agreement, the Index Provider may adjust the calculation
methodology for the Index Price without notice to, or consent of, the Trust or
its shareholders. The Index Provider may decide to change the calculation
methodology to maintain the integrity of the Index Price calculation should it
identify or become aware of previously unknown variables or issues with the
existing methodology that it believes could materially impact its performance
and/or reliability. The Index Provider has sole discretion over the
determination of the Index Price and may change the methodologies for
determining the Index Price from time to time. Shareholders will be notified of
any material changes to the calculation methodology or the Index Price in the
Trust’s current reports and will be notified of all other changes that the
Sponsor considers significant in the Trust’s periodic or current reports. The
Sponsor will determine the materiality of any changes to the Index Price on a
case-by-case basis, in consultation with external counsel.
The
Index Provider may change the trading venues that are used to calculate the
Index or otherwise change the way in which the Index is calculated at any time.
For example, the Index Provider has scheduled quarterly reviews in which it may
add or remove Constituent Trading Platforms that satisfy or fail the Inclusion
Criteria. The Index Provider does not have any obligation to consider the
interests of the Sponsor, the Trust, the shareholders, or anyone else in
connection with such changes. While the Index Provider is not required to
publicize or explain the changes or to alert the Sponsor to such changes, it has
historically notified the Trust of any material changes to the Constituent
Trading Platforms, including any additions or removals of the Constituent
Trading Platforms, in addition to issuing press releases in connection with the
same. The Sponsor will notify investors of any such material event by filing a
current report on Form 8-K. Although the Index methodology is designed to
operate without any manual intervention, rare events would justify manual
intervention. Intervention of this kind would be in response to
non-market-related events, such as the halting of deposits or withdrawals of
funds on a Digital Asset Trading Platform, the unannounced closure of operations
on a Digital Asset Trading Platform, insolvency or the compromise of user funds.
In the event that such an intervention is necessary, the Index Provider would
issue a public announcement through its website, API and other established
communication channels with its clients.
Determination
of the Index Price
The
Index, as will be reflected by the CoinDesk SUI CCIXber Reference Rate, for SUI
is calculated through the application of an algorithm to the price of SUI on the
Constituent Trading Platforms calculated every 5 seconds over a 24-hour period.
The Index’s algorithm is expected to reflect a five-pronged methodology to
calculate the Index Price from the Constituent Trading Platforms for
SUI:
•
Volume
Weighting: Constituent Trading Platforms with greater liquidity receive a higher
weighting in each Index, increasing the ability to execute against (i.e.,
replicate) the Index in the underlying spot markets. The Index methodology is a
volume-weighted real-time price where each Constituent Trading Platform is
weighted based on its trailing 24-hour volume.
•
FX
Conversion: The Index algorithm utilizes a volume-weighted real-time FX
conversion rate for any trading activity for the relevant Stablecoin-USD pair.
This normalizes all trading activity to USD denomination.
•
Outlier
Detection Factor: The Index algorithm excludes trade data and price(s) deemed to
be an outlier relative to the most recently calculated Index.
•
Outlier
Detection Factor: The Index algorithm penalizes stale activity from any given
Constituent Trading Platform. When a Constituent Trading Platform does not have
recent trading data, the outdated prices and their contribution to the Index
calculation are gradually reduced until they are de-weighted to 0.1%. Similarly,
once trading activity at a Constituent Trading Platform resumes, the
corresponding weighting for that Constituent Trading Platform will no longer be
penalized.
•
Manipulation
Resistance: In an effort to determine and prioritize the most significant
Constituent Trading Platforms (i.e., those that are likely to have the most
impact on price discovery) for a given asset, the Index Provider conducts a
Constituent Trading Platform selection and review process, which seeks to
identify the highest-ranking Constituent Trading Platforms based on both
qualitative and quantitative factors. The qualitative review includes legal and
regulation, data provision, security, trade monitoring, market quality, and
negative events policy, among others. The quantitative review includes review of
trading activity for the asset on the given Constituent Trading
Platform.
The
Index Provider re-evaluates the weighting algorithm on a periodic basis, but
maintains discretion to change the way in which an Index Price is calculated
based on its periodic review or in extreme circumstances. The exact methodology
to calculate the Index Price is not publicly available. Still, the Index is
designed to limit exposure to trading or price distortion of any individual
Digital Asset Trading Platform that experiences periods of unusual activity or
limited liquidity by discounting, in real-time, anomalous price movements at
individual Digital Asset Trading Platforms.
The
Sponsor believes the Index Provider’s selection process for Constituent Trading
Platforms as well as the methodology of the Index Price’s algorithm provides a
more accurate picture of SUI price movements than a simple average of Digital
Asset Trading Platform spot prices, and that the weighting of SUI prices on the
Constituent Trading Platforms limits the inclusion of data that is influenced by
temporary price dislocations that may result from technical problems, limited
liquidity or fraudulent activity elsewhere in the SUI spot market.
By
referencing multiple trading venues and weighting them based on trade activity,
the Sponsor believes that the impact of any potential fraud, manipulation or
anomalous trading activity occurring on any single venue is reduced.
If
the Index Price becomes unavailable, or if the Sponsor determines in good faith
that such Index Price does not reflect an accurate price for SUI , then the
Sponsor will, on a best efforts basis, contact the Index Provider to obtain the
Index Price directly from the Index Provider. If after such contact such Index
Price remains unavailable or the Sponsor continues to believe in good faith
that
such
Index Price does not reflect an accurate price for the SUI , then the Sponsor
will employ a cascading set of rules to determine the Index Price, as described
below in “—Determination of the Index Price When Index Price is
Unavailable.”
The
Trust values its SUI for operational purposes by reference to the Index Price.
The Index Price is the value of a SUI as represented by the Index, calculated at
4:00 p.m., New York time, on each business day.
Illustrative
Example
For
the purposes of illustration, outlined below are examples of how the attributes
that impact weighting and adjustments in the aforementioned methodology may be
utilized to generate the Index Price for a digital asset.
For
example, Constituent Trading Platforms used to calculate the Index Price of the
digital asset may include trading platforms such as Crypto.com, Kraken, LMAX
Digital and Bitstamp by Robinhood.
The
Index Price algorithm, as described above, is designed to account for
manipulation at the outset by only including data from executed trades on
Constituent Trading Platforms that charge trading fees. Then, the below-listed
elements may impact the weighting of the Constituent Trading Platforms on the
Index Price as follows:
•
Volume
Weighting: Each Constituent Trading Platform will be weighted to appropriately
reflect the trading volume share of the Constituent Trading Platform relative to
all the Constituent Trading Platforms during this same period. For example, an
average hourly weighting of 67.06%, 14.57%, 11.88%, and 6.49% for
Crypto.com, Kraken, LMAX Digital and Bitstamp by Robinhood,
respectively, would represent each Constituent Trading Platform’s share of
trading volume during the same period.
•
Inactivity
Adjustment: Assume that a Constituent Trading Platform represented a 14%
weighting on the Index Price of the digital asset, which is based on the
per-second calculations of its trading volume and price-variance relative to the
cohort of Constituent Trading Platforms included in such Index, and then went
offline for approximately two hours. The index algorithm would automatically
recognize inactivity and start de-weighting the Constituent Trading Platform at
the 5-minute mark and continue to do so with each additional 5-minute period of
inactivity until its influence was effectively zero, 25 minutes after becoming
inactive. As soon as trading activity resumed at the Constituent Trading
Platform, the index algorithm would re-weight it to the appropriate weighting
based on trading volume and price-variance relative to the cohort of Constituent
Trading Platforms included in the Index.
•
Price
Outlier Detection: New traded prices from Constituent Trading Platforms are
compared to the latest calculated Index Price. If a new traded price deviates by
+/- 5% from the latest calculated Index Price, it will be considered an outlier
and will not be used in the calculation of the Index Price until such time as a
majority of the Constituent Trading Platforms are similarly considered outlier
prices. In that case, the new prices will be used to calculate the Index Price.
For example, if the Index Price is $10 and there is a new trade price of $11
from Constituent Trading Platform X, the price of $11 will be considered an
outlier and will not be used. However, if the most recent prices on a majority
of the Constituent Trading Platforms are aligned with the price of $11, then
these prices will no longer be considered outliers and will be used to calculate
the new Index Price.
Determination
of the Index Price When Index Price is Unavailable
The
Sponsor uses the following cascading set of rules to calculate the Index Price.
For the avoidance of doubt, the Sponsor will employ the below rules sequentially
and in the order as presented below, should one or more specific rule(s)
fail:
1.
Index
Price = The price set by the Index as of 4:00 p.m., New York time, on the
valuation date. If the Index becomes unavailable, or if the Sponsor determines
in good faith that the Index does not reflect an accurate price, then the
Sponsor will, on a best efforts basis, contact the Index Provider to obtain the
Index Price directly from the Index Provider. If after such contact the Index
remains unavailable or the Sponsor continues to believe in good faith that the
Index does not reflect an accurate price, then the Sponsor will employ the next
rule to determine the Index Price. There are no predefined criteria to make a
good faith assessment and it will be made by the Sponsor in its sole
discretion.
2.
Index
Price = The price set by Coin Metrics Real-Time Rate (the “Secondary Index”) as
of 4:00 p.m., New York time, on the valuation date (the “Secondary Index
Price”). The Secondary Index Price is a real-time reference rate price,
calculated using trade data from constituent markets selected by Coin Metrics
Inc. (the “Secondary Index Provider”). The Secondary Index Price is calculated
by applying weighted-median techniques to such trade data where half the weight
is derived from the trading volume on each constituent market and half is
derived from inverse price variance, where a constituent market with high price
variance as a result of outliers or market anomalies compared to other
constituent markets is assigned a smaller weight. The Secondary Index Provider
and the Sponsor have entered into the master services agreement, dated as of
August
4,
2020, and order forms thereunder, pursuant to which the Sponsor may obtain and
use the Secondary Index and the Secondary Index Price from the Secondary Index
Provider. If the Secondary Index becomes unavailable, or if the Sponsor
determines in good faith that the Secondary Index does not reflect an accurate
price, then the Sponsor will, on a best efforts basis, contact the Secondary
Index Provider to obtain the Secondary Index Price directly from the Secondary
Index Provider. If after such contact the Secondary Index remains unavailable or
the Sponsor continues to believe in good faith that the Secondary Index does not
reflect an accurate price, then the Sponsor will employ the next rule to
determine the Index Price. There are no predefined criteria to make a good faith
assessment and it will be made by the Sponsor in its sole
discretion.
3.
Index
Price = The price set by the Trust’s principal market (the “Tertiary Pricing
Option”) as of 4:00 p.m., New York time, on the valuation date. The Tertiary
Pricing Option is a spot price derived from the principal market’s public data
feed that is believed to be consistently publishing pricing information as of
4:00 p.m., New York time, and is provided to the Sponsor via an application
programming interface. If the Tertiary Pricing Option becomes unavailable, or if
the Sponsor determines in good faith that the Tertiary Pricing Option does not
reflect an accurate price, then the Sponsor will, on a best efforts basis,
contact the Tertiary Pricing Provider to obtain the Tertiary Pricing Option
directly from the Tertiary Pricing Provider. If after such contact the Tertiary
Pricing Option remains unavailable after such contact or the Sponsor continues
to believe in good faith that the Tertiary Pricing Option does not reflect an
accurate price, then the Sponsor will employ the next rule to determine the
Index Price. There are no predefined criteria to make a good faith assessment
and it will be made by the Sponsor in its sole discretion.
4.
Index
Price = The Sponsor will use its best judgment to determine a good faith
estimate of the Index Price. There are no predefined criteria to make a good
faith assessment and it will be made by the Sponsor in its sole
discretion.
In
the event of a fork, the Index Provider may calculate the Index Price based on a
digital asset that the Sponsor does not believe to be the appropriate asset that
is held by the Trust. In this event, the Sponsor has full discretion to use a
different index provider or calculate the Index Price itself using its best
judgment.
The
Sponsor may, in its sole discretion, select a different index provider, select a
different index price provided by the Index Provider, calculate the Index Price
by using the cascading set of rules set forth above, or change the cascading set
of rules set forth above at any time. The Sponsor will provide notice of any
such changes in the Trust’s periodic or current reports and, if the Sponsor
makes such a change other than on an ad hoc or temporary basis, will file a
proposed rule change with the SEC.
Historical
SUI Prices
As
movements in the price of SUI
will directly affect the price of the Shares, investors should understand recent
movements
in the price of SUI. Investors, however, should also be aware that past
movements in the SUI price are not indicators of future movements. Movements may
be influenced by various factors, including, but not limited to, government
regulation, security breaches experienced by service providers, as well as
political and economic uncertainties around the world.
The
following table illustrates the movements in the Index Price of SUI, as reported
on the Trust’s principal market, from August 1, 2024 (the commencement of the
Trust’s operations) to September 30, 2025. During such period, the price of SUI
has ranged from $0.53 to $5.23, with the straight average being $2.95 through
September 30, 2025. The
Sponsor has not observed a material difference between the Index Price and
average prices from the Constituent Trading Platforms individually or as a
group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
|
|
|
|
|
|
|
Period |
|
Average |
|
|
Index
Price |
|
|
Date |
|
Index
Price |
|
|
Date |
|
End
of
period |
|
|
Last
business
day |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2024 |
|
$ |
1.02 |
|
|
$ |
1.83 |
|
|
9/29/2024 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
1.81 |
|
|
$ |
1.81 |
|
|
Twelve
months ended September 30, 2025 |
|
$ |
3.28 |
|
|
$ |
5.23 |
|
|
1/4/2025 |
|
$ |
1.67 |
|
|
10/28/2024 |
|
$ |
3.23 |
|
|
$ |
3.23 |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2025 |
|
$ |
2.95 |
|
|
$ |
5.23 |
|
|
1/4/2025 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
3.23 |
|
|
$ |
3.23 |
|
The
following table illustrates the movements in the Digital Asset Market price of
SUI from August 1, 2024 (the commencement of the Trust’s operations) to
September 30, 2025. During such period, the price of SUI has ranged from $0.53
to $5.24, with the straight average being $2.95 through September 30,
2025.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
|
|
|
|
|
|
|
Period |
|
Average |
|
|
Digital
Asset
Market
Price |
|
|
Date |
|
Digital
Asset
Market
Price |
|
|
Date |
|
End
of
period |
|
|
Last
business
day |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2024 |
|
$ |
1.02 |
|
|
$ |
1.83 |
|
|
9/29/2024 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
1.81 |
|
|
$ |
1.81 |
|
|
Twelve
months ended September 30, 2025 |
|
$ |
3.28 |
|
|
$ |
5.24 |
|
|
1/4/2025 |
|
$ |
1.68 |
|
|
10/28/2024 |
|
$ |
3.26 |
|
|
$ |
3.26 |
|
|
August
1, 2024 (the Commencement of the Trust's Operations) to September 30,
2025 |
|
$ |
2.95 |
|
|
$ |
5.24 |
|
|
1/4/2025 |
|
$ |
0.53 |
|
|
8/5/2024 |
|
$ |
3.26 |
|
|
$ |
3.26 |
|
Forms
of Attack Against the Sui Network
All
networked systems are vulnerable to various kinds of attacks. As with any
computer network, the Sui Network contains certain flaws. For example, the Sui
Network is currently vulnerable to attacks where, if a validator or group of
validators acting in concert were to gain control of more than certain
thresholds of staked SUI, a malicious actor would be able to gain full control
of the network and the ability to manipulate the Sui Network. As of the date of
this prospectus, no validator node individually controlled more than 3% of the
voting power on the Sui Network.
In
addition, many digital asset networks have been subjected to a number of denial
of service attacks, which has led to temporary delays in block creation and the
transfer of digital assets.
For
example, on June 19, 2023, smart-contract audit firm Certik disclosed that they
had discovered a bug in the Sui code that could cause a type of denial of
service attack that could cause the Sui Network to go offline and cease full
functionality. Certik apparently disclosed the vulnerability to the Sui
Foundation and Mysten before the Sui Network’s launch, so it could be fixed
unilaterally. However, had the vulnerability been exploited after the network
was launched, while persons associated with the Sui Foundation and/or Mysten
would have likely played a key role in bringing the network back online, the
broader community would have had to play a key role, as Sui Network validators
would have had to coordinate to upgrade and restart the network. Any similar
attacks on the Sui Network that impact the ability to transfer SUI could have a
material adverse effect on the price of SUI and the value of the
Shares.
Market
Participants
Validators
Validators
range from Sui enthusiasts to professional operations that design and build
dedicated machines and data centers, including “clusters,” which are groups of
validators that act cohesively and combine their processing to confirm
transactions. When a validator confirms a transaction, the validator and any
associated stakers receive a fee. During the course of ordering transactions and
validating blocks, validators may be able to prioritize certain transactions in
return for increased transaction fees, an incentive system known as “Maximal
Extractable Value” or MEV. For example, in blockchain networks that facilitate
DeFi protocols in particular, such as the Ethereum Network, users may attempt to
gain an advantage over other users by offering greater transaction fees.
Validators less commonly capture MEV in the Sui Network because, unlike the
Ethereum Network, it does not publicly expose transactions before they are
accepted by a validator. However, some efforts are underway to help SUI
validators consistently capture MEV. See “—Summary of a SUI Transaction”
above.
Investment
and Speculative Sector
This
sector includes the investment and trading activities of both private and
professional investors and speculators. Historically, larger financial services
institutions are publicly reported to have limited involvement in investment and
trading in digital assets, although the participation landscape is beginning to
change. Currently, there is relatively limited use of digital assets in the
retail and commercial marketplace in comparison to relatively extensive use by
speculators, and a significant portion of demand for digital assets is generated
by speculators and investors seeking to profit from the short- or long-term
holding of digital assets.
Retail
Sector
The
retail sector includes users transacting in direct peer-to-peer SUI transactions
through the direct sending of SUI over the Sui Network. The retail sector also
includes transactions in which consumers purchase goods and services from
commercial or service businesses through direct transactions or third-party
service providers, although the use of SUI as a means of payment is still
developing and has not yet been accepted in the same manner as Bitcoin or Ether
due to its infancy and because SUI has a different purpose than Bitcoin and
Ether.
Service
Sector
This
sector includes companies that provide a variety of services including the
buying, selling, payment processing and storing of SUI. For buying and selling
SUI, Coinbase, Crypto.com, Kraken, and Bitstamp are some of the largest Digital
Asset Trading Platforms by volume traded. For storing SUI, Coinbase Custody
Trust Company, LLC, the Custodian for the Trust, is a digital asset custodian
that provides custodial accounts that store SUI for users. As SUI continues to
grow in acceptance, it is anticipated that service providers will expand the
currently available range of services and that additional parties will enter the
service sector for SUI.
Competition
Thousands
of digital assets, as tracked by CoinMarketCap.com as of September 30, 2025,
have been developed since the inception of Bitcoin, which is currently the most
developed digital asset because of the length of time it has been in existence,
the investment in the infrastructure that supports it, and the network of
individuals and entities that are using Bitcoin in transactions. While SUI has
enjoyed some success in its limited history, the aggregate value of outstanding
SUI is much smaller than that of Bitcoin and many other digital assets and may
be further eclipsed by the more rapid development of other digital assets. In
addition, a number of other digital assets also function as smart contract
platforms, including the Ethereum Network, the Avalanche network and the Cardano
network.
Some
industry groups are also creating private, permissioned blockchain versions of
digital asset technologies. For example, J.P. Morgan is developing a platform
called Onyx, which is described as a blockchain-based platform designed for use
by the financial services industry.
Government
Oversight
As
digital assets have grown in both popularity and market size, the U.S. Congress
and a number of U.S. federal and state agencies (including FinCEN, SEC, CFTC,
FINRA, the CFPB, the Department of Justice, the Department of Homeland Security,
the Federal Bureau of Investigation, the IRS, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve and
state financial institution and securities regulators) have been examining the
operations of digital asset networks, digital asset users and the Digital Asset
Markets, with particular focus on the extent to which digital assets can be used
to launder the proceeds of illegal activities, evade sanctions or fund criminal
or terrorist enterprises and the safety and soundness of trading platforms and
other service providers that hold or custody digital assets for users. Many of
these state and federal agencies have issued consumer advisories regarding the
risks posed by digital assets to investors. In addition, federal and state
agencies, and other countries and international bodies have issued rules or
guidance about the treatment of digital asset transactions or requirements for
businesses engaged in digital asset activity. Moreover, the failure of FTX in
November 2022 and the resulting market turmoil substantially increased
regulatory scrutiny in the United States and globally and led to SEC and
criminal investigations, enforcement actions and other regulatory activity
across the digital asset ecosystem. On January 23, 2025, President Trump issued
an executive order titled “Strengthening American Leadership in Digital
Financial Technology” aimed at supporting “the responsible growth and use of
digital assets, blockchain technology, and related technologies across all
sectors of the economy.” The Executive Order also established an interagency
working group that is tasked with “proposing a Federal regulatory framework
governing the issuance and operation of digital assets” in the United States.
Pursuant to this Executive Order, the working group released a report in July
2025 outlining the administration's recommendations to Congress and various
agencies reflecting the administration’s “pro-innovation mindset toward digital
assets and blockchain technologies.” In particular, the report recommends that
Congress enact legislation regarding self custody of digital assets, clarifying
the applicability of Bank Secrecy Act obligations with respect to digital asset
service providers, granting the CFTC authority to regulate spot markets in
non-security digital assets, prohibiting the adoption of a CBDC, and clarifying
tax laws as relevant to digital assets. In addition, the report recommends that
agencies reevaluate existing guidance on digital asset activities, use existing
authorities to enable the trading of digital assets at the federal level,
embrace DeFi, launch or relaunch crypto innovation efforts, and promote U.S.
private sector leadership in the responsible development of cross-border
payments and financial markets technologies, among others.
In
addition, the SEC, U.S. state securities regulators and several foreign
governments have issued warnings and instituted legal proceedings in which they
argue that certain digital assets may be classified as securities and that both
those digital assets and any related initial coin offerings or other primary and
secondary market transactions are subject to securities regulations. For
example, in June 2023, the SEC brought charges against Binance and Coinbase, and
in November 2023, the SEC brought charges against Kraken, alleging that they
operated unregistered securities exchanges, brokerages and clearing agencies. In
its complaints, the SEC asserted that several digital assets are securities
under the federal securities laws. Between February 2025 and May 2025, the SEC
entered into court-approved joint stipulations to dismiss each of the Binance
Complaint, Coinbase Complaint and the Kraken Complaint. The SEC has terminated
its investigation or enforcement action into many other digital asset market
participants as well. Nonetheless, the existence of these proceedings, as well
as ongoing uncertainty with respect to future regulatory actions, have had and
may have a material adverse effect on the digital asset industry as a whole and
on the price of SUI,
and may alter, perhaps to a materially adverse extent, the nature of an
investment in the Shares and/or the ability of the Trust to continue to operate.
Additionally, U.S. state and
federal,
and foreign regulators and legislatures have taken action against virtual
currency businesses or enacted restrictive regimes in response to adverse
publicity arising from hacks, consumer harm, or criminal activity stemming from
virtual currency activity.
In
January 2025, the SEC launched a Crypto Task Force dedicated to developing a
comprehensive and clear regulatory framework for digital assets led by
Commissioner Hester Peirce. Subsequently, Commissioner Peirce announced a list
of specific priorities to further that initiative, which included pursuing final
rules related to a digital asset’s security status, a revised path to registered
offerings and listings for digital asset-based investment vehicles, and clarity
regarding digital asset custody, lending and staking. On July 31, 2025, Chairman
Atkins announced “Project Crypto,” a Commission-wide initiative to modernize
securities rules for digital assets, reshore innovation in the United States,
and implement the recommendations of the working group report. Chairman Atkins
had directed the SEC’s policy divisions to work with the Crypto Task Force to
draft “clear and simple rules of the road for crypto asset distributions,
custody, and trading,” and the Commission and SEC staff will also consider using
interpretive, exemptive, and other authorities with respect to digital asset
markets.
Various
foreign jurisdictions have, and may continue to, in the near future, adopt laws,
regulations or directives that affect a digital asset network, the Digital Asset
Markets, and their users, particularly Digital Asset Trading Platforms and
service providers that fall within such jurisdictions’ regulatory scope. For
example:
•
China
has made transacting in cryptocurrencies illegal for Chinese citizens in
mainland China, and additional restrictions may follow. China has banned initial
coin offerings and there have been reports that Chinese regulators have taken
action to shut down a number of China-based Digital Asset Trading
Platforms.
•
South
Korea determined to amend its Financial Information Act in March 2020 to require
virtual asset service providers to register and comply with its AML and
counter-terrorism funding framework. These measures also provide the government
with the authority to close Digital Asset Trading Platforms that do not comply
with specified processes. South Korea has also banned initial coin
offerings.
•
The
Reserve Bank of India in April 2018 banned the entities it regulates from
providing services to any individuals or business entities dealing with or
settling digital assets. In March 2020, this ban was overturned in the Indian
Supreme Court, although the Reserve Bank of India is currently challenging this
ruling.
•
The
United Kingdom’s Financial Conduct Authority published final rules in October
2020 banning the sale of derivatives and exchange-traded notes that reference
certain types of digital assets, contending that they are “ill-suited” to retail
investors citing extreme volatility, valuation challenges and association with
financial crime. A new law, the Financial Services and Markets Act 2023
(“FSMA”), received royal assent in June 2023. The FSMA brings digital asset
activities within the scope of existing laws governing financial institutions,
markets and assets.
•
The
Parliament of the European Union approved the text of MiCA in April 2023,
establishing a regulatory framework for digital asset services across the
European Union. MiCA is intended to serve as a comprehensive regulation of
digital asset markets and imposes various obligations on digital asset issuers
and service providers. The main aims of MiCA are industry regulation, consumer
protection, prevention of market abuse and upholding the integrity of digital
asset markets. MiCA was formally approved by the European Union’s member states
in 2023. Certain parts of MiCA became effective as of June 2024 and the
remainder applied as of December 2024.
There
remains significant uncertainty regarding foreign governments’ future actions
with respect to the regulation of digital assets and Digital Asset Trading
Platforms. Such laws, regulations or directives may conflict with those of the
United States and may negatively impact the acceptance of SUI
by users, merchants and service providers outside the United States and may
therefore impede the growth or sustainability of the SUI
ecosystem in the United States and globally, or otherwise negatively affect the
value of SUI
held by the Trust. The effect of any future regulatory change on the Trust or
the SUI
held by the Trust is impossible to predict, but such change could be substantial
and adverse to the Trust and the value of the Shares.
The
CFTC has regulatory jurisdiction over the SUI
futures markets because the CFTC believes that most digital assets are
non-security "commodities" under the CEA and the rules thereunder, it takes the
position that it has jurisdiction to prosecute fraud and manipulation in the
cash or spot market for those non-security digital assets. Beyond instances of
fraud or manipulation, the CFTC generally does not oversee cash or spot market
exchanges, spot Digital Asset Trading Platforms or transactions involving spot
SUI
that do not utilize collateral, leverage, or financing. The National Futures
Association (“NFA”) is the self-regulatory agency for the U.S. futures industry,
and as such has jurisdiction over SUI
futures. However, the NFA does not have regulatory oversight authority for the
cash or spot market for SUI
trading or transactions.
In
September, 2025 Coinbase Derivatives as a designated contract market (“DCM”)
registered with the CFTC launched new contracts for SUI futures products. DCMs
are boards of trades (commonly referred to as exchanges) that operate under the
regulatory
oversight
of the CFTC, pursuant to Section 5 of the CEA. To obtain and maintain
designation as a DCM, an exchange must comply on an initial and ongoing basis
with twenty-three Core Principles established under Section 5(d) of the CEA.
Among other things, DCMs are required to establish self-regulatory programs
designed to enforce the DCM’s rules, prevent market manipulation and customer
and market abuses, and ensure the recording and safe storage of trade
information.
The
Coinbase Derivatives SUI futures contracts are cash-settled, based on the
MarketVector Coinbase Sui Benchmark Rate. On August 4, 2025, CFTC Acting
Chairman Caroline D. Pham announced that the CFTC will launch an initiative for
trading spot crypto asset contracts that are listed on a CFTC-registered futures
exchange (DCM). This is the first initiative in the CFTC’s “crypto sprint” to
start implementation of the recommendations in the President’s Working Group on
Digital Asset Markets report. Members of the public were invited to provide
written input by August 18, 2025 through the CFTC website.
See
“Risk Factors—Risk Factors Related to the Regulation of Digital Assets, the
Trust and the Shares— Regulatory changes or actions by the U.S. Congress or any
U.S. federal or state agencies may affect the value of the Shares or restrict
the use of SUI , validating activity or the operation of the SUI Network or the
Digital Asset Markets in a manner that adversely affects the value of the
Shares.”
Description
of the Trust
The
Trust is a Delaware Statutory Trust that was formed on April 30, 2024 by the
filing of the Certificate of Trust with the Delaware Secretary of State in
accordance with the provisions of the Delaware Statutory Trust Act (“DSTA”). The
name of the Trust is Grayscale Sui Trust (SUI) as of the date of this
prospectus, but prior to and in connection with the declaration of effectiveness
of this registration statement and the listing of the Shares on NYSE Arca, the
Sponsor intends to change the name of the Trust to Grayscale Sui Trust ETF by
filing a Certificate of Amendment to the Certificate of Trust with the Delaware
Secretary of State in accordance with the provisions of the DSTA. The Trust
operates pursuant to the Trust Agreement.
The
Shares represent units of fractional undivided beneficial interest in and
ownership of the Trust. The Trust is passive and is not managed like a
corporation or an active investment vehicle. The Trust’s SUI are held by the
Custodian on behalf of the Trust. The Trust’s SUI will be transferred out of the
Vault Balance only in the following circumstances: (i) transferred to pay the
Sponsor’s Fee or any Additional Trust Expenses, (ii) sold on an as-needed basis
to pay Additional Trust Expenses or redeem Baskets or (iii) sold on behalf of
the Trust in the event the Trust terminates and liquidates its assets or as
otherwise required by law or regulation. Assuming that the Trust is treated as a
grantor trust for U.S. federal income tax purposes, each delivery or sale of SUI
by the Trust to pay the Sponsor’s Fee or any Additional Trust Expenses will be a
taxable event for shareholders. Gains or losses from the sale of SUI to fund
cash redemptions are expected to be treated as incurred only by the shareholder
that is being redeemed. See “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders.”
The
Trust is not a registered investment company under the Investment Company Act
and the Sponsor believes that the Trust is not required to register under the
Investment Company Act. The Trust will not trade, buy, sell or hold SUI
derivatives, including SUI futures contracts, on any futures exchange. The Trust
is authorized solely to take immediate delivery of actual SUI. The Sponsor does
not believe the Trust’s activities are required to be regulated by the CFTC
under the CEA as a “commodity pool” under current law, regulation and
interpretation. The Trust will not be operated by a CFTC-regulated commodity
pool operator because it will not trade, buy, sell or hold SUI derivatives,
including SUI futures contracts, on any futures exchange. Investors in the Trust
will not receive the regulatory protections afforded to investors in regulated
commodity pools, nor may the COMEX division of the New York Mercantile Exchange
or any futures exchange enforce its rules with respect to the Trust’s
activities. In addition, investors in the Trust will not benefit from the
protections afforded to investors in SUI futures contracts on regulated futures
exchanges.
The
Trust creates Shares from time to time but only in Baskets. A Basket equals a
block of 10,000 Shares. The number of outstanding Shares is expected to increase
from time to time as a result of the creation of Baskets.
The
creation of Baskets will require the delivery to the Trust of the amount of SUI
(or cash to acquire the amount of SUI) represented by the Baskets being created.
The creation of a Basket will be made only upon the delivery to the Trust of the
number of whole and fractional SUI represented by each Basket being created, the
number of which is determined by dividing (x) the amount of SUI owned by the
Trust at 4:00 p.m., New York time, on the relevant trade date, after deducting
the amount of SUI representing the U.S. dollar value of accrued but unpaid fees
and expenses of the Trust (converted using the Index Price at such time, and
carried to the eighth decimal place) by (y) the number of Shares outstanding at
such time (with the quotient so obtained calculated to one one-hundred-millionth
of one SUI (i.e., carried to the eighth decimal place)), and multiplying such
quotient by 10,000.
The
Shares are redeemable in accordance with the provisions of the Trust Agreement
and the relevant Participant Agreement. The operation of a redemption program
allows Authorized Participants to take advantage of arbitrage opportunities
created when the market value of the Shares deviates from the value of the
Trust’s SUI, less the Trust’s expenses and other liabilities, which may
have
the
effect of reducing any premium at which the Shares trade on NYSE Arca over such
value or cause the Shares to trade at a discount to such value.
Each
Share represented approximately 14.5701 SUI as of September 30, 2025. Each Share
in the initial Baskets represented approximately 15.0 SUI. The amount of SUI
required to create a Basket is expected to continue to gradually decrease over
time due to the transfer or sale of the Trust’s SUI to pay the Sponsor’s Fee and
any Additional Trust Expenses.
The
Sponsor will determine the Trust’s NAV on each business day as of 4:00 p.m., New
York time, or as soon thereafter as practicable. The Sponsor will also determine
the NAV per Share, which equals the NAV divided by the number of outstanding
Shares. Each business day, the Sponsor will publish the Trust’s NAV and NAV per
Share on the Trust’s website, etfs.grayscale.com/gsui,
as
soon as practicable after the Trust’s NAV and NAV per Share have been determined
by the Sponsor. See “—Valuation of SUI and Determination of NAV.”
The
Trust’s assets consist solely of SUI, cash proceeds from the sale of SUI and any
rights of the Trust pursuant to any agreements, other than the Trust Agreement,
to which the Trust is a party. The Sponsor has committed to cause the Trust not
to take any Affirmative Action to acquire any Incidental Rights or IR Virtual
Currency, thereby irrevocably abandoning any Incidental Rights and IR Virtual
Currency to which the Trust may become entitled in the future. As a result, the
Trust does not expect to hold any Incidental Rights or IR Virtual Currency or to
take any Incidental Rights or IR Virtual Currency into account for the purposes
of determining the NAV or the NAV per Share.
Each
Share represents a proportional interest, based on the total number of Shares
outstanding, in each of the Trust’s assets as determined in the case of SUI by
reference to the Index Price, less the Trust’s expenses and other liabilities
(which include accrued but unpaid fees and expenses). The Sponsor expects that
the market price of the Shares will fluctuate over time in response to the
market prices of SUI. In addition, because the Shares reflect the estimated
accrued but unpaid expenses of the Trust, the amount of SUI represented by a
Share will gradually decrease over time as the Trust’s SUI are used to pay the
Trust’s expenses.
SUI
pricing information is available on a 24-hour basis from various financial
information service providers or Sui Network information sites, such as
CoinMarketCap.com. The spot price and bid/ask spreads may also be available
directly from Digital Asset Trading Platforms. As of September 30, 2025, the
constituent Digital Asset Trading Platforms of the Index were Coinbase,
Crypto.com, and Kraken based on the CoinDesk SUI Reference Rate Price. Prior to
the listing of the Shares on NYSE Arca, the Sponsor intends to change the Index
to the CoinDesk SUI CCIXber Reference Rate. The Index Provider may remove or add
Digital Asset Trading Platforms to the Index in the future at its discretion.
Market prices for the Shares will be available from a variety of sources,
including brokerage firms, information websites and other information service
providers. In addition, on each business day the Trust’s website will provide
pricing information for the Shares.
The
Trust has no fixed termination date.
Service
Providers of the Trust
The
Sponsor
The
Trust’s Sponsor is Grayscale Investments Sponsors, LLC, a Delaware limited
liability company formed on July 11, 2024 and a consolidated subsidiary of DCG.
The Sponsor’s principal place of business is 290 Harbor Drive, 4th Floor,
Stamford, Connecticut 06902, and its telephone number is (212) 668-1427. Under
the Delaware Limited Liability Company Act and the governing documents of the
Sponsor, DCG, the indirect parent company of the Sponsor, is not responsible for
the debts, obligations and liabilities of the Sponsor solely by reason of being
the indirect parent company of the Sponsor.
The
Sponsor is neither an investment adviser registered with the SEC nor a commodity
pool operator registered with the CFTC, and will not be acting in either such
capacity with respect to the Trust, and the Sponsor’s provision of services to
the Trust will not be governed by the Investment Advisers Act or the
CEA.
Grayscale
Investments, LLC, the former Sponsor of the Trust, arranged for the creation of
the Trust. As partial consideration for its receipt of the Sponsor’s Fee from
the Trust, the Sponsor is obligated to pay the Sponsor-paid Expenses. The
Sponsor also paid the costs of the Trust’s organization and the costs of the
initial sale of the Shares.
The
Sponsor is generally responsible for the day-to-day administration of the Trust
under the provisions of the Trust Agreement. This includes (i) preparing and
providing periodic reports and financial statements on behalf of the Trust for
investors, (ii) processing orders to create Baskets and coordinating the
processing of such orders with the Custodian and the Transfer Agent, (iii)
calculating and publishing the NAV and the NAV per Share of the Trust each
business day as of 4:00 p.m., New York time, or as soon thereafter as
practicable, (iv) selecting and monitoring the Trust’s service providers and
from time to time engaging additional, successor or replacement service
providers, (v) instructing the Custodian to transfer the Trust’s SUI as needed
to pay the Sponsor’s Fee and any
Additional
Trust Expenses, (vi) upon dissolution of the Trust, distributing cash proceeds
of the sale of the Trust’s remaining SUI to the owners of record of the Shares
and (vii) establishing the principal market for GAAP valuation. In addition, if
there is a fork in the Sui Network after which there is a dispute as to which
network resulting from the fork is the Sui Network, the Sponsor has the
authority to select the network that it believes in good faith is the Sui
Network, unless such selection or authority would otherwise conflict with the
Trust Agreement.
The
Sponsor does not store, hold, or maintain custody or control of the Trust’s SUI
but instead has entered into the Prime Broker Agreement with the Custodian to
facilitate the security of the Trust’s SUI.
The
Sponsor may transfer all or substantially all of its assets to an entity that
carries on the business of the Sponsor if at the time of the transfer the
successor assumes all of the obligations of the Sponsor under the Trust
Agreement. In such an event, the Sponsor will be relieved of all further
liability under the Trust Agreement.
The
Sponsor’s Fee is paid by the Trust to the Sponsor as compensation for services
performed under the Trust Agreement and as partial consideration for the
Sponsor’s agreement to pay the Sponsor-paid Expenses. See “—Expenses; Sales of
SUI.”
The
Sponsor may, in its sole discretion, select a different index provider, select a
different index price provided by the Index Provider, calculate the Index Price
by using the cascading set of rules set forth under “— Overview of the Sui
Industry and Market—The Index and the Index Price—Determination of the Index
Price When Index Price is Unavailable” above, or change the cascading set of
rules set forth above at any time.
Marketing
Agent Agreement
Pursuant
to a Marketing Agent Agreement (the “Marketing Agent Agreement”) entered into
between the Sponsor and Foreside Fund Services, LLC, as Marketing Agent (the
“Marketing Agent”), the Marketing Agent will be paid by the Sponsor an annual
fee. In addition, the Sponsor will pay certain out-of-pocket fees and expenses
of the Marketing Agent incurred in connection with its assistance in the
marketing of the Trust and its Shares. Under the Marketing Agent Agreement, the
Marketing Agent will provide the following services to the Sponsor: (i) assist
the Sponsor in facilitating Participation Agreements between and among
Authorized Participants, the Sponsor, on behalf of the Trust, and the Transfer
Agent; (ii) provide prospectuses to Authorized Participants; (iii) work with the
Transfer Agent to review and approve orders placed by the Authorized
Participants and transmitted to the Transfer Agent; (iv) review and file
applicable marketing materials with FINRA and (v) maintain, reproduce and store
applicable books and records related to the services provided under the
Marketing Agent Agreement.
Index
License Agreement
The
Sponsor has entered into the Index License Agreement with CoinDesk Indices,
Inc., the Index Provider, governing the Sponsor’s use of the Index for
calculation of the Index Price. The Index Provider may adjust the calculation
methodology for the Index without notice to, or consent of, the Trust or its
shareholders. Under the Index License Agreement, the Sponsor pays a monthly fee
and a fee based on the NAV of the Trust to the Index Provider in consideration
of its license to the Sponsor of Index-related intellectual property. The
initial term of the Index License Agreement was February 1, 2022 through the
later of February 29, 2024 and the latest date set forth on any order form
executed under the Index License Agreement. On June 20, 2023, the Sponsor and
the Index Provider, entered into an amendment to the Index License Agreement to
extend the initial term of the Index License Agreement from February 29, 2024,
to February 28, 2025. On February 5, 2025, the Sponsor and the Index Provider,
entered into an amendment to the Index License Agreement to extend the term of
the Index License Agreement from February 28, 2025, to February 29, 2028.
Thereafter, the Index License Agreement will automatically renew on an annual
basis, unless a notice of non-renewal is provided. The Index License Agreement
is terminable by either party upon written notice in the event of a material
breach that remains uncured for thirty days after initial written notice of such
breach. Further, either party may terminate the Index License Agreement
immediately upon notice under certain circumstances, including with respect to
the other party’s (i) insolvency, bankruptcy or analogous event or (ii)
violation of money transmission, taxation or trading regulations that materially
adversely affect either party’s ability to perform under the Index License
Agreement.
Administration
and Accounting Agreement
The
Sponsor expects to enter into a Fund Administration and Accounting Agreement
with BNY Mellon Asset Servicing, a division of The Bank of New York Mellon, to
provide administration and accounting services to the Trust. Pursuant to the
terms of the Agreement and under the supervision and direction of the Sponsor
and the Trust, BNY Mellon Asset Servicing keeps the operational records of the
Trust and prepares and files certain regulatory filings on behalf of the Trust.
BNY Mellon Asset Servicing may also perform other services for the Trust
pursuant to the Agreement as mutually agreed upon by the Sponsor, the Trust and
BNY Mellon Asset Servicing from time to time. The Administrator’s fees are paid
on behalf of the Trust by the Sponsor.
The
Trustee
CSC
Delaware Trust Company (formerly known as Delaware Trust Company) serves as
Delaware trustee of the Trust under the Trust Agreement. The Trustee has its
principal office at 251 Little Falls Drive, Wilmington, Delaware 19808. The
Trustee is unaffiliated with the Sponsor. A copy of the Trust Agreement is
available for inspection at the Sponsor’s principal office identified above and
is filed as an exhibit to the registration statement of which this prospectus
forms a part.
The
Trustee is appointed to serve as the trustee of the Trust in the State of
Delaware for the sole purpose of satisfying the requirement of Section 3807(a)
of the DSTA that the Trust have at least one trustee with a principal place of
business in the State of Delaware. The duties of the Trustee will be limited to
(i) accepting legal process served on the Trust in the State of Delaware and
(ii) the execution of any certificates required to be filed with the Delaware
Secretary of State which the Delaware Trustee is required to execute under the
DSTA. To the extent that, at law or in equity, the Trustee has duties (including
fiduciary duties) and liabilities relating thereto to the Trust or the
shareholders, such duties and liabilities will be replaced by the duties and
liabilities of the Trustee expressly set forth in the Trust Agreement. The
Trustee will have no obligation to supervise, nor will it be liable for, the
acts or omissions of the Sponsor, Transfer Agent, Custodian, Prime Broker or any
other person.
Neither
the Trustee, either in its capacity as trustee or in its individual capacity,
nor any director, officer or controlling person of the Trustee is, or has any
liability as, the issuer, director, officer or controlling person of the issuer
of Shares. The Trustee’s liability in connection with the issuance and sale of
Shares is limited solely to the express obligations of the Trustee as set forth
in the Trust Agreement.
The
Trustee has not prepared or verified, and will not be responsible or liable for,
any information, disclosure or other statement in this prospectus or in any
other document issued or delivered in connection with the sale or transfer of
the Shares. The Trust Agreement provides that the Trustee will not be
responsible or liable for the genuineness, enforceability, collectability,
value, sufficiency, location or existence of any of the SUI or other assets of
the Trust. See “—Description of the Trust Agreement.”
The
Trustee is permitted to resign upon at least 180 days’ notice to the Trust. The
Trustee will be compensated by the Sponsor and indemnified by the Sponsor and
the Trust against any expenses it incurs relating to or arising out of the
formation, operation or termination of the Trust, or the performance of its
duties pursuant to the Trust Agreement except to the extent that such expenses
result from gross negligence, willful misconduct or bad faith of the Trustee.
The Sponsor has the discretion to replace the Trustee.
Fees
paid to the Trustee are a Sponsor-paid Expense.
The
Transfer Agent
The
Bank of New York Mellon serves as the Transfer Agent of the Trust pursuant to
the terms and provisions of the Transfer Agency and Service Agreement (the
“Transfer Agency and Service Agreement”). The Transfer Agent: (1) facilitates
the issuance and redemption of Shares of the Trust; (2) responds to
correspondence by Trust shareholders and others relating to its duties; (3)
maintains shareholder accounts; and (4) makes periodic reports to the Trust. The
Transfer Agent has its principal office at 240 Greenwich Street, New York, New
York 10286. A copy of the Transfer Agency and Service Agreement is available for
inspection at the Sponsor’s principal office identified herein.
Continental
Stock Transfer & Trust Company, a Delaware corporation, serves as a
co-transfer agent for the Trust (the “Co-Transfer Agent”) pursuant to the terms
and provisions of the Co-Transfer Agency Agreement (the “Co-Transfer Agency
Agreement”). The Co-Transfer Agent has its principal office at 1 State Street,
30th Floor, New York, New York 10004. A copy of the Co-Transfer Agency Agreement
is available for inspection at the Sponsor’s principal office identified
herein.
Fees
paid to the Transfer Agent and Co-Transfer Agent are a Sponsor-paid
Expense.
Administrator
BNY
Mellon Asset Servicing, a division of The Bank of New York Mellon, serves as the
administrator for the Trust. The Administrator’s fees are paid on behalf of the
Trust by the Sponsor.
Authorized
Participants
An
Authorized Participant must enter into a “Participant Agreement” with the
Sponsor and the Trust to govern its placement of orders to create and redeem
Baskets. The Participant Agreement sets forth the procedures for the creation
and redemption of Baskets, the delivery of SUI or cash required for creations
and the delivery of Baskets or cash required for redemptions. A copy of the form
of Participant Agreement is available for inspection at the Sponsor’s principal
office identified herein and is filed as an exhibit to the registration
statement of which this prospectus forms a part.
Each
Authorized Participant must (i) be a registered broker-dealer, (ii) have entered
into a Participant Agreement with the Sponsor and the Transfer Agent, and (iii)
in the case of any creation or redemption pursuant to In-Kind Orders, own, or
their AP Designee (as defined below) must own, a SUI wallet address that is
known to the Custodian as belonging to the Authorized Participant or its AP
Designee and maintain an account with the Custodian.
The
Trust issues and redeems Shares on an ongoing basis, but only in one or more
whole Baskets of 10,000 Shares each. The creation and redemption of Baskets
requires the delivery to or acquisition by the Trust, or the distribution or
other disposition by the Trust, of the amount of SUI represented by the Baskets
being created or redeemed, the number of which is equal to the “Basket Amount”
as of 4:00 p.m., New York time, on the trade date of a creation or redemption
order multiplied by the number of Baskets being created or redeemed (the “Total
Basket Amount”). The amount of SUI required to create a Basket, or to be
delivered or sold upon the redemption of a Basket, will gradually decrease over
time due to the transfer of the Trust’s SUI to pay the Sponsor’s Fee and the
delivery or sale of the Trust’s SUI to pay any Trust expenses not assumed by the
Sponsor. See “Description of Creation and Redemption of Shares” in this
prospectus.
The
Trust creates Baskets only upon the receipt of SUI, and redeems Baskets only by
distributing SUI or proceeds from the disposition of SUI. An Authorized
Participant may choose to submit Cash Orders, pursuant to which the Authorized
Participant will deposit cash into, or accept cash from, the Cash Account in
connection with the creation and redemption of Baskets. Cash Orders will be
facilitated by the Transfer Agent and Grayscale Investments Sponsors, LLC, which
will engage one or more Liquidity Providers to obtain or receive SUI in
connection with such orders. The Sponsor may in its sole discretion limit the
number of Shares created pursuant to Cash Orders on any specified day without
notice to the Authorized Participants and may direct the Marketing Agent to
reject any Cash Orders in excess of such capped amount. The redemption of Shares
pursuant to Cash Orders will only take place if approved by the Sponsor in
writing, in its sole discretion and on a case-by-case basis.
The
Trust may also create and redeem Baskets via In-Kind Orders, pursuant to which
an Authorized Participant or its AP Designee will deposit SUI directly with the
Trust or receive SUI directly from the Trust.
As
of the date of this prospectus, the Sponsor has entered into a Participant
Agreement with and pursuant to which such entities have agreed to act as an
Authorized Participants of the Trust, and are able to conduct creations and
redemptions for cash. In addition, as of the date of this prospectus, is able to
conduct creations and redemptions in-kind. The Sponsor may engage additional
Authorized Participants who are unaffiliated with the Trust in the future, and
such Authorized Participants may be able to conduct creations and redemptions
in-kind, in cash, or both.
No
Authorized Participant has any obligation or responsibility to the Sponsor or
the Trust to effect any sale or resale of Shares.
Liquidity
Providers
Liquidity
Providers facilitate the purchase and sale of SUI in connection with Cash Orders
for creations or redemptions of Baskets. The Liquidity Providers with which
Grayscale Investments Sponsors, LLC, acting in its capacity as the Liquidity
Engager, will engage in SUI transactions are third parties that are not
affiliated with the Sponsor or the Trust and are not acting as agents of the
Trust, the Sponsor, or any Authorized Participant, but may be affiliated with
the Authorized Participant, and such transactions will be done on an arms-length
basis. Except for the contractual relationships between each Liquidity Provider
and Grayscale Investments Sponsors, LLC in its capacity as the Liquidity
Engager, there is no other pre-existing contractual relationship between each
Liquidity Provider, on the one hand, and the Trust or the Sponsor, on the other
hand.
A
Liquidity Provider must enter into a “Liquidity Provider Agreement” with the
Liquidity Engager and the Sponsor (on behalf of the Trust), which will obligate
it to obtain or receive SUI in connection with creations and redemptions
pursuant to Cash Orders.
As
of the date of this prospectus, the Liquidity Engager has engaged and
as
Liquidity Providers. The Liquidity Engager may engage additional Liquidity
Providers who are unaffiliated with the Trust in the future.
,
one of the Authorized Participants, is an affiliate of , one of the Liquidity
Providers.
The
Custodian and Prime Broker
Coinbase
Custody Trust Company, LLC is a fiduciary under § 100 of the New York Banking
Law and a qualified custodian for purposes of Rule 206(4)-2(d)(6) under the
Investment Advisers Act. The Custodian is authorized to serve as the Trust’s
custodian under the Trust Agreement and pursuant to the terms and provisions of
the Prime Broker Agreement. The Custodian has its principal office at 200 Park
Avenue South, Suite 1208, New York, NY 10003. A copy of the Prime Broker
Agreement is available for inspection at the Sponsor’s principal office
identified herein and is filed as an exhibit to the registration statement of
which this prospectus forms a part.
Under
the Prime Broker Agreement, the Custodian controls and secures the Trust’s
“Vault Balance,” a segregated custody account to store private keys, which allow
for the transfer of ownership or control of the Trust’s SUI, on the Trust’s
behalf. The Custodian’s services (i) allow SUI to be deposited from a public
blockchain address to the Trust’s Vault Balance and (ii) allow the Trust or
Sponsor to withdraw SUI from the Trust’s Vault Balance to a public blockchain
address the Trust or Sponsor controls (the “Custodial and Prime Broker
Services”). The Vault Balance uses offline storage, or “cold” storage,
mechanisms to secure the Trust’s private keys. The term cold storage refers to a
safeguarding method by which the private keys corresponding to digital assets
are disconnected.
The
Custodian will withdraw from the Trust’s Vault Balance the amount of SUI
necessary to pay the Trust’s expenses.
Fees
paid to the Custodian are a Sponsor-paid Expense.
Under
the Prime Broker Agreement, each of the Custodian and the Trust has agreed to
indemnify and hold harmless the other party from any third-party claim or
third-party demand (including reasonable and documented attorneys’ fees and any
fines, fees or penalties imposed by any regulatory authority) arising out of or
related to the Custodian’s or the Trust’s, as the case may be, breach of the
Prime Broker Agreement, inaccuracy in any of the Custodian’s or the Trust’s, as
the case may be, representations or warranties in the Prime Broker Agreement, or
the Trust’s violation, or the Custodian’s knowing violation, of any law, rule or
regulation, or the rights of any third party, except where such claim directly
results from the negligence, fraud or willful misconduct of the other such
party. In addition, the Trust has agreed to indemnify the Custodian with respect
to any Incidental Rights or IR Virtual Currency abandoned by the Trust and any
tax liability relating thereto or arising therefrom.
The
Custodian and its affiliates may from time to time purchase or sell SUI for
their own accounts and as agent for their customers or Shares for their own
accounts. The foregoing notwithstanding, SUI in the Vault Balance are not
treated as general assets of the Custodian and cannot be commingled with any
other digital assets held by the Custodian. The Custodian serves as a fiduciary
and custodian on the Trust’s behalf, and the SUI in the Vault Balance are
considered fiduciary assets that remain the Trust’s property at all
times.
Once
each calendar year, the Sponsor or the Trust may request that the Custodian
deliver a certificate signed by a duly authorized officer to certify that all
representations and warranties made by the Custodian in the Prime Broker
Agreement are true and correct on and as of the date of such certificate, and
have been true and correct throughout the preceding year. In addition, the
Custodian has agreed to allow the Trust and the Sponsor to take any necessary
steps to verify that satisfactory internal control system and procedures are in
place, and to visit and inspect the systems on which the Custodian’s coins are
held.
If
the Custodian resigns in its capacity as custodian, the Sponsor may appoint an
additional or replacement custodian and enter into a custodian agreement on
behalf of the Trust with such custodian. Furthermore, the Sponsor and the Trust
may use SUI custody services or similar services provided by entities other than
Coinbase Custody Trust Company, LLC at any time without prior notice to Coinbase
Custody Trust Company, LLC.
Custody
of the Trust’s SUI
Digital
assets and digital asset transactions are recorded and validated on blockchains,
the public transaction ledgers of a digital asset network. Each digital asset
blockchain serves as a record of ownership for all of the units of such digital
asset, even in the case of certain privacy-preserving digital assets, where the
transactions themselves are not publicly viewable. All digital assets recorded
on a blockchain are associated with a public blockchain address, also referred
to as a digital wallet. Digital assets held at a particular public blockchain
address may be accessed and transferred using a corresponding private
key.
Key
Generation
Public
addresses and their corresponding private keys are generated by the Custodian in
secret key generation ceremonies at secure locations inside faraday cages, which
are enclosures used to block electromagnetic fields and thus mitigate against
attacks. The Custodian uses quantum random number generators to generate the
public and private key pairs.
Once
generated, private keys are encrypted, separated into “shards”, and then further
encrypted. After the key generation ceremony, all materials used to generate
private keys, including computers, are destroyed. All key generation ceremonies
are performed offline. No party other than the Custodian has access to the
private key shards of the Trust, including the Trust itself.
Key
Storage
Private
key shards are distributed geographically by the Custodial Entities in secure
vaults around the world, including in the United States. The locations of the
secure vaults may change regularly and are kept confidential by the Custodian
and the Prime Broker for security purposes.
The
Vault Balance primarily uses “cold” storage mechanisms to secure a substantial
portion of the Trust’s private keys. A substantial portion of the Trust’s SUI
holdings are held in cold storage at all times, with a portion of the Settlement
Balance held temporarily in “hot” storage from time to time, for purposes of
facilitating the receipt and distribution of SUI in connection with the creation
and redemption of Baskets. Any SUI credited to the Trust’s Settlement Balance is
stored in omnibus accounts, either on the Prime Broker’s systems or at Coinbase
Connected Venues, using a combination of cold and hot storage mechanisms to
secure the private keys representing the assets credited to the Trust’s
Settlement Balance.
Cold
storage is a safeguarding method with multiple layers of protections and
protocols, by which the private keys corresponding to the Trust’s SUI are
generated and stored in an offline manner. A digital wallet may receive deposits
of digital assets but may not send digital assets without use of the digital
assets’ corresponding private keys. In order to send digital assets from a
digital wallet in which the private keys are kept in cold storage, either the
private keys must be retrieved from cold storage and entered into an online, or
hot, digital asset software program to sign the transaction, or the unsigned
transaction must be transferred to the cold server in which the private keys are
held for signature by the private keys and then transferred back to the online
digital asset software program. At that point, the user of the digital wallet
can transfer its digital assets. While private keys held in hot storage are more
accessible and therefore enable more efficient transfers, such assets are more
vulnerable to theft, loss or misappropriation.
Security
Procedures
The
Custodian and the Prime Broker hold the Trust’s private keys in custody in
accordance with the terms and provisions of the Prime Broker Agreement.
Transfers to and from the Vault Balance and, where held in cold storage, the
Trust’s Settlement Balance, require certain security procedures, including but
not limited to, multiple encrypted private key shards, usernames, passwords and
2-step verification. Multiple private key shards held by the applicable
Custodial Entity or Entities must be combined to reconstitute the private key to
sign any transaction in order to transfer the Trust’s assets. Private key shards
are distributed geographically by the Custodial Entities in secure vaults around
the world, including in the United States.
As
a result, if any one secure vault is ever compromised, this event will have no
impact on the ability of the Trust to access its assets, other than a possible
delay in operations, while one or more of the other secure vaults is used
instead. These security procedures are intended to remove single points of
failure in the protection of the Trust’s assets.
Transfers
of SUI to the Vault Balance from the Settlement Balance will be available to the
Trust once processed on the Sui Network, subject to the availability of the
Prime Broker’s online platform. When SUI is credited to the Settlement Balance,
certain movements to allocate the balance among (i) omnibus cold storage wallets
and omnibus hot storage wallets on the Prime Broker’s platform; or (ii) omnibus
accounts at Coinbase Connected Venues may not be viewable by the Trust via the
Prime Broker’s online portal. In addition, on a monthly basis the Custodial
Entities will provide the Sponsor with an account statement identifying the
amount of cash and SUI in the Trust’s Accounts at the end of the period and
listing all account activity during that period.
The
process of accessing and withdrawing SUI from the Trust to redeem a Basket by an
Authorized Participant follows the same general procedure as transferring SUI to
the Trust to create a Basket by an Authorized Participant, only in reverse. See
“Description of Creation and Redemption of Shares.”
The
Marketing Agent
Foreside
Fund Services, LLC (“Foreside”) is the marketing agent of the Shares. Foreside
is a registered broker-dealer with the SEC and is a member of FINRA.
In
its capacity as marketing agent, Foreside provides the following services to the
Sponsor: (i) assist the Sponsor in facilitating Participation Agreements between
and among Authorized Participants, the Sponsor, on behalf of the Trust, and the
Transfer Agent; (ii) provide prospectuses to Authorized Participants; (iii) work
with the Transfer Agent to review and approve orders placed by the Authorized
Participants and transmitted to the Transfer Agent; (iv) review and file
applicable marketing materials with FINRA and (v) maintain, reproduce and store
applicable books and records related to the services provided under the
Marketing Agent Agreement.
The
Sponsor may engage additional or successor marketing agents in the
future.
Valuation
of SUI and Determination of NAV
The
Sponsor will evaluate the SUI held by the Trust and determine the NAV of the
Trust in accordance with the relevant provisions of the Trust Documents. The
following is a description of the material terms of the Trust Documents as they
relate to valuation of the Trust’s SUI and the NAV calculations, which is
calculated using non-GAAP methodology and is not used in the Trust’s financial
statements.
On
each business day at 4:00 p.m., New York time, or as soon thereafter as
practicable (the “Evaluation Time”), the Sponsor will evaluate the SUI held by
the Trust and calculate and publish the NAV of the Trust. To calculate the NAV,
the Sponsor will:
1.
Determine
the Index Price as of such business day.
2.
Multiply
the Index Price by the Trust’s aggregate amount of SUI owned by the Trust as of
4:00 p.m., New York time, on the immediately preceding day, less the aggregate
amount of SUI payable as the accrued and unpaid Sponsor’s Fee as of 4:00 p.m.,
New York time, on the immediately preceding day.
3.
Add
the U.S. dollar value of SUI, calculated using the Index Price, receivable under
pending creation orders, if any, determined by multiplying the number of the
Creation Baskets represented by such creation orders by the Basket Amount and
then multiplying such product by the Index Price.
4.
Subtract
the U.S. dollar amount of accrued and unpaid Additional Trust Expenses, if
any.
5.
Subtract
the U.S. dollar value of the SUI, calculated using the Index Price, which are
either (i) to be distributed under pending redemption orders, if any, determined
by multiplying the number of Baskets to be redeemed represented by such
redemption orders by the Basket Amount and then multiplying such product by the
Index Price, or (ii) to be distributed to Shareholders pursuant to a binding
obligation of the Trust following the declaration of an in-kind dividend
(including through interests in any liquidating trust or other vehicle formed to
hold such SUI) (the amount derived from steps 1 through 5 above, the “NAV Fee
Basis Amount”).
6.
Subtract
the U.S. dollar amount of the Sponsor’s Fee that accrues for such business day,
as calculated based on the NAV Fee Basis Amount for such business
day.
In
the event that the Sponsor determines that the primary methodology used to
determine the Index Price is not an appropriate basis for valuation of the
Trust’s SUI, the Sponsor will utilize the cascading set of rules as described in
“—Overview of the Sui Industry and Market—The Index and the Index
Price.”
The
Sponsor will publish the Index Price, the Trust’s NAV and the NAV per Share on
the Trust’s website as soon as practicable after its determination. If the NAV
and NAV per Share have been calculated using a price per SUI other than the
Index Price for such Evaluation Time, the publication on the Trust’s website
will note the valuation methodology used and the price per SUI resulting from
such calculation.
In
the event of a hard fork of the Sui Network, the Sponsor will, if permitted by
the terms of the Trust Agreement, use its discretion to determine, in good
faith, which peer-to-peer network, among a group of incompatible forks of the
Sui Network, is generally accepted as the network for SUI and should therefore
be considered the appropriate network for the Trust’s purposes. The Sponsor will
base its determination on a variety of then relevant factors, including (but not
limited to) the following: (i) the Sponsor’s beliefs regarding expectations of
the core developers of SUI, users, services, businesses, validators and other
constituencies and (ii) the actual continued acceptance of, validating power on,
and community engagement with the Sui Network.
The
shareholders may rely on any evaluation furnished by the Sponsor. The
determinations that the Sponsor makes will be made in good faith upon the basis
of, and the Sponsor will not be liable for any errors contained in, information
reasonably available to it. The Sponsor will not be liable to the Authorized
Participants, the shareholders or any other person for errors in judgment.
However, the preceding liability exclusion will not protect the Sponsor against
any liability resulting from gross negligence, willful misconduct or bad faith
in the performance of its duties.
Expenses;
Sales of SUI
The
Trust’s only ordinary recurring expense is expected to be the Sponsor’s Fee. The
Sponsor’s Fee will accrue daily in U.S. dollars at an annual rate of % of the
NAV Fee Basis Amount of the Trust as of 4:00 p.m., New York time, on each day;
provided that for a day that is not a business day, the calculation will be
based on the NAV Fee Basis Amount from the most recent business day, reduced by
the accrued and unpaid Sponsor’s Fee for such most recent business day and for
each day after such most recent business day and prior to the relevant
calculation date. This dollar amount for each daily accrual will then be
converted into SUI by reference to the same Index Price used to determine such
accrual. The Sponsor’s Fee is payable in SUI to the Sponsor daily in
arrears.
In
addition, the Sponsor may, in its sole discretion, agree to rebate all or a
portion of the Sponsor’s Fee attributable to Shares held by certain large
investors, individuals or entities. Any such rebate will be subject to
negotiation and written agreement between the Sponsor and the investor/entity on
a case-by-case basis. The Sponsor is under no obligation to provide any rebates
of the Sponsor’s Fee. Neither the Trust nor the Trustee will be a party to any
Sponsor’s Fee rebate arrangements negotiated by the Sponsor.
Expenses
to Be Paid by the Sponsor
The
Trust pays the Sponsor’s Fee to the Sponsor. As partial consideration for its
receipt of the Sponsor’s Fee from the Trust, the Sponsor is obligated under the
Trust Agreement to assume and pay all fees and other expenses incurred by the
Trust in the ordinary course of its affairs, excluding taxes, but including: (i)
the Marketing Fee; (ii) the Administrator Fee, if any; (iii) the Custodian Fee
and fees for any other security vendor engaged by the Trust; (iv) the Transfer
Agent Fee; (v) the Trustee fee; (vi) fees and expenses related to the listing,
quotation or trading of the Shares on any Secondary Market (including customary
legal, marketing and audit fees and expenses) in an amount up to $600,000 in any
given fiscal year; (vii) ordinary course legal fees and expenses; (viii) audit
fees; (ix) regulatory fees, including, if applicable, any fees relating to
registration of the Shares under the Securities Act or the Exchange Act; (x)
printing and mailing costs; (xi) the costs of maintaining the Trust’s website;
and (xii) applicable license fees (each a “Sponsor-paid Expense”), provided that
any expense that qualifies as an Additional Trust Expense will be deemed to be
an Additional Trust Expense and not a Sponsor-paid Expense. The Sponsor, from
time to time, may temporarily waive all or a portion of the Sponsor’s Fee of the
Trust in its discretion for stated periods of time. Presently, the Sponsor does
not intend to waive any of the Sponsor’s Fee for the Trust and there are no
circumstances under which the Sponsor has determined it will definitely waive
the fee. The Sponsor is under no obligation to waive any portion of its fees and
any such waiver shall create no obligation to waive any such fees during any
period not covered by the waiver.
The
Sponsor’s Fee will generally be paid in SUI. After the Trust’s payment of the
Sponsor’s Fee to the Sponsor, the Sponsor may elect to convert the SUI received
as payment of the Sponsor’s Fee into U.S. dollars. The rate at which the Sponsor
converts such SUI to U.S. dollars may differ from the rate at which the relevant
Sponsor’s Fee was determined. The Trust will not be responsible for any fees and
expenses incurred by the Sponsor to convert SUI received in payment of the
Sponsor’s Fee into U.S. dollars.
Extraordinary
and Other Expenses
In
certain extraordinary circumstances, the Trust may incur certain extraordinary,
non-recurring expenses that are not Sponsor-paid Expenses, including, but not
limited to: taxes and governmental charges; expenses and costs of any
extraordinary services performed by the Sponsor (or any other service provider)
on behalf of the Trust to protect the Trust or the interests of shareholders;
any indemnification of the Custodian or other agents, service providers or
counterparties of the Trust; the fees and expenses related to the listing,
quotation or trading of the Shares on any Secondary Market (including legal,
marketing and audit fees and expenses) to the extent exceeding $600,000 in any
given fiscal year; and extraordinary legal fees and expenses, including any
legal fees and expenses incurred in connection with litigation, regulatory
enforcement or investigation matters (collectively, “Additional Trust
Expenses”). If Additional Trust Expenses are incurred, the Trust will be
required to pay these Additional Trust Expenses by selling or delivering SUI.
Generally, the Sponsor will cover such expenses on behalf of the Trust and the
Trust will reimburse the Sponsor by delivering to the Sponsor SUI in an amount
equal to such expenses. When the Trust and the Sponsor, acting on behalf of the
Trust, sell or deliver, as applicable, SUI, they generally do not transact
directly with counterparties other than the Authorized Participants, a Liquidity
Provider or other similarly eligible financial institutions that are subject to
federal and state licensing requirements and maintain practices and policies
designed to comply with AML and KYC regulations.
The
Sponsor or any of its affiliates may be reimbursed only for the actual cost to
the Sponsor or such affiliate of any expenses that it advances on behalf of the
Trust for payment of which the Trust is responsible. In addition, the Trust
Agreement prohibits the Trust from paying to the Sponsor or such affiliate for
indirect expenses incurred in performing services for the Trust in its capacity
as the Sponsor (or an affiliate of the Sponsor) of the Trust, such as salaries
and fringe benefits of officers and directors, rent or depreciation, utilities
and other administrative items generally falling within the category of the
Sponsor’s “overhead.”
Disposition
of SUI
To
cause the Trust to pay the Sponsor’s Fee, the Sponsor will instruct the
Custodian to (i) withdraw from the Vault Balance the amount of SUI, determined
as described above in “—Expenses; Sales of SUI,” equal to the accrued but unpaid
Sponsor’s Fee and (ii) transfer such SUI to an account maintained by the
Custodian for the Sponsor at such times as the Sponsor determines in its
absolute discretion. In addition, if the Trust incurs any Additional Trust
Expenses, the Sponsor or its delegates (i) will instruct the Custodian to
withdraw from the Vault Balance SUI in such quantity as may be necessary to
permit payment of such Additional Trust Expenses and (ii) may either (x) cause
the Trust to convert such SUI into U.S. dollars or other fiat currencies at the
Actual Exchange Rate or (y) when the Sponsor incurs such expenses on behalf of
the Trust, cause the Trust (or its delegate) to deliver such SUI in kind to the
Sponsor, in each case in such quantity as may be necessary to permit payment of
such Additional Trust Expenses. The Sponsor’s Fee and Additional Trust Expenses
payable by the Trust will generally be paid in SUI. Shareholders do not have the
option of choosing to pay their proportionate shares of Additional Trust
Expenses in lieu of having their shares of Additional Trust Expenses paid by the
Trust’s delivery or disposition of SUI. Assuming that the Trust is a grantor
trust for U.S. federal income tax purposes, the transfer or sale of SUI to pay
the Trust’s expenses will be a taxable event for shareholders. See “Material
U.S. Federal Income Tax Consequences—Tax Consequences to U.S.
Holders.”
Because
the amount of SUI held by the Trust will decrease as a consequence of the
payment of the Sponsor’s Fee in SUI or the sale of SUI to pay Additional Trust
Expenses (and the Trust will incur additional fees associated with converting
SUI into U.S. dollars), the amount of SUI represented by a Share will decline at
such time and the Trust’s NAV may also decrease. Accordingly, the shareholders
will bear the cost of the Sponsor’s Fee and any Additional Trust Expenses. New
SUI deposited into the Vault Balance in exchange for additional new Baskets
issued by the Trust will not reverse this trend.
The
Sponsor will also cause the sale of the Trust’s SUI if the Sponsor determines
that sale is required by applicable law or regulation or in connection with the
termination and liquidation of the Trust. The Sponsor will not be liable or
responsible in any way for depreciation or loss incurred by reason of any sale
of SUI.
The
quantity of SUI to be delivered to the Sponsor or other relevant payee in
payment of the Sponsor’s Fee or any Additional Trust Expenses, or sold to permit
payment of Additional Trust Expenses, will vary from time to time depending on
the level of the Trust’s expenses and the value of SUI held by the Trust. See
“—Expenses; Sales of SUI.” Assuming that the Trust is a grantor trust for U.S.
federal income tax purposes, each delivery or sale of SUI by the Trust for the
payment of expenses will be a taxable event to shareholders. See “Material U.S.
Federal Income Tax Consequences—Tax Consequences to U.S. Holders.”
Hypothetical
Expense Example
The
following table illustrates the anticipated impact of the payment of the Trust’s
expenses on the amount of SUI represented by each outstanding Share for three
years. It assumes that the only transfers of SUI will be those needed to pay the
Sponsor’s Fee and that the price of SUI and the number of Shares remain constant
during the three-year period covered. The table does not show the impact of any
Additional Trust Expenses. Any Additional Trust Expenses, if and when incurred,
will accelerate the decrease in the fractional amount of SUI represented by each
Share. In addition, the table does not show the effect of any waivers of the
Sponsor’s Fee that may be in effect from time to time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
|
|
1 |
|
|
2 |
|
|
3 |
|
|
Hypothetical
price per SUI, beginning |
|
$ |
100.00 |
|
|
$ |
100.00 |
|
|
$ |
100.00 |
|
|
Sponsor’s
Fee |
|
% |
|
|
% |
|
|
% |
|
|
Shares
of Trust, beginning |
|
|
100,000.00 |
|
|
|
100,000.00 |
|
|
|
100,000.00 |
|
|
SUI in
Trust, beginning |
|
|
10,000.00 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Hypothetical
value of SUI in Trust |
|
$ |
1,000,000.00 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Beginning
NAV of the Trust |
|
$ |
1,000,000.00 |
|
|
$ |
- |
|
|
$ |
- |
|
|
SUI to
be delivered to cover the Sponsor’s Fee |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
SUI in
Trust, ending |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Ending
NAV of the Trust |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Ending
NAV per share |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Hypothetical
price per SUI, ending |
|
$ |
100.00 |
|
|
$ |
100.00 |
|
|
$ |
100.00 |
|
Discretion
of the Index Provider
The
Index Provider has sole discretion over the determination of Index Price and may
change the methodologies for determining the Index Price from time to
time.
Description
of the Trust Agreement
The
following is a description of the material terms of the Trust Agreement. The
Trust Agreement establishes the roles, rights and duties of the Sponsor and the
Trustee.
The
Sponsor
Liability
of the Sponsor and Indemnification
Neither
the Sponsor nor the Trust insure the Trust’s SUI. The Sponsor and its affiliates
(each a “Covered Person”) will not be liable to the Trust or any shareholder for
any loss suffered by the Trust which arises out of any action or inaction of
such Covered Person if such Covered Person determined in good faith that such
course of conduct was in the best interests of the Trust. However, the preceding
liability exclusion will not protect any Covered Person against any liability
resulting from its own willful misconduct, bad faith or gross negligence in the
performance of its duties.
Each
Covered Person will be indemnified by the Trust against any loss, judgment,
liability, expense incurred or amount paid in settlement of any claim sustained
by it in connection with the Covered Person’s activities for the Trust, provided
that (i) the Covered Person was acting on behalf of, or performing services for,
the Trust and had determined, in good faith, that such course of conduct was in
the best interests of the Trust and such liability or loss was not the result of
fraud, gross negligence, bad faith, willful misconduct or a material breach of
the Trust Agreement on the part of such Covered Person and (ii) any such
indemnification will be recoverable only from the property of the Trust. Any
amounts payable to an indemnified party will be payable in advance under certain
circumstances.
Fiduciary
and Regulatory Duties of the Sponsor
The
Sponsor is not effectively subject to the duties and restrictions imposed on
“fiduciaries” under both statutory and common law. Rather, the general fiduciary
duties that would apply to the Sponsor are defined and limited in scope by the
Trust Agreement.
Under
Delaware law, a shareholder may bring a derivative action if the shareholder is
a shareholder at the time the action is brought and either (i) was a shareholder
at the time of the transaction at issue or (ii) acquired the status of
shareholder by operation of law or the Trust’s governing instrument from a
person who was a shareholder at the time of the transaction at issue.
Additionally, Section 3816(e) of the Delaware Statutory Trust Act specifically
provides that “a beneficial owner’s right to bring a derivative action may be
subject to such additional standards and restrictions, if any, as are set forth
in the governing instrument of the statutory trust, including, without
limitation, the requirement that beneficial owners owning a specified beneficial
interest in the statutory trust join in the bringing of the derivative action.”
In addition to the requirements of applicable law, the Trust Agreement provides
that no shareholder will have the right, power or authority to bring or maintain
a derivative action, suit or other proceeding on behalf of the Trust unless two
or more shareholders who (i) are not “Affiliates” (as defined in the Trust
Agreement and below) of one another and (ii) collectively hold at least 10.0% of
the outstanding Shares join in the bringing or maintaining of such action, suit
or other proceeding. The Trust selected the 10.0% ownership threshold because
the Trust believed that this was a threshold that investors would be comfortable
with based on market precedent.
This
provision applies to any derivative action brought in the name of the Trust
other than claims brought under the federal securities laws or the rules and
regulations thereunder, to which Section 7.4 does not apply. Due to this
additional requirement, a shareholder attempting to bring a derivative action in
the name of the Trust will be required to locate other shareholders with which
it is not affiliated and that have sufficient Shares to meet the 10.0% threshold
based on the number of Shares outstanding on the date the claim is brought and
thereafter throughout the duration of the action, suit or proceeding.
“Affiliate”
is defined in the Trust Agreement to mean any natural person, partnership,
limited liability company, statutory trust, corporation, association or other
legal entity (each, a “Person”) directly or indirectly owning, controlling or
holding with power to vote 10% or more of the outstanding voting securities of
such Person, (ii) any Person 10% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held with power to vote by such
Person, (iii) any Person, directly or indirectly, controlling, controlled by or
under common control of such Person, (iv) any employee, officer, director,
member, manager or partner of such Person, or (v) if such Person is an employee,
officer, director, member, manager or partner, any Person for which such Person
acts in any such capacity.
Any
shareholders seeking to bring a derivative action may determine whether the
10.0% ownership threshold required to bring a derivative action has been met by
dividing the number Shares owned by such shareholders by the total number of
Shares outstanding. Following the effectiveness of the registration statement of
which this prospectus forms a part, shareholders may determine the total number
of Shares outstanding by reviewing the Trust’s annual filings on Form 10-K,
quarterly filings on Form 10-Q and current reports on Form 8-K reporting sales
of unregistered securities pursuant to Item 3.02 thereof, or by requesting the
number of Shares outstanding at any time from the Sponsor pursuant to Sections
7.2 and 8.1 of the Trust Agreement and Section 3819(a) of the DSTA. Because the
Trust is a grantor trust, it may only issue one class of securities, the
Shares.
The
Trust offers Shares on a periodic basis at such times and for such periods as
the Sponsor determines in its sole discretion. As a result, in order to maintain
the 10.0% ownership threshold required to maintain a derivative action,
shareholders may need to increase their holdings or locate additional
shareholders during the pendency of a claim. The Trust will post the number of
Shares outstanding as of the end of each month on its website and as of the end
of each quarter in its annual and quarterly filings with the SEC. The Trust
additionally will report sales of unregistered securities on Form 8-K pursuant
to Item 3.02 thereof. Following the effectiveness of the registration statement
of which this prospectus forms a part, shareholders may monitor the number of
Shares outstanding at any time for purposes of calculating their ownership
threshold by reviewing the Trust’s website and SEC filings and by requesting the
number of Shares outstanding on any date from the Sponsor at any time pursuant
to Sections 7.2 and 8.1 of the Trust Agreement. Shareholders have the
opportunity at any time to increase their holdings or locate other shareholders
to maintain the 10.0% threshold throughout the duration of a derivative claim.
Shareholders may do so by contacting shareholders that are required to file
Schedule 13Ds or Schedule 13Gs with the SEC or by requesting from the Sponsor
the list of the names and last known address of all shareholders pursuant to
Sections 7.2 and 8.1 of the Trust Agreement and Section 3819(a) of the
DSTA.
The
Sponsor is not aware of any reason to believe that Section 7.4 of the Trust
Agreement is not enforceable under state or federal law. The Court of Chancery
of Delaware has stated that “[t]he DSTA is enabling in nature and, as such,
permits a trust through its declarations of trust to delineate additional
standards and requirements with which a stockholder-plaintiff must comply to
proceed derivatively in the name of the trust.” Hartsel
v. Vanguard Group., Inc.,
Del. Ch. June 15, 2011. However, there is limited case law addressing the
enforceability of provisions like Section 7.4 under state and federal law and it
is possible that this provision would not be enforced by a court in another
jurisdiction or under other circumstances.
Beneficial
owners may have the right, subject to certain legal requirements, to bring class
actions in federal court to enforce their rights under the federal securities
laws and the rules and regulations promulgated thereunder by the SEC. Beneficial
owners who have suffered losses in connection with the purchase or sale of their
beneficial interests may be able to recover such losses from the Sponsor where
the losses result from a violation by the Sponsor of the anti-fraud provisions
of the federal securities laws.
Actions
Taken to Protect the Trust
The
Sponsor may prosecute, defend, settle or compromise actions or claims at law or
in equity that it considers necessary or proper to protect the Trust or the
interests of the shareholders. The expenses incurred by the Sponsor in
connection therewith (including the fees and disbursements of legal counsel)
will be expenses of the Trust and are deemed to be Additional Trust Expenses.
The Sponsor will be entitled to be reimbursed for the Additional Trust Expenses
it pays on behalf of the Trust.
Successor
Sponsors
If
the Sponsor is adjudged bankrupt or insolvent, the Trust may dissolve and a
Liquidating Trustee may be appointed to terminate and liquidate the Trust and
distribute its remaining assets. The Trustee will have no obligation to appoint
a successor sponsor or to assume the duties of the Sponsor, and will have no
liability to any person because the Trust is or is not terminated. However, if a
certificate of dissolution or revocation of the Sponsor’s charter is filed (and
ninety (90) days have passed after the date of notice to the Sponsor of
revocation without a reinstatement of the Sponsor’s charter) or the withdrawal,
removal, adjudication or admission of bankruptcy or insolvency of the Sponsor
has occurred, shareholders holding at least a majority (over 50%) of the Shares
may agree in writing to continue the affairs of the Trust and to select,
effective as of the date of such event, one or more successor sponsors within
ninety (90) days of any such event.
The
Trustee
The
Trustee is a fiduciary under the Trust Agreement and must satisfy the
requirements of Section 3807 of the Delaware Trust Statute. However, the
fiduciary duties, responsibilities and liabilities of the Trustee are limited
by, and are only those specifically set forth in, the Trust
Agreement.
Limitation
on Trustee’s Liability
Under
the Trust Agreement, the Sponsor has exclusive control of the management of all
aspects of the activities of the Trust and the Trustee has only nominal duties
and liabilities to the Trust. The Trustee is appointed to serve as the trustee
for the sole purpose of satisfying Section 3807(a) of the DSTA which requires
that the Trust have at least one trustee with a principal place of business in
the State of Delaware. The duties of the Trustee are limited to (i) accepting
legal process served on the Trust in the State of Delaware and (ii) the
execution of any certificates required to be filed with the Delaware Secretary
of State which the Trustee is required to execute under the DSTA.
To
the extent the Trustee has duties (including fiduciary duties) and liabilities
to the Trust or the shareholders under the DSTA, such duties and liabilities
will be replaced by the duties and liabilities of the Trustee expressly set
forth in the Trust Agreement. The Trustee will have no obligation to supervise,
nor will it be liable for, the acts or omissions of the Sponsor, Transfer Agent,
Custodian or any other person. Neither the Trustee, either in its capacity as
trustee or in its individual capacity, nor any director, officer or controlling
person of the Trustee is, or has any liability as, the issuer, director, officer
or controlling person of the issuer of Shares. The Trustee’s liability is
limited solely to the express obligations of the Trustee as set forth in the
Trust Agreement.
Under
the Trust Agreement, the Sponsor has the exclusive management, authority and
control of all aspects of the activities of the Trust. The Trustee has no duty
or liability to supervise or monitor the performance of the Sponsor, nor does
the Trustee have any liability for the acts or omissions of the Sponsor. The
existence of a trustee should not be taken as an indication of any additional
level of management or supervision over the Trust. The Trust Agreement provides
that the management authority with respect to the Trust is vested directly in
the Sponsor and that the Trustee is not responsible or liable for the
genuineness, enforceability, collectability, value, sufficiency, location or
existence of any of the SUI or other assets of the Trust.
Possible
Repayment of Distributions Received by Shareholders; Indemnification by
Shareholders
The
Shares are limited liability investments. Investors may not lose more than the
amount that they invest plus any profits recognized on their investment.
Although it is unlikely, the Sponsor may, from time to time, make distributions
to the shareholders. However, shareholders could be required, as a matter of
bankruptcy law, to return to the estate of the Trust any distribution they
received at a time when the Trust was in fact insolvent or in violation of its
Trust Agreement. In addition, the Trust Agreement provides that shareholders
will indemnify the Trust for any harm suffered by it as a result of
shareholders’ actions unrelated to the activities of the Trust.
The
foregoing repayment of distributions and indemnity provisions (other than the
provision for shareholders indemnifying the Trust for taxes imposed upon it by a
state, local or foreign taxing authority, which is included only as a formality
due to the fact that many states do not have statutory trust statutes therefore
the tax status of the Trust in such states might, theoretically, be challenged)
are commonplace in statutory trusts and limited partnerships.
Indemnification
of the Trustee
The
Trustee and any of the officers, directors, employees and agents of the Trustee
will be indemnified by the Trust as primary obligor and the Sponsor as secondary
obligor and held harmless against any loss, damage, liability, claim, action,
suit, cost, expense, disbursement (including the reasonable fees and expenses of
counsel), tax or penalty of any kind and nature whatsoever, arising out of,
imposed upon or asserted at any time against such indemnified person in
connection with the performance of its obligations under the Trust Agreement,
the creation, operation or termination of the Trust or the transactions
contemplated therein; provided, however, that neither the Trust nor the Sponsor
will be required to indemnify any such indemnified person for any such expenses
which are a result of the willful misconduct, bad faith or gross negligence of
such indemnified person. If the Trust has insufficient assets or improperly
refuses to pay such an indemnified person within 60 days of a request for
payment owed under the Trust Agreement, the Sponsor will, as secondary obligor,
compensate or reimburse the Trustee or indemnify, defend and hold harmless such
an indemnified person as if it were the primary obligor under the Trust
Agreement. Any amount payable to such an indemnified person under the Trust
Agreement may be payable in advance under certain circumstances and will be
secured by a lien on the Trust property. The obligations of the Sponsor and the
Trust to indemnify such indemnified persons under the Trust Agreement will
survive the termination of the Trust Agreement.
Holding
of Trust Property
The
Trust will hold and record the ownership of the Trust’s assets in a manner such
that it will be owned for the benefit of the shareholders for the purposes of,
and subject to and limited by the terms and conditions set forth in, the Trust
Agreement. The Trust will not create, incur or assume any indebtedness or borrow
money from or loan money to any person. The Trustee may not commingle its assets
with those of any other person.
The
Trustee may employ agents, attorneys, accountants, auditors and nominees and
will not be answerable for the conduct or misconduct of any such custodians,
agents, attorneys or nominees if such custodians, agents, attorneys and nominees
have been selected with reasonable care.
Resignation,
Discharge or Removal of Trustee; Successor Trustees
The
Trustee may resign as Trustee by written notice of its election so to do,
delivered to the Sponsor with at least 180 days’ notice. The Sponsor may remove
the Trustee in its discretion. If the Trustee resigns or is removed, the
Sponsor, acting on behalf of the shareholders, will appoint a successor trustee.
The successor Trustee will become fully vested with all of the rights, powers,
duties and obligations of the outgoing Trustee.
If
the Trustee resigns and no successor trustee is appointed within 180 days after
the Trustee notifies the Sponsor of its resignation, the Trustee will terminate
and liquidate the Trust and distribute its remaining assets.
Amendments
to the Trust Agreement
In
general, the Sponsor may amend the Trust Agreement without the consent of any
shareholder. In particular, the Sponsor may, without the approval of the
shareholders, amend the Trust Agreement if the Trust is advised at any time by
the Trust’s accountants or legal counsel that the amendments are necessary to
permit the Trust to take the position that it is a grantor trust for U.S.
federal income tax purposes. The Sponsor is also permitted to make certain
restatements, amendments or supplements to the Trust Agreement that would
materially adversely affect the interests of the shareholders as determined by
the Sponsor in its sole discretion with a 20-day notice to shareholders.
Additionally, the Sponsor is permitted to make certain restatements, amendments
or supplements to the Trust Agreement that could adversely affect the status of
the Trust as a grantor trust for U.S. federal income tax purposes, but only if
certain conditions set forth in the amendments relating to the qualification of
the Trust as a grantor trust for U.S. federal income tax purposes
are
satisfied. Furthermore, subject to certain limitations, the Sponsor may make any
other amendments to the Trust Agreement which do not materially adversely affect
the interests of the shareholders in its sole discretion without shareholder
consent.
Termination
of the Trust
The
Trust will dissolve if any of the following events occur:
•
a
U.S. federal or state regulator requires the Trust to shut down or forces the
Trust to liquidate its SUI
or seizes, impounds or otherwise restricts access to Trust
assets;
•
any
ongoing event exists that either prevents the Trust from making or makes
impractical the Trust’s reasonable efforts to make a fair determination of the
Index Price;
•
any
ongoing event exists that either prevents the Trust from converting or makes
impractical the Trust’s reasonable efforts to convert SUI
to U.S. dollars; or
•
a
certificate of dissolution or revocation of the Sponsor’s charter is filed (and
90 days have passed since the date of notice to the Sponsor of revocation
without a reinstatement of its charter) or the withdrawal, removal, adjudication
or admission of bankruptcy or insolvency of the Sponsor has occurred, unless (i)
at the time there is at least one remaining Sponsor and that remaining Sponsor
carries on the Trust or (ii) within 90 days of any such event shareholders
holding at least a majority (over 50%) of Shares, not including Shares held by
the Sponsor and its affiliates, agree in writing to continue the activities of
the Trust and to select, effective as of the date of such event, one or more
successor sponsors.
The
Sponsor may, in its sole discretion, dissolve the Trust if any of the following
events occur:
•
the
SEC determines that the Trust is an investment company required to be registered
under the Investment Company Act of 1940;
•
the
CFTC determines that the Trust is a commodity pool under the
CEA;
•
the
Trust is determined to be a “money service business” under the regulations
promulgated by FinCEN under the authority of the Bank Secrecy Act and is
required to comply with certain FinCEN regulations
thereunder;
•
the
Trust is required to obtain a license or make a registration under any state law
regulating money transmitters, money services businesses, providers of prepaid
or stored value or similar entities, or virtual currency
businesses;
•
the
Trust becomes insolvent or bankrupt;
•
the
Custodian resigns or is removed without replacement;
•
all
of the Trust’s assets are sold;
•
the
Sponsor determines that the aggregate net assets of the Trust in relation to the
expenses of the Trust make it unreasonable or imprudent to continue the affairs
of the Trust;
•
the
Sponsor receives notice from the IRS or from counsel for the Trust or the
Sponsor that the Trust fails to qualify for treatment, or will not be treated,
as a grantor trust under the U.S. Internal Revenue Code of 1986, as amended (the
“Code”);
•
if
the Trustee notifies the Sponsor of the Trustee’s election to resign and the
Sponsor does not appoint a successor trustee within 180 days;
or
•
the
Sponsor determines, in its sole discretion, that it is desirable or advisable
for any reason to discontinue the affairs of the Trust.
The
Sponsor may determine that it is desirable or advisable to discontinue the
affairs of the Trust for a variety of reasons. For example, the Sponsor may
terminate the Trust if a federal court upholds an allegation that SUI is a
security under the federal securities laws.
The
death, legal disability, bankruptcy, insolvency, dissolution, or withdrawal of
any shareholder (as long as such shareholder is not the sole shareholder of the
Trust) will not result in the termination of the Trust, and such shareholder,
his or her estate, custodian or personal representative will have no right to a
redemption or value such shareholder’s Shares. Each shareholder (and any
assignee
thereof)
expressly agrees that in the event of his or her death, he or she waives on
behalf of himself or herself and his or her estate, and he or she directs the
legal representative of his or her estate and any person interested therein to
waive the furnishing of any inventory, accounting or appraisal of the assets of
the Trust and any right to an audit or examination of the books of account for
the Trust, except for such rights as are set forth in Article VIII of the Trust
Agreement relating to the books of account and reports of the Trust.
Upon
dissolution of the Trust and surrender of Shares by the shareholders,
shareholders will receive a distribution in U.S. dollars after the Sponsor has
sold the Trust’s SUI, if applicable, and has paid or made provision for the
Trust’s claims and obligations.
If
the Trust is forced to liquidate, the Trust will be liquidated under the
Sponsor’s direction. The Sponsor, on behalf of the Trust, will engage directly
with Digital Asset Markets to liquidate the Trust’s SUI as promptly as possible
while obtaining the best fair value possible. The proceeds therefrom will be
applied and distributed in the following order of priority: (a) to the expenses
of liquidation and termination and to creditors, including shareholders who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Trust other than liabilities for distributions to
shareholders and (b) to the holders of Shares pro rata in accordance with the
respective percentages of Shares that they hold. It is expected that the Sponsor
would be subject to the same regulatory requirements as the Trust, and
therefore, the markets available to the Sponsor will be the same markets
available to the Trust.
Governing
Law
The
Trust Agreement and the rights of the Sponsor, Trustee and shareholders under
the Trust Agreement are governed by the laws of the State of
Delaware.
Description
of the Prime Broker Agreement
The
Prime Broker Agreement establishes the rights and responsibilities of the
Custodian, the Prime Broker, the Sponsor and the Trust with respect to the
Trust’s SUI which is held in accounts maintained and operated by the Custodian,
as a fiduciary with respect to the Trust’s assets, and the Prime Broker
(together with the Custodian, the “Custodial Entities”) on behalf of the Trust.
For a general description of the Custodian’s obligations, see “—Service
Providers of the Trust—The Custodian and Prime Broker.”
Account;
Location of SUI
All
of the Trust’s SUI, other than that which is credited to a settlement balance
maintained with the Prime Broker (the “Settlement Balance”), is held in custody
accounts maintained on the books of the Custodian, as to which the Custodian
controls the private keys which allow for the transfer of ownership or control
of the Trust’s SUI on the Trust’s behalf (the “Vault Balance”). The Prime Broker
Agreement provides that the Trust’s Vault Balance will be held by the Custodian
in segregated wallets or accounts. The Custodian will keep all of the private
keys associated with the Trust’s SUI held in the Vault Balance in an offline
manner. The term “cold storage” refers to a safeguarding method where the
storage of private keys may involve keeping such keys’ materials on a
non-networked computer or electronic device or storing the private keys on a
storage device. Cold storage is a safeguarding method with multiple layers of
protections and protocols, by which the private keys corresponding to the
Trust’s SUI are generated and stored in an offline manner. The term “hot
storage” refers to the safeguarding method by which the private keys are held
online, where they are more accessible, leading to more efficient transfers,
though they are potentially more vulnerable to theft, loss or damage.
Additionally, at the Sponsor’s discretion, a portion of the Trust’s SUI holdings
may be credited to the Settlement Balance, which will be reflected in a ledger
maintained on the books of the Prime Broker. The Prime Broker Agreement provides
that any SUI credited to the Trust’s Settlement Balance will be held (i) in
omnibus cold storage wallets; (ii) in omnibus hot storage wallets; or (iii) in
omnibus accounts with one of the third-party venues to which Coinbase has
established connections (each, a “Coinbase Connected Venue”). The Settlement
Balance shall be separate from the Vault Balance and any other account(s) the
Trust or the Sponsor maintain with the Custodian. From time to time, the Prime
Broker may temporarily keep a portion of the private keys associated with the
SUI credited to the Trust’s Settlement Balance in hot storage for purposes of
facilitating the receipt and distribution of SUI in connection with the creation
and redemption of Baskets.
Private
key shards associated with the Trust’s SUI are distributed geographically by the
Custodial Entities in secure vaults around the world, including in the United
States. The locations of the secure vaults may change and are kept confidential
by the Custodian for security purposes.
The
Prime Broker Agreement states that the Custodian serves as a fiduciary and
custodian on the Trust’s behalf with respect to the Trust’s SUI held in the
Vault Balance and the SUI in the Vault Balance are considered fiduciary assets
that remain the Trust’s property at all times and are not treated as general
assets of the Custodian. Under the Prime Broker Agreement, the Custodian
represents and warrants that it has no right, interest, or title in the SUI in
the Trust’s Vault Balance, and agrees that it will not, directly or indirectly,
lend, pledge, hypothecate or rehypothecate such digital assets. The Custodian
does not reflect such digital assets as assets on the balance sheet of the
Custodian, but does reflect the obligation to safeguard such digital assets with
a corresponding asset measured at fair value for such obligation. With respect
to the Trust’s SUI credited to the Settlement Balance, the Prime Broker
maintains an internal ledger that specifies the SUI credited to the Trust’s
Settlement Balance. The Prime Broker Agreement states that
the
Prime Broker treats such SUI as custodial assets held for the benefit of the
Trust, and shall not be considered the property of the Prime Broker.
Additionally,
under the Prime Broker Agreement, the Prime Broker represents and warrants that
it will not, directly or indirectly, sell, transfer, loan, rehypothecate or
otherwise alienate the Trust’s SUI credited to the Settlement
Balance.
The
Prime Broker Agreement also contains an agreement by the parties to treat the
digital assets credited to the Trust’s Vault Balance and Settlement Balance as
“financial assets” under Article 8 of the New York Uniform Commercial Code
(“Article 8”) and to treat the Vault Balance and Settlement Balance as
“securities accounts” with respect to which the Trust is the “entitlement
holder” within the meaning of Article 8. The Custodial Entities’ ultimate
parent, Coinbase Global, has stated in its 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, although due to the novelty of digital assets courts
have not yet considered this type of treatment for custodied digital assets. See
“Risk Factors—Risk Factors Related to the Trust and the Shares—The Trust relies
on third-party service providers to perform certain functions essential to the
affairs of the Trust and the replacement of such service providers could pose
challenges to the safekeeping of the Trust’s SUI and to the operations of the
Trust.”
Safekeeping
of SUI
The
Custodian will use commercially reasonable efforts to keep in safe custody on
behalf of the Trust all SUI received by the Custodian. All SUI credited to the
Vault Balance will (i) be held in the Vault Balance at all times, and the Vault
Balance will be controlled by the Custodian; (ii) be labeled or otherwise
appropriately identified as being held for the Trust; (iii) be held on a
non-fungible basis; (iv) not be commingled with other digital assets held by the
Custodian, whether held for the Custodian’s own account or the account of other
clients other than the Trust; and (v) not without the prior written consent of
the Trust be deposited or held with any third-party depositary, custodian,
clearance system or wallet. Additionally, the Custodian will use commercially
reasonable efforts to keep the private key or keys for the Vault Balance secure,
and will not disclose such keys to the Trust, the Sponsor or to any other
individual or entity except to the extent that any keys are disclosed consistent
with a standard of commercially reasonable efforts and as part of a multiple
signature solution that would not result in the Trust or the Sponsor “storing,
holding, or maintaining custody or control of” the SUI “on behalf of others”
within the meaning of the New York BitLicense Rule (23 NYCRR Part 200) as in
effect as of June 24, 2015 such that it would require the Trust or the Sponsor
to become licensed under such law.
SUI
credited to the Trust’s Settlement Balance may be held in omnibus wallets
maintained by the Prime Broker and/or at Coinbase Connected Venues. While the
SUI credited to the Trust’s Settlement Balance could be commingled with other
assets, the SUI in the Trust’s Settlement Balance will represent entitlement to
a pro-rata share of the SUI held in such omnibus wallets and/or at Coinbase
Connected Venues. In all circumstances the Prime Broker will keep an internal
ledger that specifies the assets credited to the Settlement Balance such that
the Trust, its auditors and regulators can identify the Trust’s pro-rata share
of the SUI held in omnibus wallets and/or at Coinbase Connected Venues. Neither
the Trust nor the Sponsor have a contractual relationship with the Coinbase
Connected Venues utilized by the Custodial Entities.
Insurance
Pursuant
to the terms of the Prime Broker Agreement, the Custodian is required to
maintain insurance in such types and amounts as are commercially reasonable for
the custodial services it provides. The Custodian has advised the Sponsor that
it has insurance coverage pursuant to policies held by Coinbase Global, which
procures fidelity (or crime) insurance coverage at commercially reasonable
amounts for the custodial services provided. This insurance coverage is limited
to losses of the digital assets the Custodian custodies on behalf of its
clients, including the Trust’s SUI, resulting from theft, including internal
theft by employees of Coinbase and its subsidiaries and theft or fraud by a
director of Coinbase if the director is acting in the capacity of an employee of
Coinbase or its subsidiaries. Although the Prime Broker is not required to
maintain insurance under the terms of the Prime Broker Agreement, the Custodial
Entities have also advised the Sponsor that they maintain insurance coverage
pursuant to such policies held by Coinbase Global.
Moreover,
while the Custodian maintains certain capital reserve requirements depending on
the assets under custody and to the extent required by applicable law, and such
capital reserves may provide additional means to cover client asset losses, the
Sponsor does not know the amount of such capital reserves, and neither the Trust
nor the Sponsor have access to such information. The Trust cannot be assured
that the Custodian will maintain capital reserves sufficient to cover losses
with respect to the Trust’s digital assets. Furthermore, Coinbase has
represented in securities filings that the total value of crypto assets in its
possession and control is significantly greater than the total value of
insurance coverage that would compensate Coinbase in the event of theft or other
loss of funds.
Deposits,
Withdrawals and Storage
The
Custodian and the Prime Broker provide for: (i) holding of the Trust’s SUI in
the Vault Balance and the Settlement Balance; (ii) transfer of the Trust’s SUI
between the relevant Vault Balance and the Settlement Balance; (iii) the deposit
of SUI from a public blockchain address into the respective account or accounts
in which the Vault Balance or the Settlement Balance are maintained; and (iv)
the withdrawal of SUI from the Vault Balance to a public blockchain address the
Trust controls (each such transaction is a “Custody Transaction”) (collectively,
the “Custodial and Prime Broker Services”).
The
Custodian reserves the right to refuse to process or to cancel any pending
Custody Transaction as required by law or in response to a subpoena, court
order, or other binding government order or to enforce transaction, threshold,
and condition limits, in each case as communicated to the Trust as soon as
reasonably practicable where the Custodian is permitted to do so, or if the
Custodian reasonably believes that the Custody Transaction may violate or
facilitate the violation of an applicable law, regulation or applicable rule of
a governmental authority or self-regulatory organization. The Custodial Entities
may suspend, restrict or terminate the Trust’s and the Sponsor’s access to the
Custodial and Prime Broker Services, and/or suspend, restrict or close the
Accounts if the Trust or Sponsor has taken certain actions, including any
prohibited use or prohibited business as set forth in the Prime Broker Agreement
or if either or both of the Custodial Entities are required to do so by a
subpoena, court order, or other binding government order.
From
the time the Custodian has verified the authorization of a complete set of
instructions to withdraw SUI from the Vault Balance, the Custodian will have a
limited amount of time to process and complete such withdrawal. The Custodian
will ensure that initiated deposits are processed in a timely manner but the
Custodian makes no representations or warranties regarding the amount of time
needed to complete processing which is dependent upon many factors outside of
the Custodian’s control. Transactions relating to SUI held in the Settlement
Balance occur on the Sui Network.
The
Custodial Entities make no other representations or warranties with respect to
the availability and/or accessibility of SUI or the availability and/or
accessibility of the Vault Balance, the Settlement Balance or the Custodial and
Prime Broker Services.
Security
of the Accounts
The
Custodial Entities securely store all digital asset private keys held by the
Custodian on secure servers or offline, in cold storage. Under the Prime Broker
Agreement, the Custodian must use commercially reasonable efforts to keep the
private key or keys to the Vault Balance secure, and may not disclose such
private keys to the Sponsor, Trust or any other individual or entity.
The
Custodial Entities have implemented and will maintain reasonable information
security programs that include policies and procedures that are reasonably
designed to safeguard the Custodial Entities’ electronic systems and the Trust’s
and the Sponsor’s confidential information from, among other things,
unauthorized access or misuse. In the event of a Data Security Event (as defined
in the Prime Broker Agreement), the Custodial Entities will promptly (subject to
any legal or regulatory requirements) notify the Trust and the
Sponsor.
Record
Keeping; Inspection and Auditing
The
Custodian will keep timely and accurate records as to the deposit, disbursement,
investment and reinvestment of the SUI in the Vault Balance, and such records
must be retained by the Custodian for no less than seven years. The Prime Broker
Agreement also provides that each Custodial Entity will permit, to the extent it
may legally do so, the Trust’s third-party representatives, upon thirty days’
notice, to inspect, take extracts from and audit the records that it maintains,
take such steps as necessary to verify that satisfactory internal control
systems and procedures are in place, as the Trust may reasonably request. The
Prime Broker is obligated to notify the Trust of any audit report prepared by
its internal or independent auditors if such report reveals any material
deficiencies or makes any material objections.
The
Trust and the Sponsor obtain and perform a comprehensive review of the Services
Organization Controls (“SOC”) 1 report and SOC 2 each year. For additional
information, see “—Description of Trust Documents—Description of the Prime
Broker Agreement.” In addition to the review of SOC 1 and SOC 2 reports, the
Trust, the Sponsor and/or their respective auditors may inspect or audit the
Custodian’s records in a variety of manners if considered necessary. Such
processes may include validating the existing balances as reflected on the
Custodian’s user interface to nodes of the underlying blockchain and confirming
that such digital assets are associated with its public keys to validate the
existence and exclusive ownership of the digital assets. To validate software
functionality of the private keys, the Trust may transfer a portion of its
digital assets from one public key to another public key of the
Trust.
The
Trust, the Sponsor and their independent auditors may evaluate the Custodian’s
protection of private keys and other customer information, including review of
supporting documentation related to the processes surrounding key lifecycle
management, the key generation process (hardware, software, and algorithms
associated with generation) the infrastructure used to generate and
store
private
keys, how private keys are stored (for example, cold wallets), the segregation
of duties in the authorization of digital asset transactions, and the number of
users required to process a transaction and the monitoring of addresses for any
unauthorized activity. For additional information, see “—Custody of the Trust’s
SUI.”
Once
each calendar year, the Trust and the Sponsor will be entitled to request that
the Custodial Entities provide a copy of the Services Organization Controls
(“SOC”) 1 report and SOC 2 report once per calendar year. Such reports are
required to be dated within one year prior to such request. The Custodial
Entities reserve the right to combine the SOC 1 and SOC 2 reports into a
comprehensive report. In the event that the Custodial Entities do not deliver a
SOC 1 Report or SOC 2 Report, as applicable, the Sponsor and the Trust will be
entitled to terminate the Prime Broker Agreement. In addition to the review of
SOC 1 and SOC 2 reports, the Trust may also request letters of representation on
a quarterly basis between SOC reports regarding any known changes or conclusions
to the SOC 1 and SOC 2 report.
Standard
of Care; Limitations of Liability
The
Custodian will use commercially reasonable efforts to keep in safe custody on
behalf of the Trust all SUI received by the Custodian. The Custodial Entities
are liable to the Sponsor and the Trust for the loss of any SUI to the extent
such loss resulted from the negligence, fraud or willful misconduct of the
Custodial Entities. To the extent any loss is caused by a Custodial Entity’s
negligence, fraud or willful misconduct, the Custodial Entities are required to
return to the Trust a quantity of SUI equal to the quantity of any such lost
SUI.
The
Custodial Entities’ or Trust’s total liability under the Prime Broker Agreement
will not exceed the greater of: (i) the value of the SUI or cash involved in the
event, including but not limited to transaction(s) or deliveries(s), giving rise
to such liability at the time of the event giving rise to such liability; (ii)
the aggregate amount of fees paid by the Trust to the Custodial Entities in
respect of the Custodial and Prime Broker Services in the 12-month period prior
to the event giving rise to such liability; or (iii) five million U.S. dollars.
The Custodian’s total liability under the Prime Broker Agreement will not exceed
the greater of: (i) the aggregate amount of fees paid by the Trust to the
Custodian in respect of the custodial services in the 12-month period prior to
the event giving rise to such liability; or (ii) the value of the SUI on deposit
in the Vault Balance at the time of the events giving rise to the liability
occurred, the value of which will be determined in accordance with the Prime
Broker Agreement. In addition, the Custodian’s maximum liability in respect of
each cold storage address that holds SUI shall be limited to $100 million (the
“Cold Storage Threshold”). The Sponsor monitors the value of SUI deposited in
cold storage addresses for whether the Cold Storage Threshold has been met by
determining the U.S. dollar value of SUI deposited in each cold storage address
on business days. Although the Cold Storage Threshold has to date not been met
for a given cold storage address, to the extent it is met the Trust would not
have a claim against the Custodian with respect to the digital assets held in
such address to the extent the value exceeds the Cold Storage
Threshold.
The
Custodial Entities and the Trust are not liable to each other for any special,
incidental, indirect, punitive, or consequential damages, whether or not the
other party had been advised of such losses or knew or should have known of the
possibility of such damages. In addition, the Custodial Entities are not liable
to the Trust for circumstances resulting from certain force majeure
events.
Indemnity
The
Trust and the Custodial Entities have agreed to indemnify one another from and
against certain claims or losses, subject to customary exceptions and
limitations.
Fees
and Expenses
The
Sponsor will pay an annualized fee to the Coinbase Entities, covering the
Trust’s use of the Custodial and Prime Broker Services, that is accrued on a
monthly basis as a percentage of the Trust’s monthly assets under custody. The
Sponsor will also pay a monthly fee to the Prime Broker, covering withdrawals
and deposits to or from the Settlement Balance in connection with the creation
and redemption of Shares.
Term;
Termination and Suspension
The
Prime Broker Agreement will remain in effect until either party terminates the
Prime Broker Agreement; provided, however, that the Coinbase Entities shall not
restrict, suspend, or modify any Prime Broker Services following termination of
the Prime Broker Agreement by a Custodial Entity without Cause (as defined in
the Prime Broker Agreement) or by the Trust until the end of the applicable
notice period and neither party’s termination of the Prime Broker Agreement will
be effective until the Trust and/or the Custodial Entities, as the case may be,
have fully satisfied their obligations thereunder.
The
Trust may terminate the Prime Broker Agreement in whole or in part upon thirty
days’ prior written notice to the applicable Custodial Entity; and (ii) for
Custodian Cause (as defined in the Prime Broker Agreement) at any time by
written notice to the Prime Broker, effective immediately, or on such later date
as may be specified in such notice. The Trust will also be entitled to terminate
the
Prime
Broker Agreement in the event that the Custodial Entities do not deliver a SOC 1
Report or SOC 2 Report, as applicable. See “—Record Keeping; Inspection and
Auditing.”
The
Custodial Entities may terminate the Prime Broker Agreement (i) upon one hundred
eighty days’ prior written notice to the Trust; and (ii) for Cause at any time
by written notice to the Trust, effective immediately, or on such later date as
may be specified in the notice.
In
the event that either the Trust or the Custodial Entities terminate the Prime
Broker Agreement without Cause, the Custodial Entities shall use reasonable
efforts to assist the Trust with transferring any digital assets, fiat currency
or funds associated with the Trust’s Accounts to another custodial services
provider within ninety days of receipt of the applicable termination
notice.
Governing
Law
The
Prime Broker Agreement is governed by New York law.
Legal
Proceedings
The
Sponsor or former Co-Sponsor of the Trust until May 3, 2025, as applicable, was
a party to certain legal proceedings during the periods covered by the financial
statements included in this prospectus. Although the Trust is not a party to
these proceedings, the Trust may in the future be subject to legal proceedings
or disputes.
On
January 30, 2023, Osprey Funds, LLC (“Osprey”) filed a suit in Connecticut
Superior Court against the Sponsor alleging that statements the Sponsor made in
its advertising and promotion of Grayscale Bitcoin Trust ETF violated the
Connecticut Unfair Trade Practices Act (“CUTPA”), and seeking statutory damages
and injunctive relief. On April 17, 2023, the Sponsor filed a motion to dismiss
the complaint and, following briefing, a hearing on the motion to dismiss was
held on June 26, 2023. On October 23, 2023, the Court denied the Sponsor’s
motion to dismiss. On November 6, 2023, the Sponsor filed a motion for
reargument of the Court’s order denying the Sponsor’s motion to dismiss. On
November 16, 2023, Osprey filed an opposition to the Sponsor’s motion for
reargument, and on November 30, 2023, the Sponsor filed a reply in further
support of its motion for reargument. On March 11, 2024, the Court denied the
Sponsor’s motion for reargument. On March 25, 2024, the Sponsor filed an
application for interlocutory appeal. On March 28, 2024, Osprey filed an
opposition to the Sponsor’s application for interlocutory appeal. On April 1,
2024, the Court denied the Sponsor’s application for interlocutory appeal. On
April 10, 2024, Osprey filed a motion to amend the complaint. The amended
complaint went into effect on April 25, 2024. A scheduling order was entered by
the Court with trial scheduled to begin on July 15, 2025. On July 31, 2024, the
Sponsor filed a motion to strike the amended complaint. On August 30, 2024,
Osprey filed an opposition to the Sponsor’s motion to strike the amended
complaint. On October 11, 2024, the Court denied the Sponsor’s motion to strike.
On November 22, 2024, the Sponsor filed a motion for summary judgment on the
grounds that CUTPA does not apply to practices undertaken in connection with the
purchase and sale of securities, and the Court granted the Sponsor’s motion for
summary judgment on February 7, 2025. On February 10, 2025, Osprey filed a
motion for reargument, and the Court denied Osprey’s motion for reargument on
March 19, 2025. On March 31, 2025, Osprey filed a notice of appeal of the
summary judgment decision and the Court’s denial of the motion for reargument to
the Connecticut Appellate Court. On May 12, 2025, Osprey withdrew the action and
the appeal.
On
May 19, 2025, Genesis Global Capital, LLC (“Genesis Capital”) and Genesis Asia
Pacific Pte. Ltd. (“Genesis Asia”) filed a complaint in the United States
Bankruptcy Court for the Southern District of New York (“SDNY Bankruptcy Court”)
against Digital Currency Group, Inc. (“DCG”) and certain of its affiliates
including GSO alleging that Genesis Capital made certain preferential transfers
to GSI, the predecessor in interest to GSO prior to the Merger, during the
preference period prior to Genesis Capital’s filing of a bankruptcy petition in
SDNY Bankruptcy Court while GSI was allegedly an insider to Genesis Capital
pursuant to 11 U.S.C. § 101(31). Genesis Capital seeks to avoid the alleged
preferential transfers pursuant to 11 U.S.C. § 547(b), as well as recovery of
property and disallowance of claims. GSO believes this lawsuit is without merit
and intends to vigorously defend against it.
As
of the date of this prospectus, the Sponsor does not expect the foregoing
proceedings to have a material adverse effect on the Trust’s business, financial
condition or results of operations.
The
Sponsor and/or the Trust may be subject to additional legal proceedings and
disputes in the future.
The
Trust does not have any directors, officers or employees. Under the Trust
Agreement, all management functions of the Trust have been delegated to and are
conducted by the Sponsor, its agents and its affiliates, including without
limitation, the Custodian and its agents. As officers of the Sponsor, Peter
Mintzberg, the principal executive officer of the Sponsor, and Edward McGee, the
principal financial and accounting officer of the Sponsor, may take certain
actions and execute certain agreements and certifications for the Trust, in
their capacity as the principal officers of the Sponsor.
As
of and prior to December 31, 2024, GSI had a board of directors that was
responsible for managing and directing the affairs of the Sponsor. From January
1, 2025 to October 22, 2025, GSO Intermediate Holdings Corporation (“GSOIH”), a
Delaware corporation formed in connection with the Reorganization, which was the
sole managing member of GSO and an indirect subsidiary of DCG, had a board of
directors which was responsible for managing and directing the affairs of the
Sponsor.
On
October 22, 2025, GSOIH consummated an internal corporate reorganization (the
"Management Reorganization"), pursuant to which GSOIH transferred a portion of
its common membership units of GSO for Class A shares of Grayscale Investments,
Inc. ("Grayscale Investments"), a Delaware corporation incorporated in
connection with the Management Reorganization, and ceded its managing member
rights in GSO to Grayscale Investments. As a result of the Management
Reorganization, Grayscale Investments is now the sole managing member of GSO,
the sole member of the Sponsor.
From
and after October 22, 2025, as a result of the Management Reorganization, DCG
Grayscale Holdco, LLC ("DCG Holdco"), the sole stockholder of Grayscale
Investments, elected a board of directors (the "Board") at Grayscale
Investments. As a result of the Management Reorganization, the Board of
Grayscale Investments is responsible for managing and directing the affairs of
the Sponsor and consists of Barry Silbert, Mark Shifke, Simon Koster, Peter
Mintzberg and Edward McGee, the same members as the board of directors of GSOIH
prior to the Management Reorganization. Mr. Mintzberg and Mr. McGee also retain
the authority granted to them as officers of the Sponsor under the limited
liability company agreement of the Sponsor.
The
Sponsor has an Audit Committee. The Audit Committee has the responsibility for
overseeing the financial reporting process of the Trust, including the risks and
controls of that process and such other oversight functions as are typically
performed by an audit committee of a public company.
The
Sponsor has
a code of ethics (the “Code of Ethics”) that applies to its executive officers
and agents. The Code of Ethics is available by writing the Sponsor at 290 Harbor
Drive, 4th Floor, Stamford, Connecticut 06902 or calling the Sponsor at (212)
668-1427. The Sponsor’s Code of Ethics is intended to be a codification of the
business and ethical principles that guide the Sponsor, and to deter wrongdoing,
to promote honest and ethical conduct, to avoid conflicts of interest, and to
foster compliance with applicable governmental laws, rules and regulations, the
prompt internal reporting of violations and accountability for adherence to this
code.
Prior
to January 1, 2025, references to the “Sponsor” in this section refer to GSI,
and thereafter refer to GSO or GSIS, as applicable. In connection with the
Reorganization, the former Board of GSI was reconstituted at GSOIH and in
connection with the Management Reorganization, the former board of GSOIH was
reconstituted at Grayscale Investments. Prior to January 1, 2025, any references
to the “Board” refer to the board of directors of Grayscale Investments, LLC,
the former sponsor of the Trust. From January 1, 2025 to October 22, 2025, any
references to the "Board" refer to the board of directors of GSOIH. From and
after October 22, 2025, any references to the "Board" refer to the board of
directors of Grayscale Investments.
Barry
Silbert,
49, is the Founder and Chief Executive Officer of DCG and has served as chairman
of the Board since August 25 (previously served as a director and chairman of
the Board from February 2020 through December 2023). Until January 2021, Mr.
Silbert was the Chief Executive Officer of the Sponsor. A pioneer in blockchain
investing, Mr. Silbert established himself in 2012 as one of the earliest and
most active investors in the industry. Mr. Silbert founded DCG in 2015 and
today, it is one of the world’s most prolific investors in decentralized
technologies, backing over 250 early-stage companies in more than 40 countries.
Mr. Silbert founded Yuma, a decentralized AI-focused subsidiary of DCG, where he
also serves as CEO. Yuma invests in, builds, and scales the Bittensor network.
The Sponsor is a consolidated subsidiary of DCG. DCG also owns Foundry,
Fortitude, Luno and Yuma. DCG also invests directly in digital currencies and
other digital assets. Prior to leading DCG, Mr. Silbert was the founder and CEO
of SecondMarket, a venture-backed technology company that was acquired by
Nasdaq. Mr. Silbert has received numerous awards and accolades, including being
named “Entrepreneur of the Year” by both Ernst & Young and Crain’s, and
being selected to Fortune’s prestigious “40 under 40” list. Before becoming an
entrepreneur, Mr. Silbert worked as an investment banker. He graduated with
honors from the Goizueta Business School of Emory University.
Mark
Shifke,
66, is the Chief Financial Officer of DCG and has served as a director of the
Sponsor since January 2024. Since March 2021, Mr. Shifke has served on the board
of directors of Dock Ltd., a full-stack payments and digital banking platform.
Since September 2023, Mr. Shifke has served on the board of directors of Luno, a
cryptocurrency platform. Mr. Shifke has nearly four decades of financial and
fintech experience, and more than eight years of CFO experience leading two
publicly-traded companies.
Prior
to joining DCG, Mr. Shifke served as CFO of Billtrust, a company focused on
providing AR and cloud-based solutions around payments, and as CFO of Green Dot
(NYSE: GDOT), a mobile banking company and payments platform. Previously, Mr.
Shifke led teams at JPMorgan Chase and Goldman Sachs, specializing in M&A
Structuring and Advisory, as well as Tax Asset Investments. Mr. Shifke also
served as the Head of International Structured Finance Group at KPMG. Mr. Shifke
began his career at Davis Polk, where he was a partner. He is a graduate of
Tulane University (B.A./J.D.) and the New York University School of Law (LL.M.
in Taxation).
Simon
Koster,
44, is the
Chief Strategy Officer of DCG and has served as a director of the Board since
October 2025. As CSO, Mr. Koster leads the investment team, managing the
portfolio comprised of digital assets, wholly owned subsidiaries, and more than
250 early-stage companies in over 35 nations across the world as of the date of
this filing. Prior to his current role, Mr. Koster was the CEO of Real Estate at
DCG, spearheading both internal and external real estate ventures. Previously,
he served as CEO of The Collective and brings a decade of real estate experience
from JDS Development Group, where he was instrumental in the acquisition and
development of top-tier residential, hospitality, and mixed-use projects in New
York City and Miami. He is a graduate of Rutgers University (B.S.) and holds a
Master’s degree in Engineering from the University of Michigan. Mr. Koster has
served on the board of directors of Foundry and Luno since 2023. He has served
as a director of Fortitude since 2024 and as a director of Yuma since 2025. Each
of Foundry, Luno, Fortitude and Yuma are affiliated with the
registrant.
Peter
Mintzberg,
57, has been the Chief Executive Officer of the Sponsor and has served as a
director of the Sponsor since August 2024. Mr. Mintzberg joins the Sponsor from
Goldman Sachs, where he served as Global Head of Strategy for Asset and Wealth
Management. Prior, he held several global leadership roles in Strategy, M&A,
and Investor Relations at BlackRock, Apollo, OppenheimerFunds, and Invesco. With
deep knowledge across a broad base of client types and asset classes, Mr.
Mintzberg has over two decades of experience developing and executing strategy
and innovating to drive growth. Mr. Mintzberg started his career working at
McKinsey & Co. in New York, San Francisco, and São Paulo, focused on the
financial services and
technology sectors. Mr. Mintzberg was recognized as a Latino leader in Finance
by The Alumni Society in 2018, and was selected as a David Rockefeller Fellow in
the 2016-2017 Class by the Partnership for New York City. He earned a bachelor’s
degree in engineering from the Universidade Federal Rio de Janeiro, and an MBA
from Harvard University.
Edward
McGee,
42, has been the Chief Financial Officer of the Sponsor since January 2022 and
has served as a director of the Sponsor since January 2024. Before serving as
CFO, Mr. McGee was Vice President, Finance and Controller of the Sponsor since
June 2019. Prior to taking on his role at the Sponsor, Mr. McGee served as a
Vice President, Accounting Policy at Goldman, Sachs & Co. providing coverage
to their SEC Financial Reporting team facilitating the preparation and review of
their financial statements and provided U.S. GAAP interpretation, application
and policy development while servicing their Special Situations Group, Merchant
Banking Division and Urban Investments Group from 2014 to 2019. From 2011 to
2014, Mr. McGee was an auditor at Ernst & Young providing assurance services
to publicly listed companies. Mr. McGee earned his Bachelor of Science degree in
accounting from the John H. Sykes College of Business at the University of Tampa
and graduated with honors while earning his Master of Accountancy in Financial
Accounting from the Rutgers Business School at the State University of New
Jersey. Mr. McGee is a Certified Public Accountant licensed in the state of New
York.
Certain
Relationships and
Related Party Transactions
General
The
Sponsor has not established formal procedures to resolve all potential conflicts
of interest. Consequently, shareholders may be dependent on the good faith of
the respective parties subject to such conflicts to resolve them equitably.
Although the Sponsor attempts to monitor these conflicts, it is extremely
difficult, if not impossible, for the Sponsor to ensure that these conflicts do
not, in fact, result in adverse consequences to the Trust.
The
Sponsor presently intends to assert that shareholders have, by subscribing for
Shares of the Trust, consented to the following conflicts of interest in the
event of any proceeding alleging that such conflicts violated any duty owed by
the Sponsor to investors.
Digital
Currency Group, Inc.
Digital
Currency Group, Inc. is (i) the sole equity holder and indirect parent company
of the Sponsor and (ii) a minority interest holder in Kraken, one of the Digital
Asset Trading Platforms included in the Index, representing less than 1.0% of
its equity.
Digital
Currency Group, Inc. has investments in a large number of digital assets and
companies involved in the digital asset ecosystem, including trading platforms
and custodians. Digital Currency Group, Inc.’s positions on changes that should
be adopted in the Sui Network could be adverse to positions that would benefit
the Trust or its shareholders. Additionally, before or after a hard fork,
Digital Currency Group, Inc.’s position regarding which fork among a group of
incompatible forks of the Sui Network should be considered the “true” Sui
Network, could be adverse to positions that would most benefit the
Trust.
The
Sponsor
The
Sponsor has a conflict of interest in allocating its own limited resources
among, when applicable, different clients and potential future business
ventures, to each of which it owes fiduciary duties. Additionally, the
professional staff of the Sponsor also services other affiliates of the Trust,
including several other digital asset investment vehicles, and their respective
clients. Although the Sponsor and its professional staff cannot and will not
devote all of its or their respective time or resources to the management of the
affairs of the Trust, the Sponsor intends to devote, and to cause its
professional staff to devote, sufficient time and resources to manage properly
the affairs of the Trust consistent with its or their respective fiduciary
duties to the Trust and others.
The
Sponsor and Grayscale Securities are affiliates of each other, and the Sponsor
may engage other affiliated service providers in the future. Because of the
Sponsor’s affiliated status, it may be disincentivized from replacing affiliated
service providers. In connection with this conflict of interest, shareholders
should understand that affiliated service providers will receive fees for
providing services to the Trust. Clients of the affiliated service providers may
pay commissions at negotiated rates which are greater or less than the rate paid
by the Trust.
The
Sponsor and any affiliated service provider may, from time to time, have
conflicting demands in respect of their obligations to the Trust and, in the
future, to other clients. It is possible that future business ventures of the
Sponsor and affiliated service providers may generate larger fees, resulting in
increased payments to employees, and therefore, incentivizing the Sponsor and/or
the affiliated service providers to allocate its/their limited resources
accordingly to the potential detriment of the Trust.
There
is an absence of arm’s length negotiation with respect to some of the terms of
the Trust, and, where applicable, there has been no independent due diligence
conducted with respect to the Trust. The Sponsor will, however, not retain any
affiliated service providers for the Trust which the Sponsor has reason to
believe would knowingly or deliberately favor any other client over the
Trust.
Authorized
Participants
As
of the date of this prospectus, the Sponsor, on behalf of the Trust, and the
Transfer Agent entered into a Participant Agreement with and pursuant
to which
such entities have agreed to act as an Authorized Participants, and are able to
conduct creations and redemptions for cash. In addition, as of the date of this
prospectus, is able to conduct creations and redemptions in-kind. The Sponsor
may engage additional Authorized Participants who are unaffiliated with the
Trust in the future.
Proprietary
Trading/Other Clients
Because
the officers of the Sponsor may trade SUI for their own personal trading
accounts (subject to certain internal trading policies and procedures) at the
same time as they are managing the account of the Trust, the activities of the
officers of the Sponsor, subject to their fiduciary duties, may, from
time-to-time, result in their taking positions in their personal trading
accounts which are
opposite
of the positions taken for the Trust. Records of the Sponsor’s officers’
personal trading accounts will not be available for inspection by
shareholders.
Description
of
the Shares
The
Trust is authorized under the Trust Agreement to create and issue an unlimited
number of Shares. Shares will be issued only in Baskets (a Basket equals a block
of 10,000 Shares) in connection with creations. The Shares represent units of
fractional undivided beneficial interest in and ownership of the Trust and have
no par value. The Shares are currently quoted on OTCQX under the ticker symbol
“GSUI” and following the effectiveness of the registration statement of which
this prospectus forms a part, the Shares are expected to be listed on NYSE Arca
under the ticker symbol “GSUI”.
Description
of Limited Rights
The
Shares do not represent a traditional investment and should not be viewed as
similar to “shares” of a corporation operating a business enterprise with
management and a board of directors. A shareholder will not have the statutory
rights normally associated with the ownership of shares of a corporation. Each
Share is transferable, is fully paid and non-assessable and entitles the holder
to vote on the limited matters upon which shareholders may vote under the Trust
Agreement. For example, shareholders do not have the right to elect or remove
directors and will not receive dividends. The Shares do not entitle their
holders to any conversion or pre-emptive rights or, except as discussed below,
any redemption rights or rights to distributions.
Voting
and Approvals
The
shareholders take no part in the management or control of the Trust. Under the
Trust Agreement, shareholders have limited voting rights. For example, in the
event that the Sponsor withdraws, a majority of the shareholders may elect and
appoint a successor sponsor to carry out the affairs of the Trust. The Sponsor
is also permitted to make certain restatements, amendments or supplements to the
Trust Agreement that would materially adversely affect the interests of the
shareholders as determined by the Sponsor in its sole discretion with a 20-day
notice to shareholders. Additionally, the Sponsor is permitted to make certain
restatements, amendments or supplements to the Trust Agreement that could
adversely affect the status of the Trust as a grantor trust for U.S. federal
income tax purposes, but only if certain conditions set forth in the amendments
relating to the qualification of the Trust as a grantor trust for U.S. federal
income tax purposes are satisfied. Furthermore, subject to certain limitations,
the Sponsor may make any other amendments to the Trust Agreement which do not
materially adversely affect the interests of the shareholders in its sole
discretion without shareholder consent.
Distributions
Pursuant
to the terms of the Trust Agreement, the Trust may make distributions on the
Shares in-cash or in-kind. In addition, if the Trust is terminated and
liquidated, the Sponsor will distribute to the shareholders any amounts of the
cash proceeds of the liquidation remaining after the satisfaction of all
outstanding liabilities of the Trust and the establishment of reserves for
applicable taxes, other governmental charges and contingent or future
liabilities as the Sponsor will determine. See “—Description of the Trust
Agreement—Termination of the Trust.” Shareholders of record on the record date
fixed by the Transfer Agent for a distribution will be entitled to receive their
pro
rata portions
of any distribution.
Creation
of Shares
The
Trust creates Shares at such times and for such periods as determined by the
Sponsor, but only in one or more whole Baskets. A Basket equals 10,000 Shares.
See “Description of Creation and Redemption of Shares.” The creation of a Basket
requires the delivery to the Trust of the amount of SUI
(or
cash to acquire the amount of SUI) represented by one Share immediately prior to
such creation multiplied by 100. The Trust may from time to time halt creations,
including for extended periods of time, for a variety of reasons, including in
connection with forks, airdrops and other similar occurrences.
Redemption
of Shares
Shares
are redeemable only in accordance with the provisions of the Trust Agreement and
the relevant Participant Agreement. Through its redemption program, the Trust
redeems Shares from Authorized Participants on an ongoing basis by distributing
SUI or proceeds from the disposition of SUI. An Authorized Participant may
choose to submit Cash Orders, pursuant to which an Authorized Participant will
accept cash from the Cash Account in connection with the redemption of Baskets.
Cash Orders will be facilitated by the Transfer Agent and Grayscale Investments
Sponsors, LLC, which will engage one or more Liquidity Providers receiving SUI
in connection with such orders. The Trust may also redeem Baskets via In-Kind
Orders, pursuant to which an Authorized Participant or its AP Designee would
receive SUI directly from the Trust. See “Description of Creation and Redemption
of Shares.”
Staking
The
Trust Agreement provides that the Trust may engage in Staking, but only if (and,
then, only to the extent that) the Staking Condition has been satisfied. Subject
to the Staking Condition being satisfied, and subject to compliance with any
additional requirements that may arise in connection with satisfaction of the
Staking Condition, in the future the Sponsor may cause the Trust to stake a
portion of its SUI holdings to receive Staking Consideration comprising
additional SUI.
As
of the date of this prospectus, the Staking Condition has not been met for the
Trust, and there can be no assurance as to whether or when the Staking Condition
will be met for the Trust in the future. As a result, the Trust currently is
prohibited from engaging in Staking, and there can be no assurance that the
Trust will be permitted to engage in Staking in the future. See “Risk
Factors—Risk Factors Related to Staking—The Trust will not be permitted to
engage in Staking unless (and, then, only to the extent that) the Staking
Condition is satisfied in addition to the Trust satisfying any additional
requirements that may arise in connection with the satisfaction of the Staking
Condition, which could negatively affect the value of the Shares.”
The
Sponsor may decide in its sole discretion not to pursue satisfaction of the
Staking Condition, and there can be no assurance that the Sponsor will cause the
Trust to engage in Staking.
Staking
Arrangements and Provider-Facilitated Staking Model
If
the Staking Condition is satisfied, the Sponsor anticipates that the Trust would
enter into written arrangements (the “Staking Arrangements”) with the Custodian
to indirectly stake the Trust’s SUI to one or more vetted third party staking
providers (each, a “Staking Provider”) operating validator software and
associated hardware (“Provider-Facilitated Staking”). The Sponsor anticipates
that the Trust’s SUI would be staked exclusively by means of
Provider-Facilitated Staking.
Under
the Staking Arrangements, the Trust would be permitted to accept only Native
Staking Consideration received in the form of SUI, and would not be permitted to
accept any Other Staking Consideration in the form of other digital assets.
Neither the Trust, nor the Sponsor on behalf of the Trust, would have the
ability under the Staking Arrangements to take advantage of any variations in
the market to improve the investments of Shareholders, including with respect to
variations based on the value of SUI or the amount of Native Staking
Consideration received as a staking rewards. As a whole, the Staking
Arrangements would permit the Trust to retain ownership of its SUI at all times
for U.S. federal income tax purposes while simultaneously protecting and
conserving the Trust Estate by mitigating the risk that another party or group
could control a majority of the SUI Network and engage in transactions that
could reduce the Trust Estate’s value.
A
Staking Provider must meet certain requirements in order to be selected to
participate in the Provider-Facilitated Staking model contemplated by the
Staking Arrangements. For example, each Staking Provider would be required to be
unrelated to both the Trust and the Sponsor. Moreover, a Staking Provider would
also be required to regularly enter into staking arrangements with unrelated
persons involving activities similar to the Staking Arrangements. Under the
Staking Arrangements, the Staking Provider would bear all of its own expenses
(including those on account of its validation activities).
The
Staking Provider would be the node operator and would be obligated to operate
the validator through which the Trust’s SUI is staked to ensure that validation
occurs. The Trust’s SUI would be staked directly from the Trust’s wallets
administered by the Custodian, and the Staking Provider would perform any
related validation activities. The Trust would retain control of its staked SUI
because (1) the staked SUI would remain in the Trust’s wallet administered by
the Custodian (rather than transferred to a wallet address controlled by the
Staking Provider) and (2) the Trust (rather than the Staking Provider) would
retain the ability through the Custodian to un-stake its SUI from the applicable
smart contracts. Because staked SUI would remain in the Trust wallet
administered by the Custodian, even when staked, the Trust’s SUI would not be
commingled with the SUI of any other SUI holder in connection with Staking, such
as the Staking Provider or others who stake to the Staking Provider, despite the
Trust delegating its validation rights to the Staking Provider, which may be in
receipt of other SUI holders’ validation rights. In particular, the Staking
Provider would not be able to transfer unstaked SUI or Staking Consideration to
another address on the Sui Network. The Trust would not itself undertake any
validation activities, and the Sponsor is not required to perform any services.
Moreover, the Sponsor would not be required to make any decisions or take any
actions, other than (i) selecting the Staking Provider(s) and entering into the
corresponding Staking Arrangement(s), and (ii) determining, from time to time,
what portion of the Trust’s SUI to stake and un-stake and informing the Staking
Provider(s) of those determinations.
Subject
to the Staking Condition being satisfied and subject to compliance with certain
related requirements, the Sponsor has sole discretion over whether the Trust
will engage in Staking, and there can be no assurance that the Sponsor will
cause the Trust to engage in Staking. If the Sponsor causes the Trust to engage
in Staking, the Sponsor would cause the Trust to engage in staking with respect
to all of the Trust’s SUI at all times, except (i) as necessary to pay the
Sponsor’s Fee and the Sponsor’s Staking Fee, (ii) as necessary to pay any
additional Trust expenses, (iii) as necessary to satisfy existing and reasonably
foreseen potential redemption requests (assuming the Trust is then permitted to
operate an ongoing redemption program) as determined by the Sponsor, (iv) as
necessary to
reduce
the SUI obtained by the Trust as Native Staking Consideration to cash for
distribution at regular intervals, (v) as necessary to reduce the SUI obtained
by the Trust as Native Staking Consideration to cash in connection with the
Trust’s liquidation, (vi) as necessary to take protective actions in respect of
vulnerabilities in the source code or cryptography underlying the Sui Network
and/or its proof-of-stake protocol, its staking smart contracts or its validator
client software, (vii) if the Custodian discontinues its arrangements with the
Trust and such discontinuance affects the Trust’s SUI, for so long as is
reasonably necessary to re-establish those arrangements or to establish similar
arrangements with other parties, (viii) if the Custodian discontinues its
arrangements with the Staking Provider and such discontinuance affects the
Trust’s SUI, for so long as is reasonably necessary to re-establish those
arrangements or to establish similar arrangements with other parties, (ix) in
the event of a change in applicable law or regulation, (x) as necessary to
maintain a Liquidity Sleeve (as defined herein), (xi) as necessary pursuant to a
“contingent liquidity arrangement” within the meaning of Section 6.02(12) of IRS
Revenue Procedure 2025-31 or (xii) in accordance with any other exception that
is expressly contemplated by an opinion, ruling or tax guidance that satisfies
the Staking Condition. All SUI received by the Trust in connection with the
creation of new Shares, or as Native Staking Consideration, would also be staked
upon receipt by the Trust, unless one or more of the exceptions described in
clauses (i)-(xii) above applies. Moreover, any staked SUI which must be
un-staked in order to fulfill a distribution in connection with a redemption (to
the extent such distribution cannot be fulfilled utilizing the portion of the
Trust’s SUI that has not been staked, or through another mechanism to manage
liquidity in connection with Redemption Orders contemplated by an opinion of a
Tax Advisor, a Tax Ruling or Tax Guidance that satisfies the Staking Condition)
would be un-staked only after the redemption request is approved by the Trust,
the Sponsor executes an un-stake or withdrawal transaction through the
Custodian, and such transaction is processed by the Sui Network. During the
portion of any Uplisted Period during which the Staking Condition has been
satisfied with respect to a particular form of Staking, the Trust Agreement
imposes further requirements relating to recently released IRS
guidance.
If
the Sponsor, in its sole discretion, causes the Trust to engage in Staking, the
Sponsor generally would stake as much of the Trust’s SUI as is practicable
(i.e., up to 100%) at all times, with the remainder of the Trust’s SUI remaining
unstaked in order to address the various exceptions and other considerations
described herein, including the satisfaction of the Staking Condition, and the
approximate percentage of the Trust’s SUI that is staked each day would be
reported the following day at 4:00 p.m., New York time, on
etfs.grayscale.com/gsui. In the future and subject to the satisfaction of the
Staking Condition thereto, the Sponsor, on behalf of the Trust, may be able to
enter into other financing arrangements or implement other mechanisms to manage
SUI liquidity constraints, including entering into short-term financing
arrangements with its Custodian to provide SUI to the Trust for settlement of
trades with the Trust’s Liquidity Provider(s), if necessary. These liquidity
risk policies and procedures are intended to be consistent with NYSE Arca’s
proposed generic listing standards. However, there can be no assurance that such
arrangements would be available as intended or provide sufficient liquidity to
satisfy redemption requests.
Under
the Staking Arrangements, any Staking Consideration earned would accrue
automatically on a periodic basis by the Sui Network to the Trust’s wallets
administered by the Custodian. Periodically, the Trust would either (i)
distribute SUI received as Staking Consideration to the Trust’s beneficiaries
(likely using a liquidating agent), (ii) sell that SUI for cash and distribute
the proceeds to the Trust’s beneficiaries, (iii) pay a portion of the Staking
Consideration to the Sponsor (the “Sponsor’s Staking Fee”) as consideration for
its facilitation of the Staking Arrangements or (iv) a combination of the
foregoing, in the Sponsor’s sole discretion. Before engaging in Staking, the
Sponsor expects to implement a Staking Policy with respect to the Trust, which
describes the frequency of, and conditions under which the Trust would make such
distributions, if any, to the Trust’s beneficiaries. The Sponsor would make such
Staking Policy available to shareholders on the Sponsor’s website. Subject to
any slashing risk, the Trust (through the Custodian) would maintain control and
remain the record and beneficial owner of the staked tokens at all times, and
the tokens would remain associated with the Trust’s wallet.
To
the extent that the Staking Condition is satisfied and Staking is implemented,
the Sponsor anticipates that the Custodian and the Staking Provider would be
entitled to receive a portion of the gross Native Staking Consideration
generated under the Staking Arrangements, reflecting the Custodian’s fee and the
Staking Provider’s share of such Staking Consideration, with the remainder
received by the Trust. The allocation of gross Native Staking Consideration
between the Custodian and the Staking Provider shall reflect an arm’s length
allocation that is independent of the expenses of both the Staking Provider and
Custodian, and may be stated as a percentage of the gross Native Staking
Consideration. In addition, pursuant to the Trust Agreement and as consideration
for the Sponsor’s facilitation of Staking, the Sponsor would be permitted to
receive a fee equal to a portion of the Native Staking Consideration, which
accrues daily in U.S. dollars in an amount calculated as a per annum percentage
of any Native Staking Consideration received by the Trust, as may be directed by
the Sponsor in its sole discretion. The Sponsor’s Staking Fee would be payable
to the Sponsor daily in arrears.
From
time to time, the Trust may distribute SUI (or cash from the sale of SUI)
received as Staking Consideration to the Trust’s shareholders. The Sponsor
expects to implement a staking policy with respect to the Trust, which describes
the frequency of, and conditions under which the Trust would make such
distributions, if any, to the Trust’s beneficiaries. The Sponsor would make such
Staking Policy available to shareholders on the Sponsor’s website.
The
Staking Arrangements are expected to generally be on market terms, consistent
with those typically offered by leading digital
asset
firms that offer staking functionality. However, the Trust would negotiate
certain provisions as necessary or helpful to preserve the Trust’s status as a
grantor trust and the security of the Trust’s SUI, as well as to address
governmental, policy or regulatory concerns. For example, unlike certain digital
asset firms that offer staking functionality through which one’s SUI is pooled
with that of others (including, potentially, the Staking Provider in its general
staking offerings), the Staking Arrangements would not permit the Trust’s SUI to
be pooled with that of other SUI holders, including the Staking Provider or
others that stake to the Staking Provider, as described above. In addition, the
portion of staking rewards to be received by the Staking Provider is expected to
be an agreed percentage of block rewards and transaction fees generated by the
validating activities, unlike certain alternative staking arrangements under
which a staking provider may be compensated as an agreed percentage of SUI
staked.
The
Trust would have no right to direct the Staking Provider in the conduct of
validation activities, except to stake, un-stake and withdraw its staked SUI
pursuant to instructions delivered to the Custodian, and would not bear any
expenses incurred by the Staking Provider in conducting those activities. In
particular, the amount of any Staking Consideration that the Trust receives
would not be determined with reference to any expenses incurred by the Custodian
or the Staking Provider. The Staking Arrangements would not include any
obligation of the Trust to continue staking its SUI, or for the Custodian or the
Staking Provider to continue the Staking Arrangements, other than to the extent
the Trust’s SUI cannot immediately be un-staked due to requirements of the Sui
protocol. There may also be instances where the Staking Provider may pause or
terminate its validation activities due to its own independent assessment of the
vulnerabilities of the Sui Network which would result in the Trust’s SUInot
being staked for a period of time. The Sponsor anticipates that the Sui protocol
and the Staking Arrangements would permit withdrawal of staked SUI at regular
intervals. The Sponsor believes that market practice for Provider-Facilitated
Staking arrangements has largely become standardized, with little variation in
terms, and therefore, the Sponsor anticipates that the Staking Arrangements
would generally align with the current practice of Staking Providers’
arrangements with other similarly situated third parties, subject to the
negotiation of certain bespoke terms outlined above. Accordingly, and because
transitioning to a new Staking Provider would involve friction costs, the
Sponsor does not expect the Trust to change Staking Providers frequently, if at
all. In addition, while the Trust may enter into Staking Arrangements with
multiple Staking Providers, the Sponsor anticipates that any such arrangements
would be substantively identical in all material respects to the Staking
Arrangements described in this prospectus, including, for the avoidance of
doubt, the bespoke terms of the Staking Arrangements outlined above. Any
material deviation from the Staking Arrangements as described in this prospectus
would be disclosed in the Trust’s subsequent filings with the
Commission.
The
Staking Arrangements would not involve a disposition of the Trust’s SUI unless
the Staking Provider commits a slash-worthy offense. Currently on the Sui
Network, slashing generally operates by social consensus, rather than being
automatically applied by the protocol’s code. The Sui community generally
aspires to slash 100% of staked assets in cases where a Sui node is maliciously
trying to violate safety rules and 0% during routine operations. As a result,
there is currently no automatic slashing in the Sui Network. Rather, for regular
consensus, after a safety violation, the Sui Network will halt. The validators
will analyze the data prior to the halt to determine who was responsible and
propose that the stake of the malicious actors responsible for the safety
violation should be slashed after restart, typically 100% of their stake. Future
protocol upgrades may include the implementation of automated slashing
mechanisms, where penalties would be triggered and enforced directly by the
network code without requiring social coordination. As of July 2025, there have
been no slashing events on the Sui Network. In light of the mechanical and
standardized nature of validation activities, the Sponsor does not anticipate
that the Staking Provider, which is expected to be an institution of recognized
and trusted standing in the digital asset marketplace, with whom the Sponsor has
had extensive prior interaction, would commit any slash-worthy offenses in the
conduct of the Provider-Facilitated Staking activities. The Sponsor would have
the right to direct the Custodian to cease staking the Trust’s SUI with the
Staking Provider at any time, subject to the extent the Trust’s SUI cannot
immediately be un-staked due to technical considerations, and the Sponsor
expects that notice of any slashing event would be timely and permit the Sponsor
to halt the staking of the Trust’s SUI, thereby mitigating the risk of permanent
loss of the Trust’s SUI without replacement.
Security
and Controls
The
Trust’s Custodian has multiple layers of security protocols designed to protect
the Trust’s assets from unauthorized access or transfer, which remain in place
when the Trust’s SUI is staked.
The
Trust’s SUI is staked directly from the Trust’s wallets and is not transferred
to any other wallet to be staked. The Sui protocol (a) mandates that the
executor of the staking transaction (i.e., the Sponsor on behalf of the Trust)
can execute the withdraw function at any time through the Trust’s wallets
administered by the Custodian and (b) limits the activities of the Staking
Provider to executing only those activities specified by the protocol, such as
staking, un-staking and performing validation activities. Accordingly, the
Staking Provider does not have any control over the Trust’s staked SUI other
than to stake or un-stake SUI at the direction of the Sponsor. In particular,
the Staking Provider is not authorized to leverage or rehypothecate the Trust’s
SUI tokens. The
Staking Provider is also not able to change the designated wallet addresses on
the Sui Network to which staked SUI
is to be withdrawn or to which Staking Consideration shall be sent.
In
addition, the Staking Arrangements do not alter the Trust’s custody environment
or security procedures. The controls currently in place between the Sponsor and
the Custodian also govern the activities related to staking and un-staking SUI,
as outlined in the
Staking
Arrangements. These controls and procedures include:
•
Private
Key Management (“Shards”):
The Custodian manages SUI
for the Trust using offline storage, or cold storage, which means that the keys
to the Trust’s SUI
are disconnected and/or deleted entirely from the internet. Transfers and other
transactions from the Trust’s wallet require compliance with certain security
procedures that will remain in place when the Trust’s SUI
is staked, including but not limited to, multiple encrypted private key
“shards,” usernames, passwords and 2-step verification. Multiple private key
shards held by the Custodian must be combined to reconstitute the private key to
sign any transaction and transfer the Trust’s assets. Private key shards are
distributed geographically in secure vaults around the world, including in the
United States. The Custodian’s system architecture requires the involvement of
the Sponsor to reconstruct the private keys and access the Trust’s assets, and
it is not possible for the Custodian’s employees to access the Trust’s assets
without the Sponsor’s involvement and approval. This architecture is part of the
Custodian’s service organizational controls (“SOC”) Type I and Type II reports,
which are authored by leading assurance providers to confirm to the Custodian’s
clients that the Custodian is compliant with a variety of security and reporting
standards, and which are delivered to the Sponsor for review on an annual
basis.
•
General
Controls on the Custodian’s Custody Environment:
Data related to transaction activity executed on the Custodian’s platform is
backed-up and saved to both an alternative location (besides the primary
location) and to a “Disaster Recovery” Amazon Web Services (“AWS”) Account to
enable recoverability in an event one of the regions becomes unavailable.
Authentication requirements for the Custodian’s platform are restricted through
two-factor authentication and encrypted network protocols, among
others.
•
User
Entity Controls:
In addition to security controls in place at the Custodian, the Sponsor expects
to implement additional controls and procedures, including, but not limited to,
(i) reviewing the Custodian’s SOC report to ensure private key management and
other general controls are consistently applied and operating without
exceptions, (ii) periodically reviewing Sponsor team members’ access to the
custodial wallet environment to ensure appropriateness, and (iii) reviewing the
Custodian’s third party management control.
The
Sponsor also reviews the SOC report for one of the key sub-service providers,
AWS, including specifically sections related to availability, security and
confidentiality. Under its third party risk management framework, the Sponsor
also performs other ongoing monitoring of the Custodian, including the
completion of an assessment of the Custodian’s cybersecurity controls. In
addition, the Sponsor expects to screen all eligible Staking Providers in a
manner consistent with its practices in screening eligible custodians,
including, but not limited to, by (i) conducting initial and, thereafter, annual
reviews of the Staking Provider’s SOC report to assess controls relevant to the
staking activities environment, (ii) conducting initial and, thereafter, annual
reviews of the SOC reports of the Staking Provider’s cloud-based infrastructure
service provider (for example, AWS) covering availability, security and
confidentiality principles to ensure necessary controls governing continued
service and “uptime” (i.e., the ratio of signatures provided by the Staking
Provider to the total number of signatures it should have provided during a
given time period), (iii) reviewing authority levels and access rights within
the Staking Provider’s staking activities environment, and (iv) performing other
ongoing diligence procedures, including periodic assessments of the Staking
Provider’s cybersecurity policies and controls, monitoring the Staking
Provider’s online environment for major security events and periodic discussions
with the Staking Provider’s client-facing teams regarding new company
initiatives.
See
“Risk Factors—Risk Factors Related to Staking.”
Book-Entry
Form
Shares
are held primarily in book-entry form by the Transfer Agent. The Sponsor or its
delegate will direct the Transfer Agent to credit or debit, as applicable, the
number of Baskets to the applicable Authorized Participant. The Transfer Agent
will issue or cancel Baskets, as applicable. Transfers will be made in
accordance with standard securities industry practice. The Sponsor may cause the
Trust to issue Shares in certificated form in limited circumstances in its sole
discretion.
Share
Splits
In
its discretion, the Sponsor may direct the Transfer Agent to declare a split or
reverse split in the number of Shares outstanding and to make a corresponding
change in the number of Shares constituting a Basket. For example, if the
Sponsor believes that the per Share price in the secondary market for Shares has
risen or fallen outside a desirable trading price range, it may declare such a
split or reverse split.
Description
of Creation and
Redemption of Shares
The
following is a description of the material terms of the Trust Documents as they
relate to the creation and redemption of the Trust’s Shares on an ongoing
basis.
General
The
Trust issues Shares to and redeems Shares from Authorized Participants on an
ongoing basis, but only in one or more Baskets (with a Basket being a block of
10,000 Shares). The Trust will not issue fractions of a Basket. The Sponsor
believes that the creation and redemption order size of 10,000 Shares will
enable Authorized Participants to manage inventory and facilitate an effective
arbitrage mechanism for the Trust. However, the Sponsor may in the future adjust
the creation and redemption order size in order to improve the effectiveness of
the activities of Authorized Participants in the secondary market for the Shares
if the Sponsor determines it to be necessary or advisable. The Sponsor does not
expect that the size of the Baskets will have an impact on the arbitrage
mechanism.
The
creation and redemption of Baskets will be made only upon the delivery to the
Trust, or the distribution or other disposition by the Trust, of the number of
whole and fractional SUI represented by each Basket being created or redeemed,
which is determined by dividing (x) the amount of SUI owned by the Trust at 4:00
p.m., New York time, on the trade date of a creation or redemption order, after
deducting the amount of SUI representing the U.S. dollar value of accrued but
unpaid fees and expenses of the Trust (converted using the Index Price at such
time, and carried to the eighth decimal place), by (y) the number of Shares
outstanding at such time (with the quotient so obtained calculated to one
one-hundred-millionth of one SUI (i.e., carried to the eighth decimal place)),
and multiplying such quotient by 10,000 (the “Basket Amount”). The U.S. dollar
value of a Basket is calculated by multiplying the Basket Amount by the Index
Price as of the trade date (the “Basket NAV”). The Basket NAV multiplied by the
number of Baskets being created or redeemed is referred to as the “Total Basket
NAV.” All questions as to the calculation of the Basket Amount will be
conclusively determined by the Sponsor and will be final and binding on all
persons interested in the Trust. One or more major market data vendors may
provide an intra-day indicative value (“IIV”) per Share updated every 15
seconds, as calculated by NYSE Arca or a third-party financial data provider
during NYSE Arca’s Core Trading Session (9:30 a.m. to 4:00 p.m., New York time).
Such IIV will be calculated using the same methodology as the NAV per Share of
the Trust, specifically by using the prior day’s closing NAV per Share as a base
and updating that value during the NYSE Arca Core Trading Session to reflect
changes in the value of the Trust’s NAV during the trading day. The IIV on a per
Share basis disseminated during the Core Trading Session should not be viewed as
a real-time update of the NAV, which is calculated once a day. The amount of SUI
represented by a Share will gradually decrease over time as the Trust’s SUI are
used to pay the Trust’s expenses.
Authorized
Participants are the only persons that may place orders to create and redeem
Baskets. Each Authorized Participant must (i) be a registered broker-dealer,
(ii) enter into a Participant Agreement with the Sponsor and the Transfer Agent,
and (iii) in the case of any creation or redemption pursuant to In-Kind Orders,
own a SUI wallet address that is known to the Custodian as belonging to the
Authorized Participant and maintain an account with the Custodian (or if the
Authorized Participant does not itself trade in SUI, a designee of such
Authorized Participant (each, an “AP Designee”) must own a SUI wallet address
that is known to the Custodian as belonging to such AP Designee and maintain an
account with the Custodian). The Sponsor currently expects that certain In-Kind
Orders would be conducted through an AP Designee and, in such case, the
Authorized Participant would not participate directly in the acquisition,
transfer or receipt of SUI.
An
Authorized Participant may act for its own account or as agent for
broker-dealers, custodians and other securities market participants that wish to
create or redeem Baskets. Shareholders who are not Authorized Participants will
only be able to create or redeem their Shares through an Authorized
Participant.
The
creation of Baskets requires the delivery to the Trust of the Total Basket
Amount (or cash to acquire the Total Basket Amount) and the redemption of
Baskets requires the distribution or other disposition by the Trust of the Total
Basket Amount. Although the Trust creates Baskets only upon the receipt of SUI,
and redeems Baskets only by distributing SUI or proceeds from the disposition of
SUI, an Authorized Participant may choose to submit Cash Orders, pursuant to
which the Authorized Participant will deposit cash into, or accept cash from, a
segregated account maintained by the Transfer Agent in the name of the Trust for
purposes of receiving and distributing cash in connection with the creation and
redemption of Baskets (such account, the “Cash Account”).
Cash
Orders will be facilitated by the Transfer Agent and Grayscale Investments
Sponsors, LLC. On an order-by-order basis, Grayscale Investments Sponsors, LLC,
acting in its capacity as Liquidity Engager, will engage one or more Liquidity
Providers to obtain or receive SUI in exchange for cash in connection with such
order, as described in more detail below. Each Liquidity Provider must enter
into a Liquidity Provider Agreement with the Liquidity Engager and the Sponsor
(on behalf of the Trust), which will obligate it to obtain or receive SUI in
connection with creations and redemptions pursuant to Cash
Orders.
Unless
the Sponsor requires that a Cash Order be effected at actual execution prices
(an “Actual Execution Cash Order”), each Authorized Participant that submits a
Cash Order to create or redeem Baskets will pay a fee (the “Variable Fee”) based
on the Total Basket NAV (a “Variable Fee Cash Order”), and any price
differential between (x) the Total Basket NAV on the trade date and (y) the
price realized in acquiring or disposing of the corresponding Total Basket
Amount, as the case may be, will be borne solely by the Liquidity Provider until
such SUI have been received or liquidated by the Trust. The Variable Fee is
intended to cover all of a Liquidity Provider’s expenses in connection with the
creation or redemption order, including any exchange fees that the Liquidity
Provider incurs in connection with buying or selling SUI. The amount may be
changed by the Sponsor in its sole discretion at any time, and Liquidity
Providers will communicate to the Sponsor in advance the Variable Fee they would
be willing to accept in connection with a Variable Fee Cash Order, based on
market conditions and other factors existing at the time of such Variable Fee
Cash Order. See “—Creation Procedures— Variable Fee Cash Orders” and
“—Redemption Procedures—Variable Fee Cash Orders.”
Alternatively,
the Sponsor may require that a Cash Order be effected as an Actual Execution
Cash Order, in its sole discretion based on market conditions and other factors
existing at the time of such Cash Order, and under such circumstances, any price
differential between (x) the Total Basket NAV on the trade date and (y) the
price realized in acquiring or disposing of the corresponding Total Basket
Amount, as the case may be, will be borne solely by such Authorized Participant
until such SUI have been received or liquidated by the Trust. See “— Creation
Procedures—Actual Execution Cash Orders” and “—Redemption Procedures—Actual
Execution Cash Orders.”
In
the case of creations to transfer the Total Basket Amount to the Trust’s Vault
Balance, the Authorized Participant or AP Designee, in the case of In-Kind
Orders, and the Liquidity Provider, in case of Cash Orders, will transfer SUI to
one of the public key addresses associated with the Vault Balance and as
provided by the Sponsor. In the case of redemptions, the same procedure is
conducted, but in reverse, using the public key addresses associated with the
wallet of the Authorized Participant or AP
Designee, in the case of In-Kind
Orders, and the Liquidity Provider, in case of Cash Orders, and as provided by
such party, as applicable. All such transactions will be conducted on the
Blockchain and parties acknowledge and agree that such transfers may be
irreversible if done incorrectly. See “Risk Factors—Risk Factors Related to the
Trust and the Shares—SUI transactions are irrevocable and stolen or incorrectly
transferred SUI may be irretrievable. As a result, any incorrectly executed SUI
transactions could adversely affect the value of the Shares.”
Authorized
Participants do not pay a transaction fee to the Trust in connection with the
creation or redemption of Baskets, but there may be transaction fees associated
with the validation of the transfer of SUI by the Sui Network, which will be
paid by the Custodian in the case of redemptions and an Authorized Participant,
its AP Designee or the Liquidity Provider in the case of creations. Service
providers may charge Authorized Participants or AP Designees administrative fees
for order placement and other services related to the creation of Baskets. As
discussed above, Authorized Participants will also pay the Variable Fee in
connection with Variable Fee Cash Orders. As discussed in further detail below
under “—Creation Procedures—Actual Execution Cash Orders” and “—Redemption
Procedures—Actual Execution Cash Orders”, under certain circumstances Authorized
Participants may also be required to deposit additional cash in the Cash
Account, or be entitled to receive excess cash from the Cash Account, in
connection with creations and redemptions pursuant to Actual Execution Cash
Orders. Authorized Participants will receive no fees, commissions or other form
of compensation or inducement of any kind from either the Sponsor or the Trust
and no such person has any obligation or responsibility to the Sponsor or the
Trust to effect any sale or resale of Shares.
The
Participant Agreements and the related procedures attached thereto may be
amended by the Sponsor and the relevant Authorized Participant. Under the
Participant Agreements, the Sponsor has agreed to indemnify each Authorized
Participant against certain liabilities, including liabilities under the
Securities Act.
The
following description of the procedures for the creation and redemption of
Baskets is only a summary and shareholders should refer to the relevant
provisions of the Trust Agreement and the form of Participant Agreement for more
detail.
Creation
Procedures
On
any business day, an Authorized Participant may place an order with the Transfer
Agent to create one or more Baskets. Orders for creations may be either In-Kind
Orders or Cash Orders. In-Kind Orders for creation must be placed with the
Transfer Agent no later than 3:59:59 p.m., New York time, and Cash Orders for
creation must be placed with the Transfer Agent no later than 1:59:59 p.m., New
York time.
The
Sponsor may in its sole discretion limit the number of Shares created pursuant
to Cash Orders on any specified day without notice to the Authorized
Participants and may direct the Marketing Agent to reject any Cash Orders in
excess of such capped amount. In exercising its discretion to limit the number
of Shares created pursuant to Cash Orders, the Sponsor expects to take into
consideration a number of factors, including (i) the availability of Liquidity
Providers to facilitate Cash Orders and (ii) the cost of processing Cash Orders
relative to the cost of processing In-Kind Orders. If the Sponsor decides to
limit Cash Orders and there are not otherwise a sufficient amount of In-Kind
Orders to allow the arbitrage mechanism to function, or if the Trust is
otherwise unable to satisfy creation orders made in cash, the Trust’s ability to
create new Shares could be negatively impacted, which could impact the Shares’
liquidity and/or cause the Shares to trade at premiums to the NAV per Share, and
otherwise have a negative impact on the
value
of the Shares. See “Risk Factors—Risk Factors Related to the Trust and the
Shares—The limited ability to facilitate in-kind creations and redemptions of
Shares could have adverse consequences for the Trust.”
In-Kind
Orders
Creations
pursuant to In-Kind Orders will take place as follows, where “T” is the trade
date and each day in the sequence must be a business day.
|
|
|
Trade
Date (T) |
Settlement
Date
(T+1,
or T+2, as established at the time of order placement) |
•
The
Authorized Participant places a creation order with the Transfer
Agent.
•
The
Marketing Agent accepts (or rejects) the creation order, which is
communicated to the Authorized Participant by the Transfer
Agent. |
·
The
Authorized Participant or AP Designee transfers the Total Basket Amount to
the Trust’s Vault Balance.
·
The
Trust issues the aggregate number of Shares corresponding to the Baskets
ordered by the Authorized Participant and the Transfer Agent delivers such
Shares by crediting the number of Baskets created to the Authorized
Participant’s DTC account. |
Cash
Orders
Creations
pursuant to Cash Orders will take place as follows, where “T” is the trade date
and each day in the sequence must be a business day. Before a creation pursuant
to a Cash Order is placed, the Sponsor determines if such creation order will be
a Variable Fee Cash Order or an Actual Execution Cash Order, which determination
is communicated to an Authorized Participant.
|
|
|
Trade
Date (T) |
Settlement
Date
(T+1,
or T+2, as established at the time of order placement) |
•
The
Authorized Participant places a creation order with the Transfer
Agent.
•
The
Marketing Agent accepts (or rejects) the creation order, which is
communicated to the Authorized Participant by the Transfer
Agent.
•
The
Sponsor notifies the Liquidity Provider of the creation
order.
•
The
Sponsor determines the Total Basket NAV and any Variable Fee and
Additional Creation Cash as soon as practicable after 4:00 p.m., New York
time. |
•
The
Authorized Participant delivers to the Cash Account:
(x) in
the case of a Variable Fee Cash Order, the Total Basket NAV, plus any
Variable Fee; or
(y) in
the case of an Actual Execution Cash Order, the Total Basket NAV, plus any
Additional Creation Cash, less any Excess Creation Cash, if applicable
(such amount, as applicable, the “Required Creation Cash”).
•
The
Liquidity Provider transfers the Total Basket Amount to the Trust’s Vault
Balance.
•
Once
the Trust is in simultaneous possession of (x) the Total Basket Amount and
(y) the Required Creation Cash, the Trust issues the aggregate number of
Shares corresponding to the Baskets ordered by the Authorized Participant,
which the Transfer Agent holds for the benefit of the Authorized
Participant.
•
Cash
equal to the Required Creation Cash is delivered to the Liquidity Provider
from the Cash Account.
•
The
Transfer Agent delivers Shares to the Authorized Participant by crediting
the number of Baskets created to the Authorized Participant’s DTC
account. |
Variable
Fee Cash Orders
Unless
the Sponsor determines otherwise in its sole discretion based on market
conditions and other factors existing at the time of such Cash Order, all
creations pursuant to Cash Orders are expected to be executed as Variable Fee
Cash Orders, and any price differential between (x) the Total Basket NAV on the
trade date and (y) the price realized in acquiring the corresponding Total
Basket Amount will be borne solely by the Liquidity Provider until such
SUI
have been received by the Trust.
The
Sponsor anticipates that the Trust’s cost to acquire the Total Basket Amount in
connection with a Variable Fee Cash Order will equal the sum of the
corresponding Total Basket NAV and Variable Fee to be delivered by the
Authorized Participant to the Trust. In the event that, by 12:00 p.m., New York
time on the settlement date of a creation pursuant to a Variable Fee Cash Order,
either (x) the Trust’s Vault Balance has not been credited with SUI
in an amount equal to the Total Basket Amount or (y) the Cash Account has not
been credited with the Total Basket NAV, plus any Variable Fee, such Cash Order
will be deemed a failed trade, with any consideration that has been delivered by
the Authorized Participant or the Liquidity Provider in respect of such Cash
Order being returned by the Trust.
The
Transfer Agent shall under no circumstances cause the Trust to issue Shares in
respect of a Variable Fee Cash Order until such time as each of (x) the Total
Basket Amount and (y) the Total Basket NAV, plus any Variable Fee, has been
delivered to the Trust, and the Trust is in simultaneous possession of
both.
Actual
Execution Cash Orders
With
respect to a creation pursuant to an Actual Execution Cash Order, as between the
Trust and an Authorized Participant, the Authorized Participant is responsible
for the dollar cost of the difference between the SUI
price utilized in calculating Total Basket NAV on the trade date and the price
at which the Trust acquires the SUI
on the settlement date. If the price realized in acquiring the corresponding
Total Basket Amount is higher than the Total Basket NAV, the Authorized
Participant will bear the dollar cost of such difference by delivering cash in
the amount of such difference (the “Additional Creation Cash”) to the Cash
Account. If the price realized in acquiring the corresponding Total Basket
Amount is lower than the Total Basket NAV, the Authorized Participant will
benefit from such difference, with the Trust promptly returning cash in the
amount of such excess (the “Excess Creation Cash”) to the Authorized
Participant.
In
the event that, by 12:00 p.m., New York time on the settlement date of a
creation pursuant to an Actual Execution Cash Order, either (x) the Trust’s
Vault Balance has not been credited with SUI
in an amount equal to the Total Basket Amount or (y) the Cash Account has not
been credited with the Total Basket NAV (net of any Additional Creation Cash or
Excess Creation Cash, if applicable), such Cash Order will be deemed a failed
trade, with any consideration that has been delivered by the Authorized
Participant or the Liquidity Provider in respect of such Cash Order being
returned by the Trust.
The
Transfer Agent shall under no circumstances cause the Trust to issue Shares in
respect of a Cash Order until such time as each of (x) the Total Basket Amount
and (y) the Total Basket NAV (net of any Additional Creation Cash or Excess
Creation Cash, if applicable) has been delivered to the Trust, and the Trust is
in simultaneous possession of both.
Redemption
Procedures
The
procedures by which an Authorized Participant can redeem one or more Baskets
mirror the procedures for the creation of Baskets. On any business day, an
Authorized Participant may place a redemption order specifying the number of
Baskets to be redeemed. Redemption orders may be placed as either In-Kind Orders
or Cash Orders, as described below. Orders for redemptions may be either In-Kind
Orders or Cash Orders. In-Kind Orders for redemption must be placed with the
Transfer Agent no later than 3:59:59 p.m., New York time, and Cash Orders for
redemption must be placed with the Transfer Agent no later than 1:59:59 p.m.,
New York time.
The
redemption of Shares pursuant to Cash Orders will only take place if approved by
the Sponsor in writing, in its sole discretion and on a case-by-case basis. In
exercising its discretion to approve the redemption of Shares pursuant to Cash
Orders, the Sponsor expects to take into consideration a number of factors,
including (i) the availability of Liquidity Providers to facilitate Cash Orders
and (ii) the cost of processing Cash Orders relative to the cost of processing
In-Kind Orders. If the Sponsor decides to limit Cash Orders and there are not
otherwise In-Kind Orders sufficient to allow the arbitrage mechanism to
function, or if the Trust is unable to satisfy redemption orders made in cash,
the Trust’s ability to redeem new Shares could be negatively impacted, which
could impact the Shares’ liquidity and/or cause the Shares to trade at
discounts, and could have a negative impact on the value of the Shares. See
“Risk Factors—Risk Factors Related to the Trust and the Shares—The limited
ability to facilitate in-kind creations and redemptions of Shares could have
adverse consequences for the Trust.”
The
Authorized Participants may only redeem Baskets and cannot redeem any Shares in
an amount less than a Basket.
In-Kind
Orders
Redemptions
pursuant to In-Kind Orders will take place as follows, where “T” is the trade
date and each day in the sequence must be a business day.
|
|
|
Trade
Date (T) |
Settlement
Date
(T+1,
or T+2, as established at the time of order placement) |
•
The
Authorized Participant places a redemption order with the Transfer
Agent.
•
The
Marketing Agent accepts (or rejects) the redemption order, which is
communicated to the Authorized Participant by the Transfer
Agent. |
·
The
Authorized Participant delivers Baskets to be redeemed from its DTC
account to the Transfer Agent.
·
The
Custodian transfers the Total Basket Amount to the Authorized Participant
or AP Designee, and the Transfer Agent cancels the
Shares. |
Cash
Orders
Redemptions
pursuant to Cash Orders will take place as follows, where “T” is the trade date
and each day in the sequence must be a business day. Before a redemption
pursuant to a Cash Order is placed, the Sponsor determines if such redemption
order will be a Variable Fee Cash Order or an Actual Execution Cash Order, which
determination is communicated to the Authorized Participant.
|
|
|
Trade
Date (T) |
Settlement
Date
(T+1,
or T+2, as established at the time of order placement) |
•
The
Authorized Participant places a redemption order with the Transfer
Agent.
•
The
Marketing Agent accepts (or rejects) the redemption order, which is
communicated to the Authorized Participant by the Transfer
Agent.
•
The
Sponsor notifies the Liquidity Provider of the redemption
order.
•
The
Sponsor determines the Total Basket NAV and, in the case of a Variable Fee
Cash Order, any Variable Fee, as soon as practicable after 4:00 p.m., New
York time. |
•
The
Authorized Participant delivers Baskets to be redeemed from its DTC
account to the Transfer Agent.
•
The
Liquidity Provider delivers to the Cash Account:
(x) in
the case of a Variable Fee Cash Order, the Total Basket NAV less any
Variable Fee; or
(y) in
the case of an Actual Execution Cash Order, the actual proceeds to the
Trust from the liquidation of the Total Basket Amount (such amount, as
applicable, the “Required Redemption Cash”).
•
Once
the Trust is in simultaneous possession of (x) the Total Basket Amount and
(y) the Required Redemption Cash, the Transfer Agent cancels the Shares
comprising the number of Baskets redeemed by the Authorized
Participant.
•
The
Custodian sends the Liquidity Provider the Total Basket Amount, and cash
equal to the Required Redemption Cash is delivered to the Authorized
Participant from the Cash Account. |
Variable
Fee Cash Orders
Unless
the Sponsor determines otherwise in its sole discretion based on market
conditions and other factors existing at the time of such Cash Order, all
redemptions pursuant to Cash Orders are expected to be executed as Variable Fee
Cash Orders, and any price differential between (x) the Total Basket NAV on the
trade date and (y) the price realized in disposing of the corresponding Total
Basket Amount will be borne solely by the Liquidity Provider.
The
Sponsor anticipates that the Trust’s proceeds from liquidating the Total Basket
Amount in connection with a Variable Fee Cash Order will equal the corresponding
Total Basket NAV less the Variable Fee to be delivered by the Liquidity Provider
to the Trust. In the event that, by 12:00 p.m. (New York time) on the settlement
date of a redemption pursuant to a Variable Fee Cash Order,
either
(x) the Transfer Agent’s account at DTC has not been credited with the total
number of Shares corresponding to the total number of Baskets to be redeemed or
(y) the Cash Account has not been credited with the Total Basket NAV, less any
Variable Fee, such Cash Order will be deemed a failed trade, with any
consideration that has been delivered by the Authorized Participant or the
Liquidity Provider in respect of such Cash Order being returned by the
Trust.
The
Transfer Agent shall under no circumstances deliver the Required Redemption Cash
to the Authorized Participant in respect of a Variable Fee Cash Order until such
time as (x) the Baskets to be redeemed have been delivered to the Transfer Agent
and (y) the Total Basket NAV, less any Variable Fee, has been delivered to the
Cash Account, and the Trust and/or the Transfer Agent is in simultaneous
possession of both.
Actual
Execution Cash Orders
With
respect to a redemption pursuant to an Actual Execution Cash Order, as between
the Trust and an Authorized Participant, the Authorized Participant is
responsible for the dollar cost of the difference between the SUI
price utilized in calculating Total Basket NAV on the trade date and the price
at which the Trust disposes of the SUI
on the settlement date. If the price realized in disposing the corresponding
Total Basket Amount on the settlement date is lower than the Total Basket NAV on
the trade date, the Authorized Participant will bear the dollar cost of such
difference (the “Redemption Cash Shortfall”), with the amount of cash to be
delivered to the Authorized Participant being reduced by the amount of such
Redemption Cash Shortfall. If the price realized in disposing the corresponding
Total Basket Amount on the settlement date is higher than the Total Basket NAV
on the trade date, the Trust will deliver cash in the amount of such excess (the
“Additional Redemption Cash”) to the Authorized Participant.
In
the event that, by 12:00 p.m. (New York time) on the settlement date of a
redemption pursuant to an Actual Execution Cash Order, either (x) the Transfer
Agent’s account at DTC has not been credited with the total number of Shares
corresponding to the total number of Baskets to be redeemed or (y) the Cash
Account has not been credited with the Total Basket NAV (plus any Additional
Redemption Cash or net of any Redemption Cash Shortfall), such Cash Order will
be deemed a failed trade, with any consideration that has been delivered by the
Authorized Participant or the Liquidity Provider in respect of such Cash Order
being returned by the Trust.
The
Transfer Agent shall under no circumstances deliver the Required Redemption Cash
to the Authorized Participant in respect of a Cash Order until such time as (x)
the Total Basket Amount has been delivered to the Transfer Agent and (y) the
Total Basket NAV (plus any Additional Redemption Cash or net of any Redemption
Cash Shortfall, if applicable) has been delivered to the Trust, and the Trust
and/or the Transfer Agent is in simultaneous possession of both.
Suspension
or Rejection of Orders and Total Basket Amount
The
creation or redemption of Shares may be suspended generally, or refused with
respect to particular requested creations or redemptions, during any period when
the transfer books of the Transfer Agent are closed or if circumstances outside
the control of the Sponsor or its delegates make it for all practical purposes
not feasible to process creation orders or redemption orders or for any other
reason at any time or from time to time. The Marketing Agent may reject an order
or, after accepting an order, may cancel such order, if: (i) such order is not
presented in proper form as described in the Participant Agreement, (ii) in the
case of In-Kind Orders, the transfer of the Total Basket Amount comes from an
account other than a SUI
wallet address that is known to the Custodian as belonging to the Authorized
Participant or its AP Designee or (iii) the fulfillment of the order, in the
opinion of counsel, might be unlawful, among other reasons. None of the Sponsor
or its delegates will be liable for the suspension, rejection or acceptance of
any creation order or redemption order.
The
Sponsor will notify investors of any suspension of creations or redemptions of
Shares by filing a current report on Form 8-K. Suspension of the creation or
redemption of Shares could negatively impact the Shares’ liquidity and/or cause
the Shares to trade at premiums and discounts, and otherwise have a negative
impact on the value of the Shares.
Tax
Responsibility
Authorized
Participants are responsible for any transfer tax, sales or use tax, stamp tax,
recording tax, value-added tax or similar tax or governmental charge applicable
to the creation and redemption of Baskets, regardless of whether such tax or
charge is imposed directly on the Authorized Participants, and agree to
indemnify the Sponsor and the Trust if the Sponsor or the Trust is required by
law to pay any such tax, together with any applicable penalties, additions to
tax or interest thereon.
Material
U.S. Federal Income Tax Consequences
The
following discussion addresses the material U.S. federal income tax consequences
of the ownership of Shares. Subject to the limitations and qualifications, and
based on the assumptions described herein and in the opinion letter filed as
Exhibit 8.1 to this registration statement, the statements of law and legal
conclusions set forth in the following discussion constitute the opinion of
Davis Polk & Wardwell LLP (“Davis Polk”) as to the material U.S. federal
income tax consequences of the ownership and disposition of Shares that
generally may apply to a “U.S. Holder” or a “non-U.S. Holder” (in each case, as
defined below). This discussion does not describe all of the tax consequences
that may be relevant to a beneficial owner of Shares in light of the beneficial
owner’s particular circumstances, including tax consequences applicable to
beneficial owners subject to special rules, such as:
•
financial
institutions;
•
dealers
in securities or commodities;
•
traders
in securities or commodities that have elected to apply a mark-to-market method
of tax accounting in respect thereof;
•
persons
holding Shares as part of a hedge, “straddle,” integrated transaction or similar
transaction;
•
Authorized
Participants (as defined below);
•
U.S.
Holders (as defined below) whose functional currency is not the U.S.
dollar;
•
entities
or arrangements classified as partnerships for U.S. federal income tax
purposes;
•
real
estate investment trusts;
•
regulated
investment companies; and
•
tax-exempt
entities, including individual retirement accounts.
This
discussion applies only to Shares that are held as capital assets and does not
address alternative minimum tax consequences or consequences of the Medicare
contribution tax on net investment income.
If
an entity or arrangement that is classified as a partnership for U.S. federal
income tax purposes holds Shares, the U.S. federal income tax treatment of a
partner will generally depend on the status of the partner and the activities of
the partnership. Partnerships holding Shares and partners in those partnerships
are urged to consult their tax advisers about the particular U.S. federal income
tax consequences of owning Shares.
This
discussion is based on the Code, administrative pronouncements, judicial
decisions and final, temporary and proposed Treasury regulations as of the date
hereof, changes to any of which subsequent to the date hereof may affect the tax
consequences described herein. For the avoidance of doubt, this summary does not
discuss any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction.
Shareholders
are urged to consult their tax advisers about the application of the U.S.
federal income tax laws to their particular situations, as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
Tax
Treatment of the Trust
The
Sponsor intends to take the position that the Trust is properly treated as a
grantor trust for U.S. federal income tax purposes. Assuming that the Trust is a
grantor trust, the Trust will not be subject to U.S. federal income tax. Rather,
if the Trust is a grantor trust, each beneficial owner of Shares will be treated
as directly owning its pro rata share of the Trust’s assets and a pro rata
portion of the Trust’s income, gains, losses and deductions will “flow through”
to each beneficial owner of Shares.
Although
not free from doubt due to the lack of authority directly addressing certain
aspects of the Trust’s affairs, and based on the assumption that the Staking
Condition will be satisfied before the Trust engages in any staking activity, in
the opinion of Davis Polk the Trust should be classified as a “grantor trust”
for U.S. federal income tax purposes. An opinion of counsel is not binding on
the IRS or any court, and there are significant uncertainties regarding the
application of existing authorities to certain aspects of SUI and the Trust.
Accordingly, there can be no complete assurance that the Trust will be treated
as a grantor trust for those purposes.
In
particular, if the Staking Condition is satisfied and the Trust engages in
Staking activity, the Sponsor intends to continue to take the position that the
Trust is properly treated as a grantor trust for U.S. federal income tax
purposes and that any Staking activity undertaken by the Trust in compliance
with the opinion, ruling or other guidance relied upon to satisfy the Staking
Condition will not prevent the Trust from continuing to qualify as a grantor
trust for such purposes. However, due to the uncertainty regarding the
ability
of
a grantor trust to engage in Staking activities, there can be no assurance that
the IRS or any court would agree with this position (or with any opinion of
counsel delivered to the Sponsor in support thereof). Accordingly, if the Trust
satisfies the Staking Condition and the Trust engages in Staking activity, the
Trust might cease to qualify as a grantor trust for U.S. federal income tax
purposes.
Furthermore,
the Sponsor has committed to cause the Trust to irrevocably abandon any
Incidental Rights and IR Virtual Currency to which the Trust may become entitled
in the future. In furtherance of that commitment, the Sponsor has, on behalf of
the Trust, notified the Prime Broker, the Custodian, and Coinbase Credit via the
Pre-Creation/Redemption Abandonment Notices (as defined herein) that the Trust
is irrevocably abandoning, effective immediately prior to each Creation Time or
Redemption Time, all Incidental Rights or IR Virtual Currency to which it would
otherwise be entitled as of such time and with respect to which it has not taken
any Affirmative Action at or prior to such time. There can be no complete
assurance that these abandonments will be treated as effective for U.S. federal
income tax purposes. If the Trust were treated as owning any asset other than
SUI as of any date on which it creates or redeems Shares, it might cease to
qualify as a grantor trust for U.S. federal income tax purposes.
In
addition, at this time the Trust is permitted to create or redeem Shares
pursuant to In-Kind Orders and Cash Orders. In general, investment vehicles
intended to be treated as grantor trusts for U.S. federal income tax purposes
historically have created additional trust interests only in kind, and there is
no authority directly addressing whether a grantor trust may create or redeem
trust interests under procedures similar to those that govern Cash Orders.
Accordingly, there can be no complete assurance that the creation or redemption
of Shares under the procedures governing Cash Orders will not cause the Trust to
fail to qualify as a grantor trust for U.S. federal income tax
purposes.
Moreover,
because of the evolving nature of digital assets, it is not possible to predict
potential future developments that may arise with respect to digital assets,
including forks, airdrops and other similar occurrences. Assuming that the Trust
is currently a grantor trust for U.S. federal income tax purposes, certain
future developments could render it impossible, or impracticable, for the Trust
to continue to be treated as a grantor trust for such purposes.
If
the Trust is not properly classified as a grantor trust, the Trust might be
classified as a partnership for U.S. federal income tax purposes. However, due
to the uncertain treatment of digital assets for U.S. federal income tax
purposes, there can be no assurance in this regard. If the Trust were classified
as a partnership for U.S. federal income tax purposes, the tax consequences of
owning Shares generally would not be materially different from the tax
consequences described herein, although there might be certain differences,
including with respect to timing of the recognition of taxable income or loss.
In addition, tax information reports provided to beneficial owners of Shares
would be made in a different form. Moreover, it is possible, in that case, that
a portion of the Trust’s income would be considered to be “effectively
connected” with the conduct of a trade or business in the United States and,
accordingly, a non-U.S. person owning Shares could be subject to U.S. federal
income tax on a net income basis with respect to that “effectively connected”
income and be required to file a U.S. tax return. If the Staking Condition were
satisfied and none of the Trust’s Staking income were considered to be
“effectively connected” income, a non-U.S. person owning Shares likely would be
subject to withholding on its pro rata portion of U.S.-source income from the
Trust’s Staking activities as described below. Tax-exempt Shareholders may also
recognize UBTI from the Trust’s Staking activities if the Trust is not treated
as a corporation for U.S. federal income tax purposes.
If
the Trust were not classified as either a grantor trust or a partnership for
U.S. federal income tax purposes, it would be classified as a corporation for
such purposes. In that event, the Trust would be subject to entity-level U.S.
federal income tax (currently at the rate of 21%) on its net taxable income and
certain distributions made by the Trust to shareholders would be treated as
taxable dividends to the extent of the Trust’s current and accumulated earnings
and profits. Any such dividend distributed to a beneficial owner of Shares that
is a non-U.S. person for U.S. federal income tax purposes would be subject to
U.S. federal withholding tax at a rate of 30% (or such lower rate as provided in
an applicable tax treaty).
The
remainder of this discussion is based on the assumption that the Trust will be
treated as a grantor trust for U.S. federal income tax purposes.
Uncertainty
Regarding the U.S. Federal Income Tax Treatment of Digital Assets
Each
beneficial owner of Shares will be treated for U.S. federal income tax purposes
as the owner of an undivided interest in the SUI (and any Incidental Rights, IR
Virtual Currency and/or, if the Staking Condition is satisfied, Native Staking
Consideration) held in the Trust. Due to the new and evolving nature of digital
assets and the absence of comprehensive guidance with respect to digital assets,
many significant aspects of the U.S. federal income tax treatment of digital
assets are uncertain.
In
2014, the IRS released a notice (the “Notice”) discussing certain aspects of the
treatment of “convertible virtual currency” (that is, digital assets that have
an equivalent value in fiat currency or that acts as substitutes for fiat
currency) for U.S. federal income tax purposes. In the Notice, the IRS stated
that, for U.S. federal income tax purposes, such digital assets (i) are
“property,” (ii) are not “currency” for purposes of the provisions of the Code
relating to foreign currency gain or loss and (iii) may be held as a capital
asset. In 2019, the IRS released a revenue ruling and a set of “Frequently Asked
Questions” (the “Ruling & FAQs”) that provide some
additional
guidance, including guidance to the effect that, under certain circumstances,
hard forks of digital assets are taxable events giving rise to ordinary income
and guidance with respect to the determination of the tax basis of digital
assets. Moreover, in 2023, the IRS released a revenue ruling that provided
guidance on digital assets staking, including guidance to the effect that
staking rewards will, under certain circumstances, be treated as giving rise to
taxable income (the “2023 Staking Guidance”). Further, the IRS recently issued a
revenue procedure providing a staking safe harbor for certain grantor trust
vehicles whose beneficial interests are listed and traded on a national
securities exchange (the “2025 Revenue Procedure”). However, the Notice, the
Ruling & FAQs, the 2023 Staking Guidance and the 2025 Revenue Procedure do
not address other significant aspects of the U.S. federal income tax treatment
of digital assets. For example, for a non-U.S. Holder, there currently is no
guidance directly addressing whether or in what circumstances engaging in
certain activities to generate yield on digital assets, including Staking, could
give rise to income that is effectively connected with a trade or business in
the United States. Similarly, for a U.S. tax-exempt shareholder, there currently
is no guidance directly addressing whether or in what circumstances such
activities could give rise to UBTI. Moreover, although the Ruling & FAQs
address the treatment of hard forks, there continues to be significant
uncertainty with respect to the timing and amount of the income
inclusions.
There
can be no assurance that the IRS will not alter its position with respect to
digital assets in the future or that a court would uphold the treatment set
forth in the Notice, the Ruling & FAQs, the 2023 Staking Guidance and the
2025 Revenue Procedure. It is also unclear what additional guidance on the
treatment of digital assets for U.S. federal income tax purposes may be issued
in the future. Any such alteration of the current IRS positions or additional
guidance could result in adverse tax consequences for shareholders and could
have an adverse effect on the prices of digital assets, including the price of
SUI in the Digital Asset Market, and therefore could have an adverse effect on
the value of Shares. Future developments that may arise with respect to digital
assets may increase the uncertainty with respect to the treatment of digital
assets for U.S. federal income tax purposes. For example, the Notice addresses
only digital assets that are “convertible virtual currency,” and it is
conceivable that, as a result of a fork, airdrop or similar occurrence, the
Trust could hold certain types of digital assets that are not within the scope
of the Notice, in the event the Sponsor seeks to change the Trust’s policy with
respect to Incidental Rights or IR Virtual Currency, subject to NYSE Arca
obtaining regulatory approval from the SEC.
The
remainder of this discussion assumes that SUI, and any Incidental Rights, IR
Virtual Currency or, if the Staking Condition is satisfied, Native Staking
Consideration that the Trust may hold, is properly treated for U.S. federal
income tax purposes as property that may be held as a capital asset and that is
not currency for purposes of the provisions of the Code relating to foreign
currency gain and loss.
Shareholders
are urged to consult their tax advisers regarding the tax consequences of an
investment in the Trust and in digital assets in general, including, in the case
of shareholders that are generally exempt from U.S. federal income taxation,
whether such shareholders may recognize UBTI as a consequence of a fork, airdrop
or similar occurrence or, if the Staking Condition is satisfied,
Staking.
Tax
Consequences to U.S. Holders
As
used herein, the term “U.S. Holder” means a beneficial owner of a Share for U.S.
federal income tax purposes that is:
•
an
individual who is a citizen or resident of the United States for U.S. federal
income tax purposes;
•
a
corporation, or other entity treated as a corporation for U.S. federal income
tax purposes, created or organized in or under the laws of the United States or
of any political subdivision thereof; or
•
an
estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
Except
as specifically noted, the discussion below assumes that each U.S. Holder will
acquire all of its Shares on the same date for the same price per Share and
solely for cash or solely for SUI that were originally acquired by the U.S.
Holder for cash on the same date.
As
discussed in the section entitled “Creation and Redemption of Shares,” a U.S.
Holder may be able to acquire Shares of the Trust by contributing SUI in kind to
the Trust (either directly or through an Authorized Participant acting as agent
of the U.S. Holder). Assuming that the Trust is properly treated as a grantor
trust for U.S. federal income tax purposes, such a contribution should not be a
taxable event to the U.S. Holder.
For
U.S. federal income tax purposes, each U.S. Holder will be treated as owning an
undivided interest in the SUI held in the Trust and will be treated as directly
realizing its pro rata share of the Trust’s income, gains, losses and deductions
(including, if the Staking Condition is satisfied, any staking income). When a
U.S. Holder purchases Shares solely for cash, (i) the U.S. Holder’s initial tax
basis in its pro rata share of the SUI held in the Trust will be equal to the
amount paid for the Shares and (ii) the U.S. Holder’s holding period for its pro
rata share of such SUI will begin on the date of such purchase. When a U.S.
Holder acquires Shares in exchange for SUI, (i) the U.S. Holder’s initial tax
basis in its pro rata share of the SUI held in the Trust will be equal to the
U.S. Holder’s tax basis in the SUI that the U.S. Holder transferred to the Trust
and (ii) the U.S. Holder’s holding period for its pro rata
share
of such SUI generally will include the period during which the U.S. Holder held
the SUI that the U.S. Holder transferred to the Trust. The Ruling & FAQs
confirm that if a taxpayer acquires tokens of a digital asset at different times
and for different prices, the taxpayer has a separate tax basis in each lot of
such tokens. Under the Ruling & FAQs, if a U.S. Holder that owns more than
one lot of SUI contributes a portion of its SUI to the Trust in exchange for
Shares, the U.S. Holder could designate the lot(s) from which such contribution
will be made, provided that the U.S. Holder is able to identify specifically
which SUI it is contributing and to substantiate its tax basis in that SUI. In
general, if a U.S. Holder acquires Shares (i) solely for cash at different
prices, (ii) partly for cash and partly in exchange for a contribution of SUI or
(iii) in exchange for a contribution of SUI with different tax bases, the U.S.
Holder’s share of the Trust’s SUI will consist of separate lots with separate
tax bases. In addition, in this situation, the U.S. Holder’s holding period for
the separate lots may be different. In addition, if the Staking Condition is
satisfied, any SUI received as part of Native Staking Consideration that the
Trust acquires will constitute a separate lot with a separate tax basis and
holding period.
Gains
or losses from the sale of SUI to fund cash redemptions are expected to be
treated as incurred only by the shareholder that is being redeemed. However,
when the Trust transfers SUI to the Sponsor as payment of the Sponsor’s Fee (or,
to the extent that the Staking Condition is satisfied, the Sponsor’s Staking
Fee) or sells SUI to fund payment of any cash distributions or of any Additional
Trust Expenses, each U.S. Holder will be treated as having sold its pro rata
share of that SUI for their fair market value at that time (which, in the case
of SUI sold by the Trust, generally will be equal to the cash proceeds received
by the Trust in respect thereof). As a result, each U.S. Holder will recognize
gain or loss in an amount equal to the difference between (i) the fair market
value of the U.S. Holder’s pro rata share of the SUI transferred and (ii) the
U.S. Holder’s tax basis for its pro rata share of the SUI transferred. Any such
gain or loss will be short-term capital gain or loss if the U.S. Holder’s
holding period for its pro rata share of the SUI is one year or less and
long-term capital gain or loss if the U.S. Holder’s holding period for its pro
rata share of the SUI is more than one year. A U.S. Holder’s tax basis in its
pro rata share of any SUI transferred by the Trust generally will be determined
by multiplying the tax basis of the U.S. Holder’s pro rata share of all of the
SUI held in the Trust immediately prior to the transfer by a fraction the
numerator of which is the amount of SUI transferred and the denominator of which
is the total amount of SUI held in the Trust immediately prior to the transfer.
Immediately after the transfer, the U.S. Holder’s tax basis in its pro rata
share of the SUI remaining in the Trust will be equal to the tax basis of its
pro rata share of the SUI held in the Trust immediately prior to the transfer,
less the portion of that tax basis allocable to its pro rata share of the SUI
transferred. A U.S. Holder’s receipt of distributions of cash proceeds from the
sale of SUI (other than in connection with a redemption) should not, itself, be
a taxable event to a U.S. Holder.
As
noted above, the IRS has taken the position in the Ruling & FAQs that, under
certain circumstances, a hard fork of a digital asset constitutes a taxable
event giving rise to ordinary income, and it is clear from the reasoning of the
Ruling & FAQs that the IRS generally would treat an airdrop as a taxable
event giving rise to ordinary income. As described above, the Sponsor has
committed to causing the Trust to abandon all Incidental Rights and IR Virtual
Currency to which the Trust otherwise might become entitled. If, however, the
Trust were to receive and retain IR Virtual Currency in the future, a U.S.
Holder would have a basis in that IR Virtual Currency equal to the amount of
income the U.S. Holder recognizes as a result of such fork or airdrop and the
U.S. Holder’s holding period for such IR Virtual Currency would begin as of the
time it recognizes such income. Similarly, although the IRS has not issued
similar guidance with respect to staking, if the Staking Condition is satisfied
and the Trust were to receive any Native Staking Consideration in connection
with Staking, it is likely that a U.S. Holder will have a basis in any SUI
received as part of such Native Staking Consideration equal to the amount of
income that the U.S. Holder recognizes and the U.S. Holder’s holding period for
such Native Staking Consideration will begin as of the time it recognizes such
income.
U.S.
Holders’ pro rata shares of the expenses incurred by the Trust will be treated
as “miscellaneous itemized deductions” for U.S. federal income tax purposes. As
a result, a non-corporate U.S. Holder’s share of these expenses will not be
deductible for U.S. federal income tax purposes.
On
a sale or other disposition of Shares, a U.S. Holder will be treated as having
sold the SUI
underlying such Shares. Accordingly, the U.S. Holder generally will recognize
gain or loss in an amount equal to the difference between (i) the amount
realized on the sale of the Shares and (ii) the portion of the U.S. Holder’s tax
basis in its pro rata share of the SUI
held in the Trust that is attributable to the Shares that were sold or otherwise
subject to a disposition. Such tax basis generally will be determined by
multiplying the tax basis of the U.S. Holder’s pro rata share of all of the
SUI
held in the Trust immediately prior to such sale or other disposition by a
fraction the numerator of which is the number of Shares disposed of and the
denominator of which is the total number of Shares held by such U.S. Holder
immediately prior to such sale or other disposition (such fraction, expressed as
a percentage, the “Share Percentage”). If the U.S. Holder’s share of the Trust’s
SUI
consists of separate lots with separate tax bases and/or holding periods, the
U.S. Holder will be treated as having sold the Share Percentage of each such
lot. Gain or loss recognized by a U.S. Holder on a sale or other disposition of
Shares will generally be short-term capital gain or loss if the U.S. Holder’s
holding period for the SUI
underlying such Shares is one year or less and long-term capital gain or loss if
the U.S. Holder’s holding period for the SUI
underlying such Shares is more than one year. The deductibility of capital
losses is subject to significant limitations.
If
the Trust redeems all or a portion of a U.S. Holder’s Shares in exchange for the
underlying SUI represented by the redeemed Shares, such redemption generally
would not be a taxable event to the U.S. Holder. The U.S. Holder’s tax basis in
the SUI received in the redemption generally would be the same as the U.S.
Holder’s tax basis for the portion of its pro rata share of the SUI held in the
Trust immediately prior to the redemption that was attributable to the Shares
redeemed, determined as described above, and the U.S.
Holder’s
tax basis in its remaining pro rata portion, if any, of the SUI held in the
Trust after the redemption would be equal to the tax basis of its pro rata share
of the total amount of the SUI held in the Trust immediately prior to the
redemption, less the U.S. Holder’s tax basis in the SUI received in the
redemption. The U.S. Holder’s holding period with respect to the SUI received
would generally include the period during which the U.S. Holder held the Shares
so redeemed. A subsequent sale of the SUI received in such redemption would
generally be a taxable event.
After
any sale or other disposition of fewer than all of a U.S. Holder’s Shares, the
U.S. Holder’s tax basis in its pro rata share of the SUI held in the Trust
immediately after the disposition will equal the tax basis in its pro rata share
of the total amount of the SUI held in the Trust immediately prior to the
disposition, less the portion of that tax basis that is taken into account in
determining the amount of gain or loss recognized by the U.S. Holder on the
disposition (or, in the case of a redemption pursuant to an In-Kind Order, that
is treated as the basis of the SUI received by the U.S. Holder in the
redemption).
Any
brokerage or other transaction fee incurred by a U.S. Holder in purchasing
Shares generally will be added to the U.S. Holder’s tax basis in the underlying
assets of the Trust. Similarly, any brokerage fee or other transaction fee
incurred by a U.S. Holder in selling Shares generally will reduce the amount
realized by the U.S. Holder with respect to the sale.
If
the Staking Condition is satisfied and the Trust receives Native Staking
Consideration, likely in the form of new SUI, any such Native Staking
Consideration received by the Trust would be reportable to Shareholders as
taxable income under current IRS guidance.
In
the absence of guidance to the contrary, it is possible that any income
recognized by a U.S. tax-exempt shareholder as a consequence of a hard fork,
airdrop or similar occurrence or, if the Staking Condition is satisfied, Staking
would constitute UBTI. A tax-exempt shareholder should consult its tax adviser
regarding whether such shareholder may recognize some UBTI as a consequence of
an investment in Shares.
Tax
Consequences to Non-U.S. Holders
As
used herein, the term “non-U.S. Holder” means a beneficial owner of a Share for
U.S. federal income tax purposes that is not a U.S. Holder. The term “non-U.S.
Holder” does not include (i) a nonresident alien individual who is present in
the United States for 183 days or more in a taxable year, (ii) a former U.S.
citizen or U.S. resident or an entity that has expatriated from the United
States; (iii) a person whose income in respect of Shares is effectively
connected with the conduct of a trade or business in the United States; or (iv)
an entity that is treated as a partnership for U.S. federal income tax purposes.
Shareholders described in the preceding sentence should consult their tax
advisers regarding the U.S. federal income tax consequences of owning
Shares.
A
non-U.S. Holder generally will not be subject to U.S. federal income or
withholding tax with respect to its share of any gain recognized on the Trust’s
transfer of SUI in payment of the Sponsor’s Fee, the Sponsor’s Staking Fee (to
the extent that the Staking Condition is satisfied) or any Additional Trust
Expense or on the Trust’s sale or other disposition of SUI. In addition,
assuming that the Trust holds no asset other than SUI, a non-U.S. Holder
generally will not be subject to U.S. federal income or withholding tax with
respect to any gain it recognizes on a sale or other disposition of Shares. A
non-U.S. Holder also will generally not be subject to U.S. federal income or
withholding tax with respect to any distribution received from the Trust,
whether in cash or in-kind.
Provided
that it does not constitute income that is treated as “effectively connected”
with the conduct of a trade or business in the United States, U.S.-source “fixed
or determinable annual or periodical” (“FDAP”) income received, or treated as
received, by a non-U.S. Holder will generally be subject to U.S. withholding tax
at the rate of 30% (subject to possible reduction or elimination pursuant to an
applicable tax treaty and to statutory exemptions such as the portfolio interest
exemption). Although the Sponsor has committed to causing the Trust to abandon
all Incidental Rights and IR Virtual Currency to which the Trust may become
entitled in the future, and although there is no guidance on point, if the Trust
were to receive and retain IR Virtual Currency arising from a future fork,
airdrop or similar occurrence, it is likely that any ordinary income recognized
by a non-U.S. Holder as a result would constitute FDAP income. It is also
possible that, if the Staking Condition is satisfied, the receipt of any Native
Staking Consideration by the Trust would constitute FDAP income. It is unclear,
however, whether any such FDAP income would be properly treated as U.S.-source
or foreign-source FDAP income. Non-U.S. Holders should assume that, in the
absence of guidance, a withholding agent (including the Sponsor) is likely to
withhold 30% from a non-U.S. Holder’s pro rata share of any such income. A
non-U.S. Holder that is a resident of a country that maintains an income tax
treaty with the United States may be eligible to claim the benefits of that
treaty to reduce or eliminate, or to obtain a partial or full refund of, the 30%
U.S. withholding tax on its share of any such income, but only if the non-U.S.
Holder’s home country treats the Trust as “fiscally transparent,” as defined in
applicable Treasury regulations.
In
order to prevent the possible imposition of U.S. “backup” withholding and (if
applicable) to qualify for a reduced rate of withholding tax at source under a
treaty, a non-U.S. Holder must comply with certain certification requirements
(generally, by delivering a properly executed IRS Form W-8BEN or W-8BEN-E to the
relevant withholding agent).
U.S.
Information Reporting and Backup Withholding
The
Trust or the appropriate broker will file certain information returns with the
IRS and provide shareholders with information regarding their annual income (if
any) and expenses with respect to the Trust in accordance with applicable
Treasury regulations.
A
U.S. Holder will generally be subject to information reporting requirements and
backup withholding unless (i) the U.S. Holder is a corporation or other exempt
recipient or (ii) in the case of backup withholding, the U.S. Holder provides a
correct taxpayer identification number and certifies that it is not subject to
backup withholding. In order to avoid the information reporting and backup
withholding requirements, a non-U.S. Holder may have to comply with
certification procedures to establish that it is not a U.S. person. The amount
of any backup withholding will be allowed as a credit against the shareholder’s
U.S. federal income tax liability and may entitle the holder to a refund,
provided that the required information is furnished to the IRS.
FATCA
As
discussed above, it is unclear whether any ordinary income recognized by a
non-U.S. Holder as a result of a fork, airdrop or similar occurrence or staking
would constitute U.S.-source FDAP income. Provisions of the Code commonly
referred to as “FATCA” require withholding of 30% on payments of U.S.-source
FDAP income and, subject to the discussion of proposed U.S. Treasury regulations
below, of gross proceeds of dispositions of certain types of property that
produce U.S.-source FDAP income to, “foreign financial institutions” (which is
broadly defined for this purpose and in general includes investment vehicles)
and certain other non-U.S. entities unless various U.S. information reporting
and due diligence requirements (generally relating to ownership by U.S. persons
of interests in or accounts with those entities) have been satisfied, or an
exemption applies. An intergovernmental agreement between the United States and
an applicable foreign country may modify these requirements. In addition,
regulations proposed by the U.S. Treasury Department (the preamble to which
indicates that taxpayers may rely on the regulations pending their finalization)
would eliminate the requirement under FATCA of withholding on gross proceeds. If
FATCA withholding is imposed, a beneficial owner that is not a foreign financial
institution generally may obtain a refund of any amounts withheld by filing a
U.S. federal income tax return (which may entail significant administrative
burden). Shareholders should consult their tax advisers regarding the effects of
FATCA on an investment in the Trust.
ERISA
and Related
Considerations
ERISA
and Section 4975 of the Code impose certain requirements on employee benefit
plans and certain other plans and arrangements, including individual retirement
accounts (“IRAs”) and annuities, Keogh plans, and certain collective investment
funds or insurance company general or separate accounts in which such plans or
arrangements are invested, that are subject to ERISA and/or the Section 4975 of
the Code (collectively, “Plans”), and on persons who are fiduciaries with
respect to the investment of Plan assets. Government plans, non-U.S. plans and
certain church plans (collectively, “Non-ERISA Arrangements”) are not subject to
the fiduciary responsibility or prohibited transaction provisions of ERISA or
Section 4975 of the Code, but may be subject to similar rules under other
federal, state, local, non-U.S. or other applicable laws (“Similar
Laws”).
General
Fiduciary Matters
In
contemplating an investment of a portion of Plan assets in Shares, the Plan
fiduciary responsible for making such investment should carefully consider,
taking into account the facts and circumstances of the Plan, the risks discussed
in this prospectus, and whether such investment is consistent with its fiduciary
responsibilities, including, but not limited to (i) whether the fiduciary has
the authority to make the investment under the appropriate governing plan
instrument, (ii) whether the investment would constitute a direct or indirect
non-exempt prohibited transaction under ERISA or the Code, (iii) the Plan’s
funding objectives, and (iv) whether under the general fiduciary standards of
investment prudence and diversification such investment is appropriate for the
Plan, taking into account the overall investment policy of the Plan, the
composition of the Plan’s investment portfolio and the Plan’s need for
sufficient liquidity to pay benefits when due. Fiduciaries of Non-ERISA
Arrangements should carefully consider whether an investment in Shares would
violate any applicable Similar Laws.
Plan
Asset Issues
Under
the Department of Labor’s regulations at section 2510.3-101, as amended by
Section 3(42) of ERISA (the “Plan Asset Regulations”), if a Plan invests in an
equity interest of an entity that is “a publicly-offered security,” the entity
will not be deemed to hold “plan assets” subject to ERISA, and a party managing
the assets of such entity will not be subject to the fiduciary responsibility
and prohibited transaction rules of ERISA and Section 4975 of the Code. A
“publicly-offered security” is a security that is freely transferable, part of a
class of securities that is widely held, and is either (i) part of a class of
securities registered under section 12(b) or 12(g) of the Exchange Act or (ii)
sold to the plan as part of an offering of securities to the public pursuant to
an effective registration statement under the Securities Act and the class of
securities of which such security is a part is registered under the Exchange Act
within 120 days (or such later time as may be allowed by the Securities and
Exchange Commission) after the end of the fiscal year of the issuer during which
the offering of such securities to the public occurred. Whether a security is
“freely transferable” is a factual question determined on the basis of facts and
circumstances. A class of securities is “widely-held” if it is a class of
securities that is owned by 100 or more investors independent of the issuer and
of one another. It is anticipated that the Shares will constitute
“publicly-offered securities” as defined in the Plan Asset Regulations.
Accordingly, only Shares held by a Plan, and not the underlying SUI
held in the Trust represented by the Shares, should be treated as assets of the
Plan, for purposes of applying the fiduciary responsibility and prohibited
transaction rules of ERISA and the Code.
Investment
by Certain Retirement Plans
IRAs
and participant-directed accounts under tax-qualified retirement plans are
limited in the types of investments they may make under the Code. Potential
purchasers of Shares that are IRAs or participant-directed accounts under a Code
Section 401(a) plan should consult with their own advisors as to the
consequences of an investment in Shares.
Ineligible
Purchasers
In
general, Shares may not be purchased with the assets of a Plan if the Trustee,
the Sponsor, the distributor or any of their respective affiliates or employees
either: (i) has investment discretion with respect to the investment of such
Plan assets; (ii) has authority or responsibility to give or regularly gives
investment advice with respect to such Plan assets, for a fee, and pursuant to
an agreement or understanding that such advice will serve as a primary basis for
investment decisions with respect to such Plan assets and that such advice will
be based on the particular investment needs of the Plan; or (iii) is an employer
maintaining or contributing to such Plan. A party that is described in clause
(i) or (ii) of the preceding sentence is a fiduciary under ERISA and the Code
with respect to the Plan, and any such purchase might result in a prohibited
transaction under ERISA and/or the Code, unless an exemption is
available.
Representation
Accordingly,
by acceptance of Shares, each purchaser and subsequent transferee of Shares will
be deemed to have represented and warranted that either (i) no portion of the
assets used by such purchaser or transferee to acquire or hold the Shares
constitutes assets of any Plan or Non-ERISA Arrangement or (ii) the acquisition,
holding and subsequent disposition of the Shares by such purchaser or transferee
will not constitute or result in any non-exempt prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code or violate any applicable
Similar Law.
Except
as otherwise set forth, the foregoing statements regarding the consequences
under ERISA and the Code of an investment in the Trust are based on the
provisions of ERISA and the Code as currently in effect, and the existing
administrative and judicial interpretations thereunder. No assurance can be
given that administrative, judicial or legislative changes will not occur that
may make the foregoing statements incorrect or incomplete.
ACCEPTANCE
OF SUBSCRIPTIONS ON BEHALF OF PLANS OR NON-ERISA ARRANGEMENTS IS IN NO RESPECT A
REPRESENTATION BY THE SPONSOR OR ANY OTHER PARTY RELATED TO THE TRUST THAT THIS
INVESTMENT MEETS THE RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY
ANY PARTICULAR PLAN OR NON-ERISA ARRANGEMENT OR PLANS OR NON-ERISA ARRANGEMENTS
GENERALLY, OR THAT THIS INVESTMENT IS APPROPRIATE FOR ANY PARTICULAR PLAN OR
NON-ERISA ARRANGEMENT OR PLANS OR NON-ERISA ARRANGEMENTS GENERALLY. THE PERSON
WITH INVESTMENT DISCRETION WITH RESPECT TO ANY PLAN OR NON-ERISA ARRANGEMENT
SHOULD CONSULT WITH ITS OWN COUNSEL AND ADVISERS AS TO THE PROPRIETY OF AN
INVESTMENT IN THE TRUST, IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN OR
NON-ERISA ARRANGEMENT BEFORE PURCHASING SHARES. NEITHER THIS DISCUSSION NOR
ANYTHING IN THIS PROSPECTUS IS OR IS INTENDED TO BE INVESTMENT ADVICE DIRECTED
AT ANY POTENTIAL PURCHASER THAT IS A PLAN OR NON-ERISA ARRANGEMENT, OR AT SUCH
PURCHASERS GENERALLY.
Plan
of Distribution
The
Trust issues Shares in Baskets only to Authorized Participants in exchange for
deposits of SUI
on an ongoing continuous basis. The Trust does not issue fractions of a Basket.
Although the Trust creates Baskets only upon the receipt of SUI,
an Authorized Participant may choose to submit Cash Orders, pursuant to which
the Authorized Participant will deposit cash into the Cash Account (and a
Liquidity Provider will transfer to the Trust’s Vault Balance the corresponding
SUI)
in connection with the creation and redemption of Baskets. Authorized
Participants may also create Baskets pursuant to In-Kind Orders, pursuant to
which an Authorized Participant or its AP Designee would deposit SUI
directly with the Trust or receive SUI
directly from the Trust.
Authorized
Participants may create a Basket pursuant to an In-Kind Order by depositing with
the Trust the Basket Amount, which equals the amount of SUI owned by the Trust
at 4:00 p.m., New York time, on each trade date (after deducting the amount of
SUI representing the U.S. dollar value of accrued but unpaid fees and expenses
of the Trust) divided by the number of Shares outstanding at such time and
multiplying such quotient by 10,000.
Cash
Orders will be facilitated by the Transfer Agent and Grayscale Investments
Sponsors, LLC, which will engage one or more eligible companies (each, a
“Liquidity Provider”) to obtain or receive SUI
in connection with such orders. Authorized Participants may create a Basket
pursuant to a Cash Order by delivering to the Cash Account (x) in the case of a
Variable Fee Cash Order, the Basket NAV and any Variable Fee, or (y) in the case
of an Actual Execution Cash Order, the Basket NAV, plus any Additional Creation
Cash, less any Excess Creation Cash (such amount, as applicable, the “Required
Creation Cash”), and the Liquidity Provider transferring the corresponding
Basket Amount to the Trust’s Vault Balance. The Basket Amount equals the amount
of SUI
owned by the Trust at 4:00 p.m., New York time, on each trade date (after
deducting the amount of SUI
representing the U.S. dollar value of accrued but unpaid fees and expenses of
the Trust) by the number of Shares outstanding at such time and multiplying such
quotient by 10,000. The Basket NAV equals the U.S. dollar value of a Basket
calculated by multiplying the Basket Amount by the Index Price as of the trade
date. Shares will only be created and delivered to the Authorized Participant
after the Trust is in simultaneous possession of (i) the Basket Amount and (ii)
the Required Creation Cash.
It
is expected that Authorized Participants that create Shares will sell Shares to
the public at varying prices to be determined by reference to, among other
considerations, the price of SUI
and the trading price of the Shares on the NYSE Arca at the time of each sale.
There will not be an “initial” creation of Baskets upon the Trust’s listing on
NYSE Arca given that the Trust already has created Baskets of Shares that will
continue to be outstanding as of such date.
While
the arbitrage mechanism is expected to keep the value of the Shares closely
linked to the Index Price, due to price volatility and differentials, trading
volume, and closings of Digital Asset Trading Platforms due to fraud, failure,
security breaches or otherwise, there can be no assurance that the value of the
Shares will reflect the value of the Trust’s SUI,
less the Trust’s expenses and other liabilities, and the Shares may trade at a
substantial premium over, or a substantial discount to, the value of the Trust’s
SUI,
less the Trust’s expenses and other liabilities. This risk may be exacerbated to
the extent in-kind creations and redemptions of Shares become limited for any
reason. See “Risk Factors—Risk Factors Related to the Trust and the Shares— The
limited ability to facilitate in-kind creations and redemptions of Shares could
have adverse consequences for the Trust.” Moreover, there may be variances in
the prices of SUI
on the various Digital Asset Trading Platforms, including as a result of
differences in fee structures or administrative procedures on different Digital
Asset Trading Platforms, which could enhance or inhibit the arbitrage mechanism
in a manner that is beyond our control.
Because
new Shares can be created and issued on an ongoing basis at any point during the
life of the Trust, a “distribution,” as such term is used in the Securities Act,
will be occurring. Authorized Participants, other broker-dealers and other
persons are cautioned that some of their activities may result in their being
deemed participants in a distribution in a manner which would render them
statutory underwriters and subject them to the prospectus delivery and liability
provisions of the Securities Act. For example, an Authorized Participant, other
broker-dealer firm or its client will be deemed a statutory underwriter if it
purchases a Basket from the Trust, breaks the Basket down into its constituent
Shares and sells the Shares directly to its customers, or if it chooses to
couple the creation of a new Basket with an active selling effort involving
solicitation of secondary market demand for the Shares. A determination of
whether a particular market participant is an underwriter must take into account
all the facts and circumstances pertaining to the activities of the
broker-dealer or its client in the particular case, and the examples mentioned
above should not be considered a complete description of all the activities that
could lead to designation as an underwriter and subject them to the prospectus
delivery and liability provisions of the Securities Act.
Investors
that purchase shares through a brokerage account (whether commission-based or
fee-based) may pay commissions or fees charged by the brokerage
account.
Dealers
that are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(3) of the Securities
Act.
Authorized
Participants will not receive from the Trust or the Sponsor any compensation in
connection with an offering or reoffering of the Shares. Accordingly, there is,
and will be, no payment of underwriting compensation in connection with any such
offering of Shares in excess of 10% of the gross proceeds of the
offering.
Pursuant
to a Marketing Agent Agreement (the “Marketing Agent Agreement”) entered into
between the Sponsor and Foreside Fund Services, LLC, as Marketing Agent (the
“Marketing Agent”), the Marketing Agent will be paid by the Sponsor an annual
fee. In addition, the Sponsor will pay certain out-of-pocket fees and expenses
of the Marketing Agent incurred in connection with its assistance in the
marketing of the Trust and its Shares.
Under
the Marketing Agent Agreement, the Marketing Agent will provide the following
services to the Sponsor:
•
Assist
the Sponsor in facilitating Participation Agreements between and among
Authorized Participants, the Trust, the Transfer Agent;
•
Provide
prospectuses to Authorized Participants;
•
Work
with the Transfer Agent to review and approve orders placed by the Authorized
Participants and transmitted to the Transfer Agent;
•
Review
and file applicable marketing materials with FINRA; and
•
Maintain,
reproduce and store applicable books and records related to the services
provided under the Marketing Agent Agreement.
The
Trust intends to list the Shares on NYSE Arca under the symbol “GSUI.”
Legal
Matters
The
validity of the Shares will be passed upon by Richards, Layton & Finger,
P.A., as special Delaware counsel to the Trust. Davis Polk & Wardwell LLP,
as special tax counsel to the Trust, will render an opinion regarding the
material U.S. federal income tax consequences of the ownership of
Shares.
Experts
The
financial statements of the Trust as of and for the year ended December 31,
2024, have been included herein and in the registration statement in reliance
upon the report of KPMG LLP, independent registered public accounting firm,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
Where
You Can Find More
Information
We
have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the Shares offered hereby. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to the
Trust and its Shares, reference is made to the registration statement and the
exhibits and any schedules filed therewith. Statements contained in this
prospectus as to the contents of any contract or other document referred to are
not necessarily complete and, in each instance, if such contract or document is
filed as an exhibit, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement, each statement being
qualified in all respects by such reference. The SEC maintains an Internet site
at www.sec.gov that contains reports, proxy and information statements we have
filed electronically with the SEC.
As
a result of the offering, we will be required to file periodic reports and other
information with the SEC. We also maintain an Internet site at etfs.grayscale.com/gsui.
Our
website and the information contained therein or connected thereto shall not be
deemed to be incorporated into this prospectus or the registration statement of
which it forms a part.
We
intend to make available to holders of the Shares annual reports containing
consolidated financial statements audited by an independent registered public
accounting firm.
Glossary
of Defined
Terms
In
this prospectus, each of the following terms has the meaning set forth
below.
“Account”—The
accounts associated with the Trust’s Vault Balance and Settlement
Balance.
“Actual
Exchange Rate”—With
respect to any particular asset, at any time, the price per single unit of such
asset (determined net of any associated fees) at which the Trust is able to sell
such asset for U.S. dollars (or other applicable fiat currency) at such time to
enable the Trust to timely pay any Additional Trust Expenses, through use of the
Sponsor’s commercially reasonable efforts to obtain the highest such
price.
“Actual
Execution Cash Order”—A
Cash Order pursuant to which any price differential between (x) the Total Basket
NAV on the trade date and (y) the price realized in acquiring or disposing of
the corresponding Total Basket Amount, as the case may be, will be borne solely
by the Authorized Participant.
“Additional
Creation Cash”—In
connection with a creation pursuant to an Actual Execution Cash Order, the
amount of additional cash required to be delivered by the Authorized Participant
in the event the price realized in acquiring the corresponding Total Basket
Amount is higher than the Total Basket NAV on the trade date.
“Additional
Redemption Cash”—In
connection with a redemption pursuant to an Actual Execution Cash Order, the
amount of additional cash to be delivered to the Authorized Participant in the
event the price realized in disposing the corresponding Total Basket Amount is
higher than the Total Basket NAV on the trade date.
“Additional
Trust Expenses”—Together,
any expenses incurred by the Trust in addition to the Sponsor’s Fee that are not
Sponsor-paid Expenses, including, but not limited to, (i) taxes and governmental
charges, (ii) expenses and costs of any extraordinary services performed by the
Sponsor (or any other service provider) on behalf of the Trust to protect the
Trust or the interests of shareholders, (iii) any indemnification of the
Custodian or other agents, service providers or counterparties of the Trust,
(iv) the fees and expenses related to the listing, quotation or trading of the
Shares on any Secondary Market (including legal, marketing and audit fees and
expenses) to the extent exceeding $600,000 in any given fiscal year and (v)
extraordinary legal fees and expenses, including any legal fees and expenses
incurred in connection with litigation, regulatory enforcement or investigation
matters.
“Administrator”—The
Bank of New York Mellon, a New York corporation authorized to conduct banking
business.
“Administrator
Fee”—The
fee payable to any administrator of the Trust for services it provides to the
Trust, which the Sponsor will pay such administrator as a Sponsor-paid
Expense.
“Affirmative
Action”—A
decision by the Trust to acquire or abandon specific Incidental Rights and IR
Virtual Currency at any time prior to the time of a creation or redemption of
Shares.’
“AP
Designee”—An
Authorized Participant’s designee in connection with In-Kind Orders.
“Authorized
Participant”—
Certain
eligible financial institutions that have entered into an agreement with the
Trust and the Sponsor concerning the creation or redemption of Shares. Each
Authorized Participant (i) is a registered broker-dealer, (ii) has entered into
a Participant Agreement with the Sponsor and the Transfer Agent, and (iii) in
the case of creations or redemptions through In-Kind Orders must also own, or
their AP Designee (as defined above) must own, a digital wallet address that is
known to the Custodian as belonging to the Authorized Participant or its AP
Designee and maintain an account with the Custodian.
“Basket”—A
block of 10,000 Shares.
“Basket
Amount”—On
any trade date, the amount of SUI required as of such trade date for the
creation or redemption of a Basket, as determined by dividing (x) the amount of
SUI owned by the Trust at 4:00 p.m., New York time, on such trade date, after
deducting the amount of SUI representing the U.S. dollar value of accrued but
unpaid fees and expenses of the Trust (converted using the Index Price at such
time, and carried to the eighth decimal place), by (y) the number of Shares
outstanding at such time (with the quotient so obtained calculated to one
one-hundred-millionth of one SUI (i.e., carried to the eighth decimal place)),
and multiplying such quotient by 10,000.
“Basket
NAV”—The
U.S. dollar value of a Basket calculated by multiplying the Basket Amount by the
Index Price as of the trade date.
“Binance”—Binance
Holdings Ltd.
“Bitcoin”—A
type of digital asset based on an open-source cryptographic protocol existing on
the Bitcoin network.
“Blockchain”
or “Sui
Blockchain”—The
public transaction ledger of the Sui Network on which transactions in
SUI
are recorded.
"Board"—Board
of Directors of Grayscale Investments, Inc., which as of October 22, 2025, and
pursuant to the Management Reorganization, manages and directs the affairs of
the Sponsor. Prior to January 1, 2025, any references to the "Board" refer to
the board of directors of Grayscale Investments, LLC, the former Sponsor of the
Trust. From January 1, 2025, to October 22, 2025, any references to the "Board"
refer to the board of directors of GSOIH. From and after October 22, 2025, any
references to the "Board" refer to the board of directors of Grayscale
Investments.
“Cash
Account”—The
segregated account maintained by the Transfer Agent in the name of the Trust for
purposes of receiving cash from Authorized Participants and Liquidity Providers
in connection with creations of Shares and distributing cash to Authorized
Participants and Liquidity Providers in connection with redemptions of
Shares.
“Cash
Order”—An
order for the creation or redemption of Shares pursuant to procedures
facilitated by the Transfer Agent and pursuant to which a Liquidity Provider is
engaged to facilitate the purchase or sale of SUI. A Cash Order may be executed
as either a Variable Fee Cash Order or an Actual Execution Cash Order. Unless
the Sponsor determines otherwise in its sole discretion based on market
conditions and other factors existing at the time of such Cash Order, all
creations and redemptions pursuant to Cash Orders are expected to be executed as
Variable Fee Cash Orders.
“CEA”—Commodity
Exchange Act of 1936, as amended.
“CFTC”—The
U.S. Commodity Futures Trading Commission, an independent agency with the
mandate to regulate commodity futures and option markets in the United
States.
“CME”—The
Chicago Mercantile Exchange.
“Code”—The
U.S. Internal Revenue Code of 1986, as amended.
“Coinbase”—Coinbase,
Inc.
“Coinbase
Credit”—Coinbase
Credit, Inc.
“Co-Transfer
Agent”—Continental
Stock Transfer & Trust Company.
“Covered
Person”—The
Sponsor and its affiliates. See “Business—Description of the Trust Agreement—
The Sponsor—Liability of the Sponsor and Indemnification.”
“Creation
Basket”—Basket
of Shares issued by the Trust upon deposit of the Basket Amount required for
each such Creation Basket.
“Creation
Time”—With
respect to the creation of any Shares by the Trust, the time at which the Trust
creates such Shares.
“Custodial
and Prime Broker Services”—The
services of the Custodian and the Prime Broker that provide for: (i) holding of
the Trust’s SUI in the Vault Balance and the Settlement Balance; (ii) transfer
of the Trust’s SUI between the relevant Vault Balance and the Settlement
Balance; (iii) the deposit of SUI from a public blockchain address into the
respective account or accounts in which the Vault Balance or the Settlement
Balance are maintained; and (iv) the withdrawal of SUI from the Vault Balance to
a public blockchain address the Trust controls.
“Custodial
Entities”—The
Prime Broker, together with the Custodian.
“Custodian”—Coinbase
Custody Trust Company, LLC. and/or other custodians, collectively or in their
individual capacities, as the context may require.
“Custodian
Fee”—Fee
payable to the Custodian and the Prime Broker for services they provide to the
Trust, which the Sponsor shall pay to the Custodian and the Prime Broker as a
Sponsor-paid Expense.
“DCG”—Digital
Currency Group, Inc.
“DCG
Holdco”—DCG
Grayscale Holdco, LLC.
“Digital
Asset Market”—A
“Brokered Market,” “Dealer Market,” “Principal-to-Principal Market” or “Exchange
Market,” as each such term is defined in the Financial Accounting Standards
Board Accounting Standards Codification Master Glossary.
“Digital
Asset Trading Platform”—An
electronic marketplace where trading platform participants may trade, buy and
sell SUI based on bid-ask trading. The largest Digital Asset Trading Platforms
are online and typically trade on a 24-hour basis, publishing transaction price
and volume data.
“Digital
Asset Trading Platform Market”—The
global exchange market for the trading of SUI, which consists of transactions on
electronic Digital Asset Trading Platforms.
“DSTA”—The
Delaware Statutory Trust Act, as amended.
“DTC”—The
Depository Trust Company. DTC is a limited purpose trust company organized under
New York law, a member of the U.S. Federal Reserve System and a clearing agency
registered with the SEC. DTC will act as the securities depository for the
Shares.
“ERISA”—The
U.S. Employee Retirement Income Security Act of 1974, as amended.
“ETC”
or “Ethereum
Classic”—
Ether Classic tokens, which are a type of digital asset based on an open-source
cryptographic protocol existing on the Ethereum Classic Network.
“Ether”—Ethereum
tokens, which are a type of digital asset based on an open source cryptographic
protocol existing on the Ethereum Network, comprising units that constitute the
assets underlying the Trust’s Shares.
“Ethereum
Classic Network”—The
online, end-user-to-end-user network hosting a public transaction ledger, known
as the Ethereum Classic blockchain, and the source code comprising the basis for
the cryptographic and algorithmic protocols governing the Ethereum Classic
network.
“Ethereum
Network”—The
online, end-user-to-end-user network hosting the public transaction ledger,
known as the Ethereum Blockchain, and the source code comprising the basis for
the cryptographic and algorithmic protocols governing the Ethereum
Network.
“Excess
Creation Cash”—In
connection with a creation pursuant to an Actual Execution Cash Order, the
amount of excess cash to be returned to the Authorized Participant in the event
the price realized in acquiring the corresponding Total Basket Amount is lower
than the Total Basket NAV on the trade date.
“Exchange
Act”—The
Securities Exchange Act of 1934, as amended.
“FCA”
— The Financial Conduct Authority.
“FDIC”—
The Federal Deposit Insurance Corporation.
“FinCEN”—The
Financial Crimes Enforcement Network, a bureau of the U.S. Department of the
Treasury.
“FINRA”—The
Financial Industry Regulatory Authority, Inc., which is the primary regulator in
the United States for broker-dealers, including Authorized
Participants.
“FTX”—FTX
Trading, Ltd.
“GAAP”—United
States generally accepted accounting principles.
“Grayscale
Investments”—Grayscale
Investments, Inc., a Delaware corporation and consolidated subsidiary of
DCG.
“Grayscale
Securities”—Grayscale
Securities, LLC
“GSI”—Grayscale
Investments, LLC, the Sponsor of the Trust until December 31, 2024.
“GSIS”—Grayscale
Investments Sponsors, LLC, a Delaware limited liability company and a
consolidated subsidiary of Grayscale Operating, LLC.
“GSO”—Grayscale
Operating, LLC, a Delaware limited liability company and a consolidated
subsidiary of Digital Currency Group, Inc.
“GSOIH”—GSO
Intermediate Holdings Corporation, a Delaware corporation and a consolidated
subsidiary of DCG.
“Incidental
Rights”—Rights
to acquire, or otherwise establish dominion and control over, any virtual
currency or other asset or right, which rights are incident to the Trust’s
ownership of SUI and arise without any action of the Trust, or of the Sponsor or
Trustee on behalf of the Trust.
“Index”—The
CoinDesk SUI CCIXber Reference Rate. From the commencement of the Trust’s
operations until September 30, 2025, the Index was the CoinDesk SUI Reference
Rate Price.
“Index
License Agreement”—The
license agreement, dated as of February 1, 2022, between the Index Provider and
the Sponsor, governing the Sponsor’s use of the Index for calculation of the
Index Price, as amended by Amendment No. 1 thereto and as the same may be
amended from time to time.
“Index
Price”—The
U.S. dollar value of a SUI derived from the Digital Asset Trading Platforms that
are reflected in the Index, calculated at 4:00 p.m., New York time, on each
business day. See “Business—Overview of the Sui Industry and Market—The Index
and the Index Price” for a description of how the Index Price is calculated. For
purposes of the Trust Agreement, the term Index Price shall mean the Index Price
as defined herein.
“Index
Provider”—CoinDesk
Indices, Inc., a Delaware corporation that publishes the Index. Prior to its
sale to an unaffiliated third party on November 20, 2023, DCG was the indirect
parent company of CoinDesk Indices, Inc. As a result, CoinDesk Indices, Inc. was
an affiliate of the Sponsor and the Trust and was considered a related party of
the Trust.
“In-Kind
Order”—An
order for the creation or redemption of Shares pursuant to which the Authorized
Participant (or its AP Designee) will deliver or receive SUI directly from the
Trust’s Vault Balance.
“Investment
Advisers Act”—Investment
Advisers Act of 1940, as amended.
“Investment
Company Act”—Investment
Company Act of 1940, as amended.
“Investor”—Any
investor that has entered into a subscription agreement with an Authorized
Participant, pursuant to which such Authorized Participant will act as agent for
the investor.
“IRS”—The
U.S. Internal Revenue Service, a bureau of the U.S. Department of the
Treasury.
“IR
Virtual Currency”—Any
virtual currency tokens, or other asset or right, acquired by the Trust through
the exercise (subject to the applicable provisions of the Trust Agreement) of
any Incidental Right.
“Layer
2”—Protocols
built on top of an underlying smart contract platform blockchain intended to
provide scalability to the underlying blockchain by increasing transaction
efficiency.
“Liquidity
Engager”—Grayscale
Investments Sponsors, LLC, acting other than in its capacity as Sponsor, and in
its capacity to engage one or more Liquidity Providers.
“Liquidity
Provider”—
One
or more eligible companies that facilitate the purchase and sale of SUI in
connection with creations or redemptions pursuant to Cash Orders. The Liquidity
Providers with which Grayscale Investments Sponsors, LLC, acting in its capacity
as the Liquidity Engager, will engage in SUI transactions are third parties that
are not affiliated with the Sponsor or the Trust and are not acting as agents of
the Trust, the Sponsor, or any Authorized Participant, but may be affiliated
with the Authorized Participant, and all transactions will be done on an
arms-length basis. Except for the contractual relationships between each
Liquidity Provider and Grayscale Investments Sponsors, LLC in its capacity as
the Liquidity Engager, there is no contractual relationship between each
Liquidity Provider and the Trust or the Sponsor.
“Liquidity
Sleeve”—The
portion of SUI in the Trust intended to be maintained as unstaked, as determined
by the Sponsor from time to time, and that meets the requirements set forth in
Section 6.02(9) of IRS Revenue Procedure 2025-31.
“Management
Reorganization”—An
internal corporate reorganization consummated on October 22, 2025. As a result
of the Management Reorganization, Grayscale Investments is now the sole managing
member of GSO, the sole member of the Sponsor, and the Board of Grayscale
Investments is responsible for managing and directing the affairs of the
Sponsor.
“Marketing
Agent”—Foreside
Fund Services, LLC.
“Marketing
Agent Agreement”—An
agreement entered into by the Sponsor, on behalf of the Trust, dated , 2025,
with Foreside Fund Services, LLC.
“Marketing
Fee”—Fee
payable to the marketer for services it provides to the Trust, which the Sponsor
will pay to the marketer as a Sponsor-paid Expense.
“Merger”—The
merger of Grayscale Investments, LLC with and into Grayscale Operating, LLC,
with Grayscale Operating, LLC continuing as the surviving company.
“Native
Staking Consideration”—Any
Staking Consideration in the form of SUI.
“NAV”—The
aggregate value, expressed in U.S. dollars, of the Trust’s assets (other than
U.S. dollars or other fiat currency), less its liabilities (which include
estimated accrued but unpaid fees and expenses) calculated in the manner set
forth under “Business—Valuation of SUI and Determination of NAV.” See also
“Business— Trust Objective and Determination of Principal Market NAV and NAV”
for a description of the Trust’s Principal Market NAV, as calculated in
accordance with GAAP.
“NAV
Fee Basis Amount”—The
amount on which the Sponsor’s Fee for the Trust is based, as calculated in the
manner set forth under “Valuation of SUI and Determination of NAV”.
“NYSE
Arca”—NYSE
Arca, Inc.
“OTCQX”—The
OTCQX Best Market®
of OTC Markets Group Inc.
“Other
Staking Consideration”—Any
Staking Consideration other than SUI.
“Participant
Agreement”—An
agreement entered into by an Authorized Participant with the Sponsor and the
Transfer Agent, that provides the procedures for the creation and redemption of
Baskets.
“Pre-Creation/Redemption
Abandonment”—The
abandonment by the Trust, irrevocably for no direct or indirect consideration,
all Incidental Rights and IR Virtual Currency to which the Trust would otherwise
be entitled, effective immediately prior to a Creation Time or a Redemption Time
(as the case may be) for the Trust.
“Pre-Creation/Redemption
Abandonment Notices”—The
notices, collectively, as amended or supplemented from time to time, delivered
by the Sponsor to each of the Prime Broker, the Custodian and Coinbase Credit,
on behalf of the Trust, stating that the Trust will abandon, irrevocably and for
no direct or indirect consideration, effective immediately prior to each
Creation Time and each Redemption Time for the Trust, all Incidental Rights and
IR Virtual Currency to which it would otherwise be entitled as of such time and
with respect to which the Trust has not taken any Affirmative Action at or prior
to such time.
“Prime
Broker”—Coinbase,
Inc.
“Prime
Broker Agreement”—The
Prime Broker Agreement, dated as of , by and among the Trust, the Sponsor and
the Prime Broker, on behalf of itself, the Custodian and Coinbase Credit, that
governs the Trust’s and the Sponsor’s use of the Custodial and Prime Broker
Services provided by the Custodian and the Prime Broker. Although executed as of
, the Prime Broker Agreement shall not become effective with respect to the
Trust until the date on which shares of the Trust begin trading on NYSE Arca as
shares of an exchange-traded product.
“Principal
Market NAV”—The
net asset value of the Trust determined on a GAAP basis.
“Redemption
Cash Shortfall”—In
connection with a redemption pursuant to an Actual Execution Cash Order, the
amount by which the cash to be delivered to the Authorized Participant is
reduced in the event the price realized in disposing the corresponding Total
Basket Amount is lower than the Total Basket NAV on the trade date.
“Redemption
Time”—With
respect to the redemption of any Shares by the Trust, the time at which the
Trust redeems such Shares.
“Reorganization”—The
internal corporate reorganization of Grayscale Investments, LLC consummated on
January 1, 2025.
“Required
Redemption Cash”—The
actual proceeds to the Trust from the liquidation of the Total Basket
Amount.
“SEC”—The
U.S. Securities and Exchange Commission.
“Secondary
Index”—The
Coin Metrics Real-Time Rate.
“Secondary
Index Price”—The
price set by Coin Metrics Real-Time Rate as of 4:00 p.m., New York time, on the
valuation date. See “Business—Overview of the Sui Industry and Market—The Index
and the Index Price—Determination of the Index Price When Index Price is
Unavailable” for a description of how the Secondary Index Price is utilized when
the Index Price is unavailable.
“Secondary
Index Provider”—Coin
Metrics Inc., a Delaware corporation that publishes the Secondary
Index.
“Secondary
Market”—Any
marketplace or other alternative trading system, as determined by the Sponsor,
on which the Shares may then be listed, quoted or traded, including but not
limited to, NYSE Arca.
“Securities
Act”—The
Securities Act of 1933, as amended.
“Settlement
Balance”—An
account controlled and maintained by the Custodian to which cash and digital
assets of the Trust are credited on the Trust’s behalf.
“Shares”—Common
units of fractional undivided beneficial interest in, and ownership of, the
Trust.
“Share
Split”—A
5-for-1 Share split of the Trust's issued and outstanding Shares, which was
effective on December 9, 2024 to shareholders of record as of the close of
business on December 5, 2024.
“SIPC”—The
Securities Investor Protection Corporation.
“Sponsor”
or “Co-Sponsor”—The
sponsor of the Trust. Grayscale Investments, LLC was the sponsor of the Trust
before January 1, 2025, Grayscale Operating, LLC was a co-sponsor of the Trust
from January 1, 2025 to May 3, 2025, and Grayscale Investments Sponsors, LLC was
a co-sponsor of the Trust from January 1, 2025 to May 3, 2025 and is the sole
sponsor thereafter.
“Sponsor-paid
Expenses”—The
fees and expenses incurred by the Trust in the ordinary course of its affairs
that the Sponsor is obligated to assume and pay, excluding taxes, but including:
(i) the Marketing Fee, (ii) the Administrator Fee, (iii) the Custodian Fee and
fees for any other security vendor engaged by the Trust, (iv) the Transfer Agent
fee, (v) the Trustee fee, (vi) the fees and expenses related to the listing,
quotation or trading of the Shares on any Secondary Market (including customary
legal, marketing and audit fees and expenses) in an amount up to $600,000 in any
given fiscal year, (vii) ordinary course, legal fees and expenses, (viii) audit
fees, (ix) regulatory fees, including, if applicable, any fees relating to the
registration of the Shares under the Securities Act or the Exchange Act, (x)
printing and mailing costs, (xi) costs of maintaining the Trust’s website and
(xii) applicable license fees, provided that any expense that qualifies as an
Additional Trust Expense will be deemed to be an Additional Trust Expense and
not a Sponsor-paid Expense.
“Sponsor’s
Fee”—A
fee, payable in SUI,
which accrues daily in U.S. dollars at an annual rate of % of the NAV Fee Basis
Amount of the Trust as of 4:00 p.m., New York time, on each day; provided
that
for a day that is not a business day, the calculation of the Sponsor’s Fee will
be based on the NAV Fee Basis Amount from the most recent business day, reduced
by the accrued and unpaid Sponsor’s Fee for such most recent business day and
for each day after such most recent business day and prior to the relevant
calculation date. In
connection with the effectiveness of this registration statement and the listing
of the Shares on NYSE Arca, the Sponsor intends to amend the Trust Agreement to
reflect the Sponsor’s Fee.
“Sponsor’s
Staking Fee”—In
addition to the Sponsor’s Fee, as partial consideration for the Sponsor’s
facilitation of Staking, a portion of the staking rewards payable to the Sponsor
in SUI (or, if applicable, in the form of any Other Staking Consideration),
which accrues daily in U.S. dollars in an amount calculated as a per annum
percentage of any Staking Consideration received by the Trust, as may be
directed by the Sponsor in its sole discretion. The Sponsor’s Staking Fee is
payable to the Sponsor daily in arrears. As of the date hereof, the Sponsor’s
Staking Fee, the Custodian’s fee and the Staking Provider’s share of such
Staking Consideration comprises an aggregate of % of the gross Staking
Consideration generated under the Staking Arrangements. The Trust will receive
and retain the remainder of such gross Staking Consideration.
“Staking”—(i)
Using, or permitting to be used, indirectly through the Custodian (including,
for the avoidance of doubt, through the Custodian’s delegation of rights, on the
Trust’s behalf, to a vetted third party unrelated to the Trust or the Sponsor
with respect to any portion of the Trust’s SUI, by making any portion of the
Trust’s SUI available to such third party or by entering into any similar
arrangement with such third party), any portion of the Trust’s SUI in a
permissionless proof-of-stake protocol, (ii) accepting only Native Staking
Consideration and treating all such Native Staking Consideration consistently,
and (iii) any financing arrangement or other mechanism utilized by the Sponsor,
on behalf of the Trust, in connection with Redemption Orders to manage SUI
liquidity constraints arising from activities described in the preceding
clauses. For the avoidance of doubt, (i) the mere act of transferring units of
virtual currency on a peer-to-peer virtual currency network that utilizes a
proof-of-stake protocol shall not be considered to be “Staking” and (ii)
“Staking” shall include any related activity contemplated by a Tax Ruling, an
opinion or Tax Guidance, in each case, described in the definition of Staking
Condition (and, in the case of a Tax Ruling, that is described in the private
letter ruling request (as supplemented from time to time) submitted to the U.S.
Internal Revenue Service in connection therewith).
“Staking
Condition”—With
respect to a particular form of Staking, the condition that (i) (x) engaging in
such form of Staking should not cause the Trust to be treated as other than a
grantor trust for U.S. federal income tax purposes and (y) the Trust shall have
received (1) a written opinion from a Tax Advisor or (2) a Tax Ruling, in each
case, to that effect or (ii) such form of Staking is confirmed in Tax Guidance
to be a permissible undertaking by a grantor trust.
“Staking
Consideration”—Any
consideration of any kind whatsoever, including, but not limited to, any staking
reward paid in fiat currency or paid in kind, in exchange for using, or
permitting to be used, any portion of the Trust Estate as described in clause
(i) of the definition of “Staking.”
“SUI”—
SUI tokens, which are a type of digital asset based on an open source
cryptographic protocol existing on the Sui Network, comprising units that
constitute the assets underlying the Trust’s Shares. See “Overview of the Sui
Industry and Market.”
“Sui
Network”—The
online and permissionless end-user-to-end-user network hosting the public
transaction ledger, known as the Sui Blockchain, that uses a proof-of-stake
consensus mechanism to validate transactions, and the source code comprising the
basis for the cryptographic and algorithmic protocols governing the Sui Network.
See “Overview of the Sui Industry and Market.”
“Tax
Advisor”—An
independent law firm that is recognized as being expert in tax
matters.
“Tax
Guidance”—any
tax guidance that is issued by the U.S. Internal Revenue Service or the U.S.
Department of the Treasury and on which taxpayers may rely.
“Tax
Ruling”—A
binding ruling issued by the U.S. Internal Revenue Service.
“Total
Basket Amount”—With
respect to any creation or redemption order, the applicable Basket Amount
multiplied by the number of Baskets being created or redeemed.
“Total
Basket NAV”—The
applicable Basket NAV Amount multiplied by the number of Baskets being created
or redeemed.
“Transfer
Agency and Service Agreement”—The
agreement between the Sponsor and the Transfer Agent which sets forth the
obligations and responsibilities of the Transfer Agent with respect to transfer
agency services and related matters.
“Transfer
Agent”—
The
Bank of New York Mellon, a New York corporation authorized to conduct banking
business.
“Transfer
Agent Fee”—Fee
payable to the Transfer Agent for services it provides to the Trust, which the
Sponsor will pay to the Transfer Agent as a Sponsor-paid Expense.
“Treasury
Regulations”—The
regulations, including proposed or temporary regulations, promulgated under the
Code.
“Trust”—Grayscale
Sui Trust (SUI),
a Delaware statutory trust, formed on April 30, 2024 under the DSTA and pursuant
to the Trust Agreement. In
connection with the effectiveness of this registration statement and the listing
of the Shares on NYSE Arca, the Sponsor intends to rename the Trust as Grayscale
Sui Trust ETF by filing a Certificate of Amendment to the Certificate of Trust
with the Delaware Secretary of State in accordance with the provisions of the
DSTA.
“Trust
Agreement”—The
Second Amended and Restated Declaration of Trust and Trust Agreement, dated as
of , 2025 between the Trustee and the Sponsor establishing and governing the
operations of the Trust, as may be further amended from time to time.
“Trustee”—CSC
Delaware Trust Company (formerly known as Delaware Trust Company), a Delaware
trust company, is the Delaware trustee of the Trust.
“Trust
Estate”—Without
duplication, (i) all the SUI in the Trust’s accounts, including the SUI Account,
(ii) all Incidental Rights held by the Trust, (iii) all IR Virtual Currency in
the Trust’s accounts, (iv) all proceeds from the sale of SUI, Incidental Rights
and IR Virtual Currency pending use of such cash for payment of Additional Trust
Expenses or distribution to the Shareholders and (v) any rights of the Trust
pursuant to any agreements, other than this Trust Agreement, to which the Trust
is a party.
“Uplisted
Period”—Any
period during which the Shares of the Trust are listed and traded on NYSE Arca
or any other national securities exchange.
“U.S.”—United
States.
“U.S.
dollar”
or “$”—United
States dollar or dollars.
“Variable
Fee”—An
amount in cash based on the Total Basket NAV, which shall be paid by the
Authorized Participant in connection with Variable Fee Cash Orders. The amount
may be changed by the Sponsor in its sole discretion at any time.
“Variable
Fee Cash Order”—A
Cash Order pursuant to which any price differential between (x) the Total Basket
NAV on the trade date and (y) the price realized in acquiring or disposing of
the corresponding Total Basket Amount, as the case may be, will be borne solely
by the applicable Liquidity Provider.
“Vault
Balance”—A
segregated custody account controlled and secured by the Custodian to store
private keys, which (i) allow for the transfer of ownership or control of the
Trust’s SUI on the Trust’s behalf, (ii) are accessible solely by the Custodian
acting on the Trust’s behalf and (iii) permit the Trust to retain ownership of
the Trust’s SUI at all times for U.S. federal income tax purposes.
“Zcash”
or “ZEC”—A
type of digital asset based on an open source cryptographic protocol existing on
the Zcash network.
Index
to Financial Statements
|
|
|
Grayscale
Sui Trust (SUI) Unaudited Interim Financial Statements |
Page |
|
Statements
of Assets and Liabilities at September 30, 2025 and December 31,
2024 |
F-2 |
|
Schedules
of Investment at September 30, 2025 and December 31,
2024 |
F-3 |
|
Statements
of Operations for the Three and Nine Months Ended September 30, 2025 and
for the Period from August 1, 2024 (the Commencement of the Trust’s
Operations) to September 30, 2024 |
F-4 |
|
Statements
of Changes in Net Assets for the Three and Nine Months ended September 30,
2025 and for the Period from August 1, 2024 (the Commencement of the
Trust’s Operations) to September 30, 2024 |
F-5 |
|
Notes
to Unaudited Financial Statements |
F-6 |
GRAYSCALE
SUI TRUST (SUI)
STATEMENTS
OF ASSETS AND LIABILITIES (UNAUDITED)
(Amounts
in thousands, except Share and per Share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2025 |
|
|
December
31, 2024 |
|
|
Assets: |
|
|
|
|
|
|
|
Investment
in SUI, at fair value (cost $7,971 and $7,679 as of September 30, 2025 and
December 31, 2024, respectively) |
|
$ |
10,103 |
|
|
$ |
12,635 |
|
|
Total
assets |
|
$ |
10,103 |
|
|
$ |
12,635 |
|
|
Liabilities: |
|
|
|
|
|
|
|
Sponsor’s
Fee payable, related party |
|
$ |
- |
|
|
$ |
- |
|
|
Total
liabilities |
|
|
- |
|
|
|
- |
|
|
Net
assets |
|
$ |
10,103 |
|
|
$ |
12,635 |
|
|
Shares
issued and outstanding, no par value (unlimited Shares
authorized) |
|
|
212,700 |
|
|
|
204,100 |
|
|
Principal
Market NAV per Share |
|
$ |
47.50 |
|
|
$ |
61.90 |
|
See
accompanying notes to the unaudited financial statements.
GRAYSCALE
SUI TRUST (SUI)
SCHEDULES
OF INVESTMENT (UNAUDITED)
(Amounts
in thousands, except quantity of SUI and percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity
of SUI |
|
|
Cost |
|
|
Fair
Value |
|
|
%
of Net
Assets |
|
|
Investment
in SUI |
|
|
3,099,049.66720146 |
|
|
$ |
7,971 |
|
|
$ |
10,103 |
|
|
|
100 |
% |
|
Total
Investment |
|
|
|
|
$ |
7,971 |
|
|
$ |
10,103 |
|
|
|
100 |
% |
|
Net
assets |
|
|
|
|
|
|
|
$ |
10,103 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity
of SUI |
|
|
Cost |
|
|
Fair
Value |
|
|
%
of Net
Assets |
|
|
Investment
in SUI |
|
|
3,029,877.30003966 |
|
|
$ |
7,679 |
|
|
$ |
12,635 |
|
|
|
100 |
% |
|
Total
Investment |
|
|
|
|
$ |
7,679 |
|
|
$ |
12,635 |
|
|
|
100 |
% |
|
Net
assets |
|
|
|
|
|
|
|
$ |
12,635 |
|
|
|
100 |
% |
See
accompanying notes to the unaudited financial statements.
GRAYSCALE
SUI TRUST (SUI)
STATEMENTS
OF OPERATIONS (UNAUDITED)
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Nine
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Investment
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsor’s
Fee, related party |
|
|
70 |
|
|
|
4 |
|
|
|
194 |
|
|
|
4 |
|
|
Net
investment loss |
|
|
(70 |
) |
|
|
(4 |
) |
|
|
(194 |
) |
|
|
(4 |
) |
|
Net
realized and unrealized gain (loss) from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gain on investment in SUI |
|
|
19 |
|
|
|
1 |
|
|
|
45 |
|
|
|
1 |
|
|
Net
change in unrealized appreciation on investment in SUI |
|
|
1,359 |
|
|
|
1,255 |
|
|
|
(2,824 |
) |
|
|
1,255 |
|
|
Net
realized and unrealized gain (loss) on investment |
|
|
1,378 |
|
|
|
1,256 |
|
|
|
(2,779 |
) |
|
|
1,256 |
|
|
Net
increase (decrease) in net assets resulting from operations |
|
$ |
1,308 |
|
|
$ |
1,252 |
|
|
$ |
(2,973 |
) |
|
$ |
1,252 |
|
See
accompanying notes to the unaudited financial statements.
GRAYSCALE
SUI TRUST (SUI)
STATEMENTS
OF CHANGES IN NET ASSETS (UNAUDITED)
(Amounts
in thousands, except change in Shares outstanding)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Nine
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Increase
(decrease) in net assets from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment loss |
|
$ |
(70 |
) |
|
$ |
(4 |
) |
|
$ |
(194 |
) |
|
$ |
(4 |
) |
|
Net
realized gain on investment in SUI |
|
|
19 |
|
|
|
1 |
|
|
|
45 |
|
|
|
1 |
|
|
Net
change in unrealized appreciation on investment in SUI |
|
|
1,359 |
|
|
|
1,254 |
|
|
|
(2,824 |
) |
|
|
1,254 |
|
|
Net
increase (decrease) in net assets resulting from operations |
|
|
1,308 |
|
|
|
1,251 |
|
|
|
(2,973 |
) |
|
|
1,251 |
|
|
Increase
in net assets from capital share transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued |
|
|
- |
|
|
|
1,293 |
|
|
|
441 |
|
|
|
1,293 |
|
|
Net
increase in net assets resulting from capital share
transactions |
|
|
- |
|
|
|
1,293 |
|
|
|
441 |
|
|
|
1,293 |
|
|
Total
increase (decrease) in net assets from operations and capital share
transactions |
|
|
1,308 |
|
|
|
2,544 |
|
|
|
(2,532 |
) |
|
|
2,544 |
|
|
Net
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of period |
|
|
8,795 |
|
|
|
- |
|
|
|
12,635 |
|
|
|
- |
|
|
End of
period |
|
$ |
10,103 |
|
|
$ |
2,544 |
|
|
$ |
10,103 |
|
|
$ |
2,544 |
|
|
Change
in Shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding at beginning of period |
|
|
212,700 |
|
|
|
- |
|
|
|
204,100 |
|
|
|
- |
|
|
Shares
issued |
|
|
- |
|
|
|
94,100 |
|
|
|
8,600 |
|
|
|
94,100 |
|
|
Net
increase in Shares |
|
|
- |
|
|
|
94,100 |
|
|
|
8,600 |
|
|
|
94,100 |
|
|
Shares
outstanding at end of period |
|
|
212,700 |
|
|
|
94,100 |
|
|
|
212,700 |
|
|
|
94,100 |
|
See
accompanying notes to the unaudited financial statements.
GRAYSCALE
SUI TRUST (SUI)
NOTES
TO UNAUDITED FINANCIAL STATEMENTS
1.
Organization
Grayscale
Sui Trust (SUI) (the “Trust”) is a Delaware Statutory Trust that was formed on
April 30, 2024 and commenced operations on August 1, 2024. In general, the Trust
holds SUI (“SUI”) and, from time to time, issues common units of fractional
undivided beneficial interest (“Shares”) (in minimum baskets of 100 Shares,
referred to as “Baskets”) in exchange for SUI. The redemption of Shares is not
currently contemplated and the Trust does not currently operate a redemption
program. Subject to receipt of regulatory approval and approval by the Sponsor
in its sole discretion, the Trust may in the future operate a redemption
program. The Trust currently has no intention of seeking regulatory approval to
operate an ongoing redemption program. The Trust’s investment objective is for
the value of the Shares (based on SUI per Share) to reflect the value of the SUI
held by the Trust, less the Trust’s expenses and other liabilities.
Grayscale
Investments, LLC (“GSI”) was the sponsor of the Trust before January 1, 2025,
Grayscale Operating, LLC (“GSO”) was the co-sponsor of the Trust from January 1,
2025 to May 3, 2025, and Grayscale Investments Sponsors, LLC (“GSIS”, or the
“Sponsor”) was the co-sponsor of the Trust from January 1, 2025 to May 3, 2025
and is the sole remaining sponsor thereafter. GSI was, and each of GSO and GSIS
are a consolidated subsidiary of Digital Currency Group, Inc. (“DCG”). The
Sponsor is responsible for the day-to-day administration of the Trust pursuant
to the provisions of the Trust Agreement. The Sponsor is responsible for
preparing and providing annual and quarterly reports on behalf of the Trust to
investors and is also responsible for selecting and monitoring the Trust’s
service providers. As partial consideration for the Sponsor’s services, the
Trust pays the Sponsor a Sponsor’s Fee as discussed in Note 6. The Sponsor also
acts as the sponsor and manager of other single-asset and diversified investment
products, each of which is an affiliate of the Trust. Information related to the
affiliated investment products can be found on the Sponsor’s website at
www.grayscale.com/resources/regulatory-filings. Any information contained on or
linked from such website is not part of nor incorporated by reference into these
unaudited financial statements. Several of the affiliated investment products
are SEC reporting companies with their shares registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition, the following affiliated investment products are SEC reporting
companies with their shares registered pursuant to Section 12(b) of the Exchange
Act: Grayscale Bitcoin Trust ETF, Grayscale Ethereum Trust ETF, Grayscale
Ethereum Mini Trust ETF, Grayscale Bitcoin Mini Trust ETF, Grayscale CoinDesk
Crypto 5 ETF and, as of October 29, 2025, Grayscale Solana Trust ETF.
Authorized
Participants of the Trust are the only entities who may place orders to create
or, if permitted, redeem Baskets. Grayscale Securities, LLC (“Grayscale
Securities” or, in such capacity, an “Authorized Participant”), a registered
broker-dealer and affiliate of the Sponsor, is the only Authorized Participant,
and is party to a participant agreement with the Sponsor and the Trust.
Additional Authorized Participants may be added at any time, subject to the
discretion of the Sponsor. Liquidity Providers who are unaffiliated with the
Trust may be engaged from time to time and at any time.
The
custodian of the Trust is Coinbase Custody Trust Company, LLC (the “Custodian”),
a third-party service provider. The Custodian is responsible for safeguarding
the SUI, Incidental Rights, and IR Virtual Currency held by the Trust, and
holding the private key(s) that provide access to the Trust’s digital wallets
and vaults.
The
transfer agent for the Trust (the “Transfer Agent”) is Continental Stock
Transfer & Trust Company. The responsibilities of the Transfer Agent are to
maintain creations, redemptions, transfers, and distributions of the Trust’s
Shares which are primarily held in book-entry form.
The
Trust may also receive Incidental Rights and/or IR Virtual Currency as a result
of the Trust’s investment in SUI, in accordance with the terms of the Trust
Agreement. Incidental Rights are rights to claim, or otherwise establish
dominion and control over, any virtual currency or other asset or right, which
rights are incident to the Trust’s ownership of SUI and arise without any action
of the Trust, or of the Sponsor or Trustee on behalf of the Trust; IR Virtual
Currency is any virtual currency tokens, or other asset or right, received by
the Trust through the exercise (subject to the applicable provisions of the
Trust Agreement) of any Incidental Right.
2.
Summary of Significant Accounting Policies
In
the opinion of management of the Sponsor of the Trust, all adjustments (which
include normal recurring adjustments) necessary to present fairly the financial
position as of September 30, 2025 and December 31, 2024, and results of
operations for the three and nine months ended September 30, 2025 and for the
period from August 1, 2024 (the commencement of the Trust’s operations) to
September 30, 2024, have been made. The results of operations for the periods
presented are not necessarily indicative of the results of operations expected
for the full year. These unaudited financial statements should be read in
conjunction with the audited financial statements for the fiscal period ended
December 31, 2024 included in our Annual Report.
The
following is a summary of significant accounting policies followed by the
Trust:
The
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. GAAP”). The Trust qualifies as
an investment company for accounting purposes pursuant to the accounting and
reporting guidance under Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 946, Financial
Services—Investment Companies. The Trust uses fair value as its method of
accounting for SUI in accordance with its classification as an investment
company for accounting purposes. The Trust is not a registered investment
company under the Investment Company Act of
1940.
U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates and these differences could be
material.
The
Trust conducts its transactions in SUI, including receiving SUI for the creation
of Shares and delivering SUI for the redemption of Shares and for the payment of
the Sponsor’s Fee. At this time, the Trust is not accepting redemption requests
from shareholders. Since its inception, the Trust has not held cash or cash
equivalents. The Sponsor will determine the Trust’s net asset value (“NAV”) on
each business day as of 4:00 p.m., New York time, or as soon thereafter as
practicable.
Principal
Market and Fair Value Determination
To
determine which market is the Trust’s principal market (or in the absence of a
principal market, the most advantageous market) for purposes of calculating the
Trust’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”),
the Trust follows ASC Topic 820-10, Fair Value Measurement, which outlines the
application of fair value accounting. ASC 820-10 determines fair value to be the
price that would be received for SUI in a current sale, which assumes an orderly
transaction between market participants on the measurement date. ASC 820-10
requires the Trust to assume that SUI is sold in its principal market to market
participants or, in the absence of a principal market, the most advantageous
market. Market participants are defined as buyers and sellers in the principal
or most advantageous market that are independent, knowledgeable, and willing and
able to transact.
The
Trust only receives SUI in connection with a creation order from the Authorized
Participant (or a Liquidity Provider) and does not itself transact on any
Digital Asset Markets. Therefore, the Trust looks to market-based volume and
level of activity for Digital Asset Markets. The Authorized Participant(s), or a
Liquidity Provider, may transact in a Brokered Market, a Dealer Market,
Principal-to-Principal Markets and Exchange Markets (referred to as “Trading
Platform Markets” in this Quarterly Report), each as defined in the FASB ASC
Master Glossary (collectively, “Digital Asset Markets”).
In
determining which of the eligible Digital Asset Markets is the Trust’s principal
market, the Trust reviews these criteria in the following order:
First,
the Trust reviews a list of Digital Asset Markets that maintain practices and
policies designed to comply with anti-money laundering (“AML”) and
know-your-customer (“KYC”) regulations, and non-Digital Asset Trading Platform
Markets that the Trust reasonably believes are operating in compliance with
applicable law, including federal and state licensing requirements, based upon
information and assurances provided to it by each market.
Second,
the Trust sorts these Digital Asset Markets from high to low by market-based
volume and level of activity of SUI traded on each Digital Asset Market in the
trailing twelve months.
Third,
the Trust then reviews pricing fluctuations and the degree of variances in price
on Digital Asset Markets to identify any material notable variances that may
impact the volume or price information of a particular Digital Asset
Market.
Fourth,
the Trust then selects a Digital Asset Market as its principal market based on
the highest market-based volume, level of activity and price stability in
comparison to the other Digital Asset Markets on the list. Based on information
reasonably available to the Trust, Trading Platform Markets have the greatest
volume and level of activity for the asset. The Trust therefore looks to
accessible Trading Platform Markets as opposed to the Brokered Market, Dealer
Market and Principal-to-Principal Markets to determine its principal market. As
a result of the aforementioned analysis, a Trading Platform Market has been
selected as the Trust’s principal market.
The
Trust determines its principal market (or in the absence of a principal market
the most advantageous market) annually and conducts a quarterly analysis to
determine (i) if there have been recent changes to each Digital Asset Market’s
trading volume and level of activity in the trailing twelve months, (ii) if any
Digital Asset Markets have developed that the Trust has access to, or (iii) if
recent changes to each Digital Asset Market’s price stability have occurred that
would materially impact the selection of the principal market and necessitate a
change in the Trust’s determination of its principal market.
The
cost basis of the SUI received by the Trust in connection with a creation order
is recorded by the Trust at the fair value of SUI at 4:00 p.m., New York time,
on the creation date for financial reporting purposes. The cost basis recorded
by the Trust may differ from proceeds collected by the Authorized Participant
from the sale of the corresponding Shares to investors.
Investment
Transactions and Revenue Recognition
The
Trust considers investment transactions to be the receipt of SUI for Share
creations and the delivery of SUI for Share redemptions or for payment of
expenses in SUI. At this time, the Trust is not accepting redemption requests
from shareholders. The Trust records its investment transactions on a trade date
basis and changes in fair value are reflected as net change in unrealized
appreciation or depreciation on investments. Realized gains and losses are
calculated using the specific identification method. Realized gains and losses
are recognized in connection with transactions including settling obligations
for the Sponsor’s Fee in SUI.
Fair
Value Measurement
Fair
value is defined as the price that would be received to sell an asset or paid to
transfer a liability (i.e., the ‘exit price’) in an orderly transaction between
market participants at the measurement date.
U.S.
GAAP utilizes a fair value hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are those that market participants would use in
pricing the asset or liability based on market data obtained from sources
independent of the Trust. Unobservable inputs reflect the Trust’s assumptions
about the inputs market participants would use in pricing the asset or liability
developed based on the best information available in the
circumstances.
The
fair value hierarchy is categorized into three levels based on the inputs as
follows:
•
Level
1 – Valuations based on unadjusted quoted prices in active markets for identical
assets or liabilities that the Trust has the ability to access. Since valuations
are based on quoted prices that are readily and regularly available in an active
market, these valuations do not entail a significant degree of judgment.
•
Level
2 – Valuations based on quoted prices in markets that are not active or for
which significant inputs are observable, either directly or
indirectly.
•
Level
3 – Valuations based on inputs that are unobservable and significant to the
overall fair value measurement.
The
availability of valuation techniques and observable inputs can vary by
investment. To the extent that valuations are based on sources that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. Fair value estimates do not necessarily represent the
amounts that may be ultimately realized by the Trust.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurement Using |
|
|
(Amounts
in thousands) |
|
Amount
at
Fair Value |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
September
30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in SUI |
|
$ |
10,103 |
|
|
$ |
10,103 |
|
|
$ |
- |
|
|
$ |
- |
|
|
December
31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in SUI |
|
$ |
12,635 |
|
|
$ |
12,635 |
|
|
$ |
- |
|
|
$ |
- |
|
Segment
Reporting
The
Chief Executive Officer and Chief Financial Officer of the Sponsor act as the
Trust’s chief operating decision maker (“CODM”). The Trust represents a single
operating segment, as the CODM monitors the operating results of the Trust as a
whole and the Trust’s passive investment objective is pre-determined in
accordance with the terms of the Trust Agreement. The financial information in
the form of the Trust’s total returns, expense ratios and changes in net assets
(i.e., changes in net assets resulting from operations and capital share
transactions), which are used by the CODM to assess the segment’s performance,
are consistent with that presented within the Trust’s financial statements.
Segment assets are reflected on the accompanying Statements of Assets and
Liabilities as Total assets and the only significant segment expense, the
Sponsor’s fee, related party, is included in the accompanying Statements of
Operations.
3.
Fair Value of SUI
SUI
is held by the Custodian on behalf of the Trust and is carried at fair value. As
of September 30, 2025 and December 31, 2024, the Trust held 3,099,049.66720146
and 3,029,877.30003966 SUI, respectively.
The
Trust determined the fair value per SUI to be $3.26 and $4.17 on September 30,
2025 and December 31, 2024, respectively, using the price provided at 4:00 p.m.,
New York time, by the Digital Asset Trading Platform Market considered to be the
Trust’s principal market (Coinbase).
The
following represents the changes in quantity of SUI and the respective fair
value:
|
|
|
|
|
|
|
|
|
|
(Amounts
in thousands, except SUI amounts) |
|
Quantity |
|
|
Fair
Value |
|
|
Balance
at August 1, 2024 (the Commencement of the Trust’s
Operations) |
|
|
- |
|
|
$ |
- |
|
|
SUI
contributed |
|
|
3,045,980.27138817 |
|
|
|
7,703 |
|
|
SUI
distributed for Sponsor’s Fee, related party |
|
|
(16,102.97134851 |
) |
|
|
(45 |
) |
|
Net
change in unrealized appreciation on investment in SUI |
|
|
- |
|
|
|
4,955 |
|
|
Net
realized gain on investment in SUI |
|
|
- |
|
|
|
22 |
|
|
Balance
at December 31, 2024 |
|
|
3,029,877.30003966 |
|
|
$ |
12,635 |
|
|
SUI
contributed |
|
|
127,089.78276778 |
|
|
|
441 |
|
|
SUI
distributed for Sponsor’s Fee, related party |
|
|
(57,917.41560598 |
) |
|
|
(194 |
) |
|
Net
change in unrealized appreciation on investment in SUI |
|
|
- |
|
|
|
(2,824 |
) |
|
Net
realized gain on investment in SUI |
|
|
- |
|
|
|
45 |
|
|
Balance
at September 30, 2025 |
|
|
3,099,049.66720146 |
|
|
$ |
10,103 |
|
4.
Creations and Redemptions of Shares
At
September 30, 2025 and December 31, 2024, there were an unlimited number of
Shares authorized by the Trust. The Trust creates (and, should the Trust
commence a redemption program, redeems) Shares from time to time, but only in
one or more Baskets. The creation and redemption of Baskets on behalf of
investors are made by the Authorized Participant in exchange for the delivery of
SUI to the Trust or the distribution of SUI by the Trust. The amount of SUI
required for each Creation Basket or redemption Basket is determined by dividing
(x) the amount of SUI owned by the Trust at 4:00 p.m., New York time, on such
trade date of a creation or redemption order, after deducting the amount of SUI
representing the U.S. dollar value of accrued but unpaid fees and expenses of
the Trust, by (y) the number of Shares outstanding at such time and multiplying
the quotient obtained by 100. Each Share represented approximately 14.5701 and
14.8451 SUI at September 30, 2025 and December 31, 2024, respectively. The
decrease in the amount of SUI represented by each Share is primarily a result of
the periodic withdrawal of SUI to pay the Sponsor’s Fee.
The
cost basis of investments in SUI recorded by the Trust is the fair value of SUI,
as determined by the Trust, at 4:00 p.m., New York time, on the date of transfer
to the Trust by the Authorized Participant, or Liquidity Provider, based on the
Creation Baskets. The cost basis recorded by the Trust may differ from proceeds
collected by the Authorized Participant from the sale of each Share to
investors. The Authorized Participant or Liquidity Provider may realize
significant profits buying, selling, creating, and, if permitted, redeeming
Shares as a result of changes in the value of Shares or SUI.
At
this time, the Trust is not operating a redemption program and is not accepting
redemption requests. Subject to receipt of regulatory approval and approval by
the Sponsor in its sole discretion, the Trust may in the future operate a
redemption program.
5.
Income Taxes
The
Sponsor takes the position that the Trust is properly treated as a grantor trust
for U.S. federal income tax purposes. Assuming that the Trust is a grantor
trust, the Trust will not be subject to U.S. federal income tax. Rather, if the
Trust is a grantor trust, each beneficial owner of Shares will be treated as
directly owning its pro rata Share of the Trust’s assets and a pro rata portion
of the Trust’s income, gains, losses and deductions will “flow through” to each
beneficial owner of Shares.
If
the Trust were not properly classified as a grantor trust, the Trust might be
classified as a partnership for U.S. federal income tax purposes. However, due
to the uncertain treatment of digital assets, including forks, airdrops and
similar occurrences for U.S. federal income tax purposes, there can be no
assurance in this regard. If the Trust were classified as a partnership for U.S.
federal income tax purposes, the tax consequences of owning Shares generally
would not be materially different from the tax consequences described herein,
although there might be certain differences, including with respect to timing.
In addition, tax information reports provided to beneficial owners of Shares
would be made in a different form. If the Trust were not classified as either a
grantor trust or a partnership for U.S. federal income tax purposes, it would be
classified as a corporation for such purposes. In that event, the Trust would be
subject to entity-level U.S. federal income tax (currently at the rate of 21%)
on its net taxable income and certain distributions made by the Trust to
shareholders would be treated as taxable dividends to the extent of the Trust’s
current and accumulated earnings and profits.
In
accordance with U.S. GAAP, the Trust has defined the threshold for recognizing
the benefits of tax positions in the financial statements as
“more-likely-than-not” to be sustained by the applicable taxing authority and
requires measurement of a tax position meeting the “more-likely-than-not”
threshold, based on the largest benefit that is more than 50% likely to be
realized. Tax positions deemed to meet the “more-likely-than-not” threshold are
recorded as a tax benefit in the current period. As of, and during the periods
ended September 30, 2025 and December 31, 2024, the Trust did not have a
liability for any unrecognized tax amounts. However, the Sponsor’s conclusions
concerning its determination of “more-likely-than-not” tax positions may be
subject to review and adjustment at a later date based on factors including, but
not limited to, further implementation guidance, and ongoing analyses of and
changes to tax laws, regulations and interpretations thereof.
The
Sponsor of the Trust has evaluated whether or not there are uncertain tax
positions that require financial statement recognition and has determined that
no reserves for uncertain tax positions related to federal, state and local
income taxes existed as of September 30, 2025 or December 31, 2024.
6.
Related Parties
The
Trust considered the following entities, their directors, and certain employees
to be related parties of the Trust as of September 30, 2025: DCG, GSO, GSIS, and
Grayscale Securities. As of September 30, 2025 and December 31, 2024, 43,037 and
40,921 Shares of the Trust were held by related parties of the Trust,
respectively.
In
accordance with the Trust Agreement governing the Trust, the Trust pays a fee to
the Sponsor, calculated as 2.5% of the aggregate value of the Trust’s assets,
less its liabilities (which include any accrued but unpaid expenses up to, but
excluding, the date of calculation), as calculated and published by the Sponsor
or its delegates in the manner set forth in the Trust Agreement (the “Sponsor’s
Fee”). The Sponsor’s Fee accrues daily in U.S. dollars and is payable in SUI,
monthly in arrears. The amount of SUI payable in respect of each daily U.S.
dollar accrual will be determined by reference to the same U.S. dollar value of
SUI used to determine such accrual. For purposes of these financial statements,
the U.S. dollar value of SUI is determined by reference to the Digital Asset
Trading Platform Market that the Trust considers its principal market as of 4:00
p.m., New York time, on each valuation date. The Trust held no Incidental Rights
or IR Virtual Currency as of September 30, 2025 and December 31, 2024. No
Incidental Rights or IR Virtual Currencies have been distributed in payment of
the Sponsor’s Fee during the three and nine months ended September 30, 2025 and
for the period from August 1, 2024 (the commencement of the Trust’s operations)
to September 30, 2024.
As
partial consideration for receipt of the Sponsor’s Fee, the Sponsor is obligated
under the Trust Agreement to assume and pay all fees and other expenses incurred
by the Trust in the ordinary course of its affairs, excluding taxes, but
including marketing fees; administrator fees, if any; custodian fees; transfer
agent fees; trustee fees; the fees and expenses related to the listing,
quotation or trading of the Shares on any secondary market (including customary
legal, marketing and audit fees and expenses) in an amount up to $600,000 in any
given fiscal year; ordinary course legal fees and expenses; audit fees;
regulatory fees, including, if applicable, any fees relating to the registration
of the Shares under the Securities Act or the Exchange Act; printing and mailing
costs; the costs of maintaining the Trust’s website and applicable license fees
(together, the “Sponsor-paid Expenses”), provided that any expense that
qualifies as an Additional Trust Expense will be deemed to be an Additional
Trust Expense and not a Sponsor-paid Expense.
The
Trust may incur certain extraordinary, non-recurring expenses that are not
Sponsor-paid Expenses, including, but not limited to, taxes and governmental
charges, expenses and costs of any extraordinary services performed by the
Sponsor (or any other service provider) on behalf of the Trust to protect the
Trust or the interests of shareholders (including in connection with any
Incidental Rights and any IR Virtual Currency), any indemnification of the
Custodian or other agents, service providers or counterparties of the Trust, the
fees and expenses related to the listing, quotation or trading of the Shares on
any secondary market (including legal, marketing and audit fees and expenses) to
the extent exceeding $600,000 in any given fiscal year and extraordinary legal
fees and expenses, including any legal fees and expenses incurred in connection
with litigation, regulatory enforcement or investigation matters (collectively,
“Additional Trust Expenses”). In such circumstances, the Sponsor or its delegate
(i) will instruct the Custodian to withdraw from the Digital Asset Account SUI,
Incidental Rights and/or IR Virtual Currency in such quantity as may be
necessary to permit payment of such Additional Trust Expenses and (ii) may
either (x) cause the Trust (or its delegate) to convert such SUI, Incidental
Rights and/or IR Virtual Currency into U.S. dollars or other fiat currencies at
the Actual Exchange Rate or (y) when the Sponsor incurs such expenses on behalf
of the Trust, cause the Trust (or its delegate) to deliver such SUI, Incidental
Rights and/or IR Virtual Currency in kind to the Sponsor, in each case in such
quantity as may be necessary to permit payment of such Additional Trust
Expenses.
For
the three months ended September 30, 2025 and for the period from August 1, 2024
(the commencement of the Trust’s operations) to September 30, 2024, the Trust
incurred Sponsor’s Fees of $69,284 and $4,301, respectively. For the nine months
ended September 30, 2025 the Trust incurred Sponsor’s Fees of $193,696. As of
September 30, 2025 and December 31, 2024, there were no accrued and unpaid
Sponsor’s Fees. In addition, the Sponsor may pay Additional Trust Expenses on
behalf of the Trust, which are reimbursable by the Trust to the Sponsor. For the
three and nine months ended September 30, 2025 and for the period from August 1,
2024 (the commencement of the Trust’s operations) to September 30, 2024, the
Sponsor did not pay any Additional Trust Expenses on behalf of the
Trust.
7.
Risks and Uncertainties
The
Trust is subject to various risks including market risk, liquidity risk, and
other risks related to its concentration in a single asset, SUI. Investing in
SUI is currently highly speculative and volatile.
The
Principal Market NAV of the Trust, calculated by reference to the principal
market price in accordance with U.S. GAAP, relates primarily to the value of the
SUI held by the Trust, and fluctuations in the price of SUI could materially and
adversely affect an investment in the Shares of the Trust. The price of SUI has
a limited history. During such history, SUI prices have been volatile and
subject to influence by many factors, including the levels of liquidity. If
Digital Asset Markets continue to experience significant price fluctuations, the
Trust may experience losses. Several factors may affect the price of SUI,
including, but not limited to, global SUI
supply
and demand, theft of SUI from global trading platforms or vaults, competition
from other forms of digital currency or payment services, global or regional
political, economic or financial conditions, and other unforeseen events and
situations.
The
SUI held by the Trust are commingled, and the Trust’s shareholders have no
specific rights to any specific SUI. In the event of the insolvency of the
Trust, its assets may be inadequate to satisfy a claim by its
shareholders.
There
is currently no clearing house for SUI, nor is there a central or major
depository for the custody of SUI. There is a risk that some or all of the
Trust’s SUI could be lost or stolen. There can be no assurance that the
Custodian will maintain adequate insurance or that such coverage will cover
losses with respect to the Trust’s SUI. Further, transactions in SUI are
irrevocable. Stolen or incorrectly transferred SUI may be irretrievable. As a
result, any incorrectly executed SUI transactions could adversely affect an
investment in the Shares.
The
Securities and Exchange Commission (the “SEC”), at least under the prior
administration, has stated that certain digital assets may be considered
“securities” under the federal securities laws. The test for determining whether
a particular digital asset is a “security” is complex and difficult to apply,
and the outcome is difficult to predict. A number of SEC and SEC staff actions
with respect to a variety of digital assets demonstrate this difficulty. For
example, public though non-binding, statements by senior officials at the SEC
have indicated that the SEC did not consider Bitcoin or Ether to be securities,
and does not currently consider Bitcoin to be a security. In addition, the SEC
appears to have implicitly taken the view that Ether is not a security (i) by
not objecting to Ether futures trading on Commodity Futures Trading
Commission-regulated markets under rules designed for futures on non-security
commodity underliers and (ii) by approving the listing and trading of
exchange-traded products (“ETPs”) that invest in Ether (i.e., approving the
redemption of shares of such ETPs) under the rules for commodity-based trust
shares, without requiring these ETPs to be registered as investment companies.
Likewise, in various courts filings and arguments the SEC has distinguished
Ether from assets that it claimed were securities, and in judicial opinions,
courts have accepted or even assumed that Ether is not a security. Moreover, in
a recent settlement with another market participant relating to allegations that
it acted as an unregistered broker-dealer for facilitating trading in certain
digital assets, the SEC highlighted that the firm would cease trading in all
digital assets other than Bitcoin, Bitcoin Cash and Ether—activity that, if the
SEC believed Ether was presently a security—would continue to constitute
unregistered brokerage activity. The SEC staff has also provided informal
assurances via no-action letter to a handful of promoters that their digital
assets are not securities. Moreover, the SEC’s Division of Corporation Finance
has published statements that it does not consider, under certain circumstances,
“meme coins” or some stablecoins to be securities. However, such statements may
be withdrawn at any time without notice and comment by the Division of
Corporation Finance at the SEC or the SEC itself. In addition, the SEC has
brought enforcement actions against the issuers and promoters of several other
digital assets on the basis that the digital assets in question are securities,
and has not formally or explicitly confirmed that it does not deem Ether to be a
security. These developments demonstrate the difficulty in applying the federal
securities laws to digital assets generally. In January 2025, the SEC launched a
crypto task force dedicated to developing a comprehensive and clear regulatory
framework for digital assets led by Commissioner Hester Peirce. Subsequently,
Commissioner Peirce announced a list of specific priorities to further that
initiative, which included pursuing final rules related to a digital asset’s
security status, a revised path to registered offerings and listings for digital
assets-based investment vehicles, and clarity regarding digital asset custody,
lending, and staking. However, the efforts of the crypto task force have only
just begun, and how or whether the SEC regulates digital asset activity in the
future remains to be seen.
If
SUI is determined to be a “security” under federal or state securities laws by
the SEC or any other agency, or in a proceeding in a court of law or otherwise,
it may have material adverse consequences for SUI. For example, it may become
more difficult for SUI to be traded, cleared and custodied as compared to other
digital assets that are not considered to be securities, which could, in turn,
negatively affect the liquidity and general acceptance of SUI and cause users to
migrate to other digital assets. As such, any determination that SUI is a
security under federal or state securities laws may adversely affect the value
of SUI and, as a result, an investment in the Shares.
In
addition, if SUI is in fact a security, the Trust could be considered an
unregistered “investment company” under the Investment Company Act of 1940,
which could necessitate the Trust’s liquidation. In this case, the Trust and the
Sponsor may be deemed to have participated in an illegal offering of securities
and there is no guarantee that the Sponsor will be able to register the Trust
under the Investment Company Act of 1940 at such time or take such other actions
as may be necessary to ensure the Trust’s activities comply with applicable law,
which could force the Sponsor to liquidate the Trust.
To
the extent a private key, held by the Custodian, required to access a SUI
address is lost, destroyed or otherwise compromised and no backup of the private
keys are accessible, the Trust may be unable to access the SUI controlled by the
private key and the private key will not be capable of being restored by the SUI
Network. The processes by which SUI transactions are settled are dependent on
the SUI peer-to-peer network, and as such, the Trust is subject to operational
risk. A risk also exists with respect to previously unknown technical
vulnerabilities, which may adversely affect the value of SUI.
The
Trust relies on third-party service providers to perform certain functions
essential to its operations. Any disruptions to the Trust’s service providers’
business operations resulting from business failures, financial instability,
security failures, government mandated regulation or operational problems could
have an adverse impact on the Trust’s ability to access critical services and be
disruptive to the operations of the Trust.
The
Sponsor and the Trust may be subject to various litigation, regulatory
investigations, and other legal proceedings that arise in the ordinary course of
its business.
8.
Financial Highlights Per Share Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Nine
Months Ended September 30, 2025 |
|
|
August
1, 2024 (the commencement of the Trust’s operations) to September 30,
2024 |
|
|
Per
Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Market NAV, beginning of period |
|
$ |
41.35 |
|
|
$ |
10.37 |
|
|
$ |
61.90 |
|
|
$ |
10.37 |
|
|
Net
increase (decrease) in net assets from investment
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment loss |
|
|
(0.33 |
) |
|
|
(0.07 |
) |
|
|
(0.92 |
) |
|
|
(0.07 |
) |
|
Net
realized and unrealized gain (loss) |
|
|
6.48 |
|
|
|
16.74 |
|
|
|
(13.48 |
) |
|
|
16.74 |
|
|
Net
increase (decrease) in net assets resulting from operations |
|
|
6.15 |
|
|
|
16.67 |
|
|
|
(14.40 |
) |
|
|
16.67 |
|
|
Principal
Market NAV, end of period |
|
$ |
47.50 |
|
|
$ |
27.04 |
|
|
$ |
47.50 |
|
|
$ |
27.04 |
|
|
Total
return |
|
|
14.87 |
% |
|
|
160.75 |
% |
|
|
-23.26 |
% |
|
|
160.75 |
% |
|
Ratios
to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment loss |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
|
Expenses |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
|
|
-2.50 |
% |
Ratios
of net investment loss and expenses to average net assets have been
annualized.
An
individual shareholder’s return, ratios, and per Share performance may vary from
those presented above based on the timing of Share transactions. The amount
shown for a Share outstanding throughout the period may not correlate with the
Statement of Operations for the period due to the number of Shares issued in
Creations occurring at an operational value derived from an operating metric as
defined in the Trust Agreement.
Total
return is calculated assuming an initial investment made at the Principal Market
NAV at the beginning of the period and assuming redemption on the last day of
the period.
9.
Indemnifications
In
the normal course of business, the Trust enters into certain contracts that
provide a variety of indemnities, including contracts with the Sponsor and
affiliates of the Sponsor, DCG and its officers, directors, employees,
subsidiaries and affiliates, and the Custodian as well as others relating to
services provided to the Trust. The Trust’s maximum exposure under these and its
other indemnities is unknown. However, no liabilities have arisen under these
indemnities in the past and, while there can be no assurances in this regard,
there is no expectation that any will occur in the future. Therefore, the
Sponsor does not consider it necessary to record a liability in this
regard.
10.
Subsequent Events
On
October 22, 2025, GSO Intermediate Holdings Corporation (“GSOIH”), a Delaware
corporation which was the sole managing member of GSO, a Delaware limited
liability company which is the sole member of the Sponsor, consummated an
internal corporate reorganization (the “Management Reorganization”). Pursuant to
the Management Reorganization, GSOIH transferred a portion of its common
membership units of GSO for Class A shares of Grayscale Investments, Inc.
(“Grayscale Investments”), a Delaware corporation incorporated in connection
with the Management Reorganization, and ceded its managing member rights in GSO
to Grayscale Investments. As a result of the Management Reorganization,
Grayscale Investments is now the sole managing member of GSO, the sole member of
the Sponsor.
Also
in connection with the Management Reorganization, on October 22, 2025, DCG
Grayscale Holdco, LLC (“DCG Holdco”), the sole stockholder of Grayscale
Investments, elected a board of directors (the “Board”) at Grayscale
Investments. Prior to the Management Reorganization, GSOIH’s board of directors
was responsible for managing and directing the affairs of the Sponsor. As a
result of the Management Reorganization, the Board of Grayscale Investments is
responsible for managing and directing the affairs of the Sponsor, and consists
of Barry Silbert, Mark Shifke, Simon Koster, Peter Mintzberg and Edward McGee,
the same members as the board of directors of GSOIH prior to the Management
Reorganization. Mr. Mintzberg and Mr. McGee also retain the authority granted to
them
as
officers of the Sponsor under the limited liability company agreement of the
Sponsor. Mr. Silbert is the Chairperson of the Board of Grayscale
Investments.
DCG
Holdco, Grayscale Investments, GSOIH, GSO and the Sponsor are all consolidated
subsidiaries of Digital Currency Group, Inc.
The
Sponsor does not expect the Management Reorganization to have any material
impact on the operations of the Trust.
As
of the close of business on November 13, 2025, the fair value of SUI determined
in accordance with the Trust’s accounting policy was $1.82 per SUI.
Subsequent
events have been evaluated through November 18, 2025, the date the financial
statements were available to be issued.
Report
of Independent
Registered Public Accounting Firm
To
the Shareholders and Sponsor of
Grayscale
Sui Trust (SUI):
Opinion
on the Financial Statements
We
have audited the accompanying statement of assets and liabilities of Grayscale
Sui Trust (SUI) (the Trust), including the schedule of investment, as of
December 31, 2024, the related statements of operations and changes in net
assets for the period from August 1, 2024 (the commencement of the Trust’s
operations") to December 31, 2024, and the related notes (collectively, the
financial statements). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Trust as of December 31,
2024, and the results of its operations and changes in its net assets for the
period then ended, in conformity with U.S. generally accepted accounting
principles.
Basis
for Opinion
These
financial statements are the responsibility of the Trust’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Trust in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audit included performing
procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our
audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audit provides a reasonable basis
for our opinion.
/s/
KPMG LLP
We
have served as the Trust’s auditor since 2024.
New
York, New York
April 7, 2025
GRAYSCALE
SUI TRUST (SUI)
STATEMENT
OF ASSETS
AND LIABILITIES
(Amounts
in thousands, except Share and per Share amounts)
|
|
|
|
|
|
|
|
December
31, 2024(1) |
|
|
Assets: |
|
|
|
|
Investment
in SUI, at fair value (cost $7,679 as of December 31, 2024) |
|
$ |
12,635 |
|
|
Total
assets |
|
$ |
12,635 |
|
|
Liabilities: |
|
|
|
|
Sponsor’s
Fee payable, related party |
|
$ |
- |
|
|
Total
liabilities |
|
|
- |
|
|
Net
assets |
|
$ |
12,635 |
|
|
Shares
issued and outstanding, no par value (unlimited Shares
authorized) |
|
|
204,100 |
|
|
Principal
market net asset value per Share |
|
$ |
61.90 |
|
(1)
No
comparative financial statements have been provided as the Trust’s operations
commenced on August 1, 2024.
See
accompanying notes to the financial statements.
GRAYSCALE
SUI TRUST (SUI)
SCHEDULE
OF INVESTMENT
(Amounts
in thousands, except quantity of SUI and percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2024(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity
of SUI |
|
|
Cost |
|
|
Fair
Value |
|
|
%
of Net
Assets |
|
|
Investment
in SUI |
|
|
3,029,877.30003966 |
|
|
$ |
7,679 |
|
|
$ |
12,635 |
|
|
|
100 |
% |
|
Net
assets |
|
|
|
|
$ |
7,679 |
|
|
$ |
12,635 |
|
|
|
100 |
% |
(1)
No
comparative financial statements have been provided as the Trust’s operations
commenced on August 1, 2024.
See
accompanying notes to the financial statements.
GRAYSCALE
SUI TRUST (SUI)
STATEMENT
OF
OPERATIONS
(Amounts
in thousands)
|
|
|
|
|
|
|
|
August
1, 2024 (the
Commencement of the
Trust’s Operations) to
December
31, 2024(1) |
|
|
Investment
income: |
|
|
|
|
Investment
income |
|
$ |
- |
|
|
Expenses: |
|
|
|
|
Sponsor’s
Fee, related party |
|
|
45 |
|
|
Net
investment loss |
|
|
(45 |
) |
|
Net
realized and unrealized gain on investment from: |
|
|
|
|
Net
realized gain on investment in SUI |
|
|
22 |
|
|
Net
change in unrealized appreciation on investment in SUI |
|
|
4,955 |
|
|
Net
realized and unrealized gain on investment |
|
|
4,977 |
|
|
Net
increase in net assets resulting from operations |
|
$ |
4,932 |
|
(1)
No comparative financial statements have been provided as the Trust’s operations
commenced on August 1, 2024.
See
accompanying notes to the financial statements.
GRAYSCALE
SUI TRUST (SUI)
STATEMENT
OF CHANGES
IN NET ASSETS
(Amounts
in thousands, except change in Shares outstanding)
|
|
|
|
|
|
|
|
August
1, 2024 (the
Commencement of the
Trust’s Operations) to
December
31, 2024(1) |
|
|
Increase
(decrease) in net assets from operations: |
|
|
|
|
Net
investment loss |
|
$ |
(45 |
) |
|
Net
realized gain on investment in SUI |
|
|
22 |
|
|
Net
change in unrealized appreciation on investment in SUI |
|
|
4,955 |
|
|
Net
increase in net assets resulting from operations |
|
|
4,932 |
|
|
Increase
in net assets from capital share transactions: |
|
|
|
|
Shares
issued |
|
|
7,703 |
|
|
Net
increase in net assets resulting from capital share
transactions |
|
|
7,703 |
|
|
Total
increase in net assets from operations and capital share
transactions |
|
|
12,635 |
|
|
Net
assets: |
|
|
|
|
Beginning
of period |
|
|
- |
|
|
End of
period |
|
$ |
12,635 |
|
|
Change
in Shares outstanding: |
|
|
|
|
Shares
outstanding at beginning of period |
|
|
- |
|
|
Shares
issued |
|
|
204,100 |
|
|
Net
increase in Shares |
|
|
204,100 |
|
|
Shares
outstanding at end of period |
|
|
204,100 |
|
(1)
No comparative financial statements have been provided as the Trust’s operations
commenced on August 1, 2024.
See
accompanying notes to the financial statements.
GRAYSCALE
SUI TRUST (SUI)
NOTES
TO THE FINANCIAL STATEMENTS
1.
Organization
Grayscale
Sui Trust (SUI) (the “Trust”) is a Delaware Statutory Trust that was formed on
April 13, 2024 and commenced operations on August 1, 2024. In general, the Trust
holds Sui (“SUI”) and, from time to time, issues common units of fractional
undivided beneficial interest (“Shares”) (in minimum baskets of 100 Shares,
referred to as “Baskets”) in exchange for SUI. The redemption of Shares is not
currently contemplated and the Trust does not currently operate a redemption
program. Subject to receipt of regulatory approval and approval by the Sponsor
in its sole discretion, the Trust may in the future operate a redemption
program. The Trust currently has no intention of seeking regulatory approval to
operate an ongoing redemption program. The Trust’s investment objective is for
the value of the Shares (based on SUI per Share) to reflect the value of SUI
held by the Trust, less the Trust’s expenses and other liabilities.
As
of December 31, 2024, Grayscale Investments, LLC (“Grayscale” or the “Sponsor”)
acted as the Sponsor of the Trust and was a wholly owned subsidiary of Digital
Currency Group, Inc. (“DCG”). The Sponsor is responsible for the day-to-day
administration of the Trust pursuant to the provisions of the Trust Agreement.
Grayscale is responsible for preparing and providing annual and quarterly
reports on behalf of the Trust to investors and is also responsible for
selecting and monitoring the Trust’s service providers. As partial consideration
for the Sponsor’s services, the Trust pays Grayscale a Sponsor’s Fee as
discussed in Note 6. The Sponsor also acts as the sponsor and manager of other
investment products including Grayscale Aave Trust (AAVE), Grayscale Avalanche
Trust (AVAX), Grayscale Basic Attention Token Trust (BAT) (OTCQX: GBAT),
Grayscale Bitcoin Trust ETF (NYSE Arca: GBTC), Grayscale Bitcoin Cash Trust
(BCH) (OTCQX: BCHG), Grayscale Bitcoin Mini Trust ETF (NYSE Arca: BTC),
Grayscale Bittensor Trust (TAO), Grayscale Chainlink Trust (LINK) (OTCQX: GLNK),
Grayscale Decentraland Trust (MANA) (OTCQX: MANA), Grayscale Dogecoin Trust
(DOGE), Grayscale Ethereum Trust ETF (NYSE Arca: ETHE), Grayscale Ethereum
Classic Trust (ETC) (OTCQX: ETCG), Grayscale Ethereum Mini Trust ETF (NYSE Arca:
ETH), Grayscale Filecoin Trust (FIL) (OTC Markets: FILG), Grayscale Horizen
Trust (ZEN) (OTCQX: HZEN), Grayscale Lido DAO Trust (LDO), Grayscale Litecoin
Trust (LTC) (OTCQX: LTCN), Grayscale Livepeer Trust (LPT) (OTCQX: GLIV),
Grayscale MakerDao Trust (MKR), Grayscale NEAR Trust (NEAR), Grayscale Optimism
Trust (OP), Grayscale Pyth Trust (PYTH), Grayscale Solana Trust (SOL) (OTCQX:
GSOL), Grayscale Stacks Trust (STX), Grayscale Stellar Lumens Trust (XLM)
(OTCQX: GXLM), Grayscale XRP Trust, Grayscale Zcash Trust (ZEC) (OTCQX: ZCSH),
Grayscale Decentralized AI Fund LLC, Grayscale Decentralized Finance (DeFi) Fund
LLC (OTCQB: DEFG), Grayscale Digital Large Cap Fund LLC (OTCQX: GDLC), and
Grayscale Smart Contract Fund LLC, each of which is an affiliate of the Trust.
The following investment products sponsored or managed by the Sponsor are SEC
reporting companies with their shares registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”): Grayscale
Bitcoin Cash Trust (BCH), Grayscale Ethereum Classic Trust (ETC), Grayscale
Horizen Trust (ZEN), Grayscale Litecoin Trust (LTC), Grayscale Stellar Lumens
Trust (XLM), Grayscale Zcash Trust (ZEC), and Grayscale Digital Large Cap Fund
LLC. The following investment products sponsored by the Sponsor are SEC
reporting companies with their shares registered pursuant to Section 12(b) of
the Exchange Act: Grayscale Bitcoin Trust ETF, Grayscale Ethereum Trust ETF,
Grayscale Ethereum Mini Trust ETF, and Grayscale Bitcoin Mini Trust
ETF.
Authorized
Participants of the Trust are the only entities who may place orders to create
or, if permitted, redeem Baskets. Grayscale Securities, LLC (“Grayscale
Securities” or, in such capacity, an “Authorized Participant”), a registered
broker-dealer and affiliate of the Sponsor, is the only Authorized Participant,
and is party to a participant agreement with the Sponsor and the Trust.
Additional Authorized Participants may be added at any time, subject to the
discretion of the Sponsor. Liquidity Providers who are unaffiliated with the
Trust may be engaged from time to time and at any time.
The
custodian of the Trust is Coinbase Custody Trust Company, LLC (the “Custodian”),
a third-party service provider. The Custodian is responsible for safeguarding
the SUI, Incidental Rights, and IR Virtual Currency held by the Trust, and
holding the private key(s) that provide access to the Trust’s digital wallets
and vaults.
The
transfer agent for the Trust (the “Transfer Agent”) is Continental Stock
Transfer & Trust Company. The responsibilities of the Transfer Agent are to
maintain creations, redemptions, transfers, and distributions of the Trust’s
Shares which are primarily held in book-entry form.
The
Trust may also receive Incidental Rights and/or IR Virtual Currency as a result
of the Trust’s investment in SUI, in accordance with the terms of the Trust
Agreement.
Incidental
Rights are rights to claim, or otherwise establish dominion and control over,
any virtual currency or other asset or right, which rights are incident to the
Trust’s ownership of SUI and arise without any action of the Trust, or of the
Sponsor or Trustee on behalf of the Trust; IR Virtual Currency is any virtual
currency tokens, or other asset or right, received by the Trust through the
exercise (subject to the applicable provisions of the Trust Agreement) of any
Incidental Right.
2.
Summary of Significant Accounting Policies
The
following is a summary of significant accounting policies followed by the
Trust:
The
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States (“U.S. GAAP”). The Trust qualifies as
an investment company for accounting purposes pursuant to the accounting and
reporting guidance under Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 946, Financial
Services—Investment Companies. The Trust uses fair value as its method of
accounting for SUI in accordance with its classification as an investment
company for accounting purposes. The Trust is not a registered investment
company under the Investment Company Act of 1940. U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts in the
financial statements and accompanying notes. Actual results could differ from
those estimates and these differences could be material.
The
Trust conducts its transactions in SUI, including receiving SUI for the creation
of Shares and delivering SUI for the redemption of Shares and for the payment of
the Sponsor’s Fee. At this time, the Trust is not accepting redemption requests
from shareholders. Since its inception, the Trust has not held cash or cash
equivalents. The Sponsor will determine the Trust’s net asset value on each
business day as of 4:00 p.m., New York time, or as soon thereafter as
practicable.
Principal
Market and Fair Value Determination
To
determine which market is the Trust’s principal market (or in the absence of a
principal market, the most advantageous market) for purposes of calculating the
Trust’s net asset value in accordance with U.S. GAAP (“Principal Market NAV”),
the Trust follows ASC Topic 820-10, Fair
Value Measurement,
which outlines the application of fair value accounting. ASC 820-10 determines
fair value to be the price that would be received for SUI in a current sale,
which assumes an orderly transaction between market participants on the
measurement date. ASC 820-10 requires the Trust to assume that SUI is sold in
its principal market to market participants or, in the absence of a principal
market, the most advantageous market. Market participants are defined as buyers
and sellers in the principal or most advantageous market that are independent,
knowledgeable, and willing and able to transact.
The
Trust only receives SUI in connection with a creation order from the Authorized
Participant (or Liquidity Provider) and does not itself transact on any Digital
Asset Markets. Therefore, the Trust looks to market-based volume and level of
activity for Digital Asset Markets. The Authorized Participant(s), or a
Liquidity Provider, may transact in a Brokered Market, a Dealer Market,
Principal-to-Principal Markets and Exchange Markets (referred to as “Trading
Platform Markets” in this Annual Report), each as defined in the FASB ASC Master
Glossary (collectively, “Digital Asset Markets”).
In
determining which of the eligible Digital Asset Markets is the Trust’s principal
market, the Trust reviews these criteria in the following order:
First,
the Trust reviews a list of Digital Asset Markets that maintain practices and
policies designed to comply with anti-money laundering (“AML”) and
know-your-customer (“KYC”) regulations, and non-Digital Asset Trading Platform
Markets that the Trust reasonably believes are operating in compliance with
applicable law, including federal and state licensing requirements, based upon
information and assurances provided to it by each market.
Second,
the Trust sorts these Digital Asset Markets from high to low by market-based
volume and level of activity of SUI traded on each Digital Asset Market in the
trailing twelve months.
Third,
the Trust then reviews pricing fluctuations and the degree of variances in price
on Digital Asset Markets to identify any material notable variances that may
impact the volume or price information of a particular Digital Asset
Market.
Fourth,
the Trust then selects a Digital Asset Market as its principal market based on
the highest market-based volume, level of activity and price stability in
comparison to the other Digital Asset Markets on the list. Based on information
reasonably available to the Trust, Trading Platform Markets have the greatest
volume and level of activity for the asset. The Trust therefore looks to
accessible Trading Platform Markets as opposed to the Brokered Market, Dealer
Market and Principal-to-Principal Markets to determine its principal market. As
a result of the aforementioned analysis, a Trading Platform Market has been
selected as the Trust’s principal market.
The
Trust determines its principal market (or in the absence of a principal market
the most advantageous market) annually and conducts a quarterly analysis to
determine (i) if there have been recent changes to each Digital Asset Market’s
trading volume and level of activity in the trailing twelve months, (ii) if any
Digital Asset Markets have developed that the Trust has access to, or (iii) if
recent changes to each Digital Asset Market’s price stability have occurred that
would materially impact the selection of the principal market and necessitate a
change in the Trust’s determination of its principal market.
The
cost basis of the SUI received by the Trust in connection with a creation order
is recorded by the Trust at the fair value of SUI at 4:00 p.m., New York time,
on the creation date for financial reporting purposes. The cost basis recorded
by the Trust may differ from proceeds collected by the Authorized Participant
from the sale of the corresponding Shares to investors.
Investment
Transactions and Revenue Recognition
The
Trust considers investment transactions to be the receipt of SUI for Share
creations and the delivery of SUI for Share redemptions or for payment of
expenses in SUI. At this time, the Trust is not accepting redemption requests
from shareholders. The Trust records its investment transactions on a trade date
basis and changes in fair value are reflected as net change in unrealized
appreciation or depreciation on investments. Realized gains and losses are
calculated using the specific identification method. Realized gains and losses
are recognized in connection with transactions including settling obligations
for the Sponsor’s Fee in SUI.
Fair
Value Measurement
Fair
value is defined as the price that would be received to sell an asset or paid to
transfer a liability (i.e., the ‘exit price’) in an orderly transaction between
market participants at the measurement date.
U.S.
GAAP utilizes a fair value hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are those that market participants would use in
pricing the asset or liability based on market data obtained from sources
independent of the Trust. Unobservable inputs reflect the Trust’s assumptions
about the inputs market participants would use in pricing the asset or liability
developed based on the best information available in the
circumstances.
The
fair value hierarchy is categorized into three levels based on the inputs as
follows:
•
Level
1 – Valuations based on unadjusted quoted prices in active markets for identical
assets or liabilities that the Trust has the ability to access. Since valuations
are based on quoted prices that are readily and regularly available in an active
market, these valuations do not entail a significant degree of judgment.
•
Level
2 – Valuations based on quoted prices in markets that are not active or for
which significant inputs are observable, either directly or
indirectly.
•
Level
3 – Valuations based on inputs that are unobservable and significant to the
overall fair value measurement.
The
availability of valuation techniques and observable inputs can vary by
investment. To the extent that valuations are based on sources that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. Fair value estimates do not necessarily represent the
amounts that may be ultimately realized by the Trust.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurement Using |
|
|
(Amounts
in thousands) |
|
Amount
at
Fair Value |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
December
31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in SUI |
|
$ |
12,635 |
|
|
$ |
12,635 |
|
|
$ |
- |
|
|
$ |
- |
|
Recently
Adopted Accounting Pronouncements
In
December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-08,
Intangibles—Goodwill
and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of
Crypto Assets
(“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain
crypto assets by requiring an entity to measure those crypto assets at fair
value each reporting period with changes in fair value recognized in net income.
The amendments also improve the information provided to investors about an
entity’s crypto asset holdings by requiring disclosure about significant
holdings, contractual sale restrictions, and changes during the reporting
period. ASU 2023-08 is effective for annual and interim reporting periods
beginning after December 15, 2024. Early adoption is permitted for both interim
and annual financial statements that have not yet been issued. The Trust adopted
this new guidance on January 1, 2025, with no material impact on its financial
statements and disclosures as the Trust historically used fair value as its
method of accounting for SUI in accordance with its classification as an
investment company for accounting purposes.
In
this reporting period, the Trust adopted FASB Accounting Standards Update
2023-07, Segment
Reporting (Topic 280)—Improvements to Reportable Segment Disclosures
(“ASU 2023-07”). Adoption of the new standard impacted financial statement
disclosures only and did not affect the Trust’s financial position or the
results of its operations. Operating segments are defined as components of an
enterprise that engage in business activities for which discrete financial
information is available and regularly reviewed by the chief operating decision
maker (“CODM”) in deciding how to allocate resources and to assess performance.
The Chief Executive Officer and Chief Financial Officer of the Sponsor act as
the Trust’s CODM. The Trust represents a single operating segment, as the CODM
monitors the operating results of the Trust as a whole and the Trust’s passive
investment objective is pre-determined in accordance with the terms of the Trust
Agreement. The financial information in the form of the Trust’s total returns,
expense ratios and changes in net assets (i.e., changes in net assets resulting
from operations and capital share transactions), which are used by the CODM to
assess the segment’s performance, are consistent with that presented within the
Trust’s financial statements. Segment assets are
reflected
on the accompanying Statement of Assets and Liabilities as Total assets and the
only significant segment expense, the Sponsor’s fee, related party, is included
in the accompanying Statement of Operations.
3.
Fair Value of SUI
SUI
is held by the Custodian on behalf of the Trust and is carried at fair value. As
of December 31, 2024, the Trust held 3,029,877.30003966 SUI.
The
Trust determined the fair value per SUI to be $4.17 on December 31, 2024, using
the price provided at 4:00 p.m., New York time, by the Digital Asset Trading
Platform Market considered to be the Trust’s principal market
(Coinbase).
The
following represents the changes in quantity of SUI and the respective fair
value:
|
|
|
|
|
|
|
|
|
|
(Amounts
in thousands, except SUI amounts) |
|
Quantity |
|
|
Fair
Value |
|
|
Balance
at August 1, 2024 (the Commencement of the Trust’s
Operations) |
|
|
- |
|
|
$ |
- |
|
|
SUI
contributed |
|
|
3,045,980.27138817 |
|
|
|
7,703 |
|
|
SUI
distributed for Sponsor’s Fee, related party |
|
|
(16,102.97134851 |
) |
|
|
(45 |
) |
|
Net
change in unrealized appreciation on investment in SUI |
|
|
- |
|
|
|
4,955 |
|
|
Net
realized gain on investment in SUI |
|
|
- |
|
|
|
22 |
|
|
Balance
at December 31, 2024 |
|
|
3,029,877.30003966 |
|
|
$ |
12,635 |
|
4.
Creations and Redemptions of Shares
At
December 31, 2024, there were an unlimited number of Shares authorized by the
Trust. The Trust creates (and, should the Trust commence a redemption program,
redeems) Shares from time to time, but only in one or more Baskets. The creation
and redemption of Baskets on behalf of investors are made by the Authorized
Participant in exchange for the delivery of SUI to the Trust or the distribution
of SUI by the Trust. The amount of SUI required for each creation Basket or
redemption Basket is determined by dividing (x) the amount of SUI owned by the
Trust at 4:00 p.m., New York time, on such trade date of a creation or
redemption order, after deducting the amount of SUI representing the U.S. dollar
value of accrued but unpaid fees and expenses of the Trust, by (y) the number of
Shares outstanding at such time and multiplying the quotient obtained by 100.
Each Share represented approximately 14.8451 SUI at December 31,
2024.
The
cost basis of investments in SUI recorded by the Trust is the fair value of SUI,
as determined by the Trust, at 4:00 p.m., New York time, on the date of transfer
to the Trust by the Authorized Participant, or Liquidity Provider, based on the
creation Baskets. The cost basis recorded by the Trust may differ from proceeds
collected by the Authorized Participant from the sale of each Share to
investors. The Authorized Participant, or Liquidity Provider, may realize
significant profits buying, selling, creating, and, if permitted, redeeming
Shares as a result of changes in the value of Shares or SUI.
At
this time, the Trust is not operating a redemption program and is not accepting
redemption requests. Subject to receipt of regulatory approval and approval by
the Sponsor in its sole discretion, the Trust may in the future operate a
redemption program. The Trust currently has no intention of seeking regulatory
approval to operate an ongoing redemption program.
5.
Income Taxes
The
Sponsor takes the position that the Trust is properly treated as a grantor trust
for U.S. federal income tax purposes. Assuming that the Trust is a grantor
trust, the Trust will not be subject to U.S. federal income tax. Rather, if the
Trust is a grantor trust, each beneficial owner of Shares will be treated as
directly owning its pro rata Share of the Trust’s assets and a pro rata portion
of the Trust’s income, gains, losses and deductions will “flow through” to each
beneficial owner of Shares.
If
the Trust were not properly classified as a grantor trust, the Trust might be
classified as a partnership for U.S. federal income tax purposes. However, due
to the uncertain treatment of digital assets, including forks, airdrops and
similar occurrences for U.S. federal income tax purposes, there can be no
assurance in this regard. If the Trust were classified as a partnership for U.S.
federal income tax purposes, the tax consequences of owning Shares generally
would not be materially different from the tax consequences described herein,
although there might be certain differences, including with respect to timing.
In addition, tax information reports provided to beneficial owners of Shares
would be made in a different form. If the Trust were not classified as either a
grantor trust or a partnership for U.S. federal income tax purposes, it would be
classified as a corporation for such purposes. In that event, the Trust would be
subject to entity-level U.S. federal income tax (currently at the rate of 21%)
on its net taxable income and certain distributions made by the Trust to
shareholders would be treated as taxable dividends to the extent of the Trust’s
current and accumulated earnings and profits.
In
accordance with U.S. GAAP, the Trust has defined the threshold for recognizing
the benefits of tax positions in the financial statements as
“more-likely-than-not” to be sustained by the applicable taxing authority and
requires measurement of a tax position meeting the “more-likely-than-not”
threshold, based on the largest benefit that is more than 50% likely to be
realized. Tax positions not deemed to meet the “more-likely-than-not” threshold
are recorded as a tax benefit or expense in the current period. As of and during
the period from August 1, 2024 (the commencement of the Trust's operations) to
December 31, 2024, the Trust did not have a liability for
any
unrecognized tax amounts. However, the Sponsor’s conclusions concerning its
determination of “more-likely-than-not” tax positions may be subject to review
and adjustment at a later date based on factors including, but not limited to,
further implementation guidance, and ongoing analyses of and changes to tax
laws, regulations and interpretations thereof.
The
Sponsor of the Trust has evaluated whether or not there are uncertain tax
positions that require financial statement recognition and has determined that
no reserves for uncertain tax positions related to federal, state and local
income taxes existed as of December 31, 2024.
6.
Related Parties
The
Trust considered the following entities, their directors, and certain employees
to be related parties of the Trust as of December
31, 2024: DCG, Grayscale, and Grayscale Securities. As of December 31, 2024,
40,921 Shares of the Trust were held by related parties of the Trust.
In
accordance with the Trust Agreement governing the Trust, the Trust pays a fee to
the Sponsor, calculated as 2.5% of the aggregate value of the Trust’s assets,
less its liabilities (which include any accrued but unpaid expenses up to, but
excluding, the date of calculation), as calculated and published by the Sponsor
or its delegates in the manner set forth in the Trust Agreement (the “Sponsor’s
Fee”). The Sponsor’s Fee accrues daily in U.S. dollars and is payable in SUI,
monthly in arrears. The amount of SUI payable in respect of each daily U.S.
dollar accrual will be determined by reference to the same U.S. dollar value of
SUI used to determine such accrual. For purposes of these financial statements,
the U.S. dollar value of SUI is determined by reference to the Digital Asset
Trading Platform Market that the Trust considers its principal market as of 4:00
p.m., New York time, on each valuation date. The Trust held no Incidental Rights
or IR Virtual Currency as of December 31, 2024. No Incidental Rights or IR
Virtual Currencies have been distributed in payment of the Sponsor’s Fee during
the period from August 1, 2024 (the commencement of the Trust's operations) to
December 31, 2024.
As
partial consideration for receipt of the Sponsor’s Fee, the Sponsor is obligated
under the Trust Agreement to assume and pay all fees and other expenses incurred
by the Trust in the ordinary course of its affairs, excluding taxes, but
including marketing fees; administrator fees, if any; custodian fees; transfer
agent fees; trustee fees; the fees and expenses related to the listing,
quotation or trading of the Shares on any secondary market (including customary
legal, marketing and audit fees and expenses) in an amount up to $600,000 in any
given fiscal year; ordinary course legal fees and expenses; audit fees;
regulatory fees, including, if applicable, any fees relating to the registration
of the Shares under the Securities Act or the Exchange Act; printing and mailing
costs; the costs of maintaining the Trust’s website and applicable license fees
(together, the “Sponsor-paid Expenses”), provided that any expense that
qualifies as an Additional Trust Expense will be deemed to be an Additional
Trust Expense and not a Sponsor-paid Expense.
The
Trust may incur certain extraordinary, non-recurring expenses that are not
Sponsor-paid Expenses, including, but not limited to, taxes and governmental
charges, expenses and costs of any extraordinary services performed by the
Sponsor (or any other service provider) on behalf of the Trust to protect the
Trust or the interests of shareholders (including in connection with any
Incidental Rights and any IR Virtual Currency), any indemnification of the
Custodian or other agents, service providers or counterparties of the Trust, the
fees and expenses related to the listing, quotation or trading of the Shares on
any secondary market (including legal, marketing and audit fees and expenses) to
the extent exceeding $600,000 in any given fiscal year and extraordinary legal
fees and expenses, including any legal fees and expenses incurred in connection
with litigation, regulatory enforcement or investigation matters (collectively
“Additional Trust Expenses”). In such circumstances, the Sponsor or its delegate
(i) will instruct the Custodian to withdraw from the Digital Asset Account SUI,
Incidental Rights and/or IR Virtual Currency in such quantity as may be
necessary to permit payment of such Additional Trust Expenses and (ii) may
either (x) cause the Trust (or its delegate) to convert such SUI, Incidental
Rights and/or IR Virtual Currency into U.S. dollars or other fiat currencies at
the Actual Exchange Rate or (y) when the Sponsor incurs such expenses on behalf
of the Trust, cause the Trust (or its delegate) to deliver such SUI, Incidental
Rights and/or IR Virtual Currency in kind to the Sponsor, in each case in such
quantity as may be necessary to permit payment of such Additional Trust
Expenses.
For
the period from August 1, 2024 (the commencement of the Trust's operations) to
December 31, 2024, the Trust incurred Sponsor’s Fees of $45,381. As of December
31, 2024, there were no accrued and unpaid Sponsor’s Fees. In addition, the
Sponsor may pay Additional Trust Expenses on behalf of the Trust, which are
reimbursable by the Trust to the Sponsor. For the period from August 1, 2024
(the commencement of the Trust's operations) to December 31, 2024, the Sponsor
did not pay any Additional Trust Expenses on behalf of the Trust.
7.
Risks and Uncertainties
The
Trust is subject to various risks including market risk, liquidity risk, and
other risks related to its concentration in a single asset, SUI. Investing in
SUI is currently highly speculative and volatile.
The
Principal Market NAV of the Trust, calculated by reference to the principal
market price in accordance with U.S. GAAP, relates primarily to the value of the
SUI held by the Trust, and fluctuations in the price of SUI could materially and
adversely affect an investment in the Shares of the Trust. The price of SUI has
a limited history. During such history, SUI prices have been volatile and
subject to influence by many factors, including the levels of liquidity. If
Digital Asset Markets continue to experience significant price fluctuations, the
Trust may experience losses. Several factors may affect the price of SUI,
including, but not limited to, global SUI
supply
and demand, theft of SUI from global trading platforms or vaults, competition
from other forms of digital currency or payment services, global or regional
political, economic or financial conditions, and other unforeseen events and
situations.
The
SUI held by the Trust are commingled, and the Trust’s shareholders have no
specific rights to any specific SUI. In the event of the insolvency of the
Trust, its assets may be inadequate to satisfy a claim by its
shareholders.
There
is currently no clearing house for SUI, nor is there a central or major
depository for the custody of SUI. There is a risk that some or all of the
Trust’s SUI could be lost or stolen. There can be no assurance that the
Custodian will maintain adequate insurance or that such coverage will cover
losses with respect to the Trust’s SUI. Further, transactions in SUI are
irrevocable. Stolen or incorrectly transferred SUI may be irretrievable. As a
result, any incorrectly executed SUI transactions could adversely affect an
investment in the Shares.
The
Securities and Exchange Commission (the “SEC”) has stated that certain digital
assets may be considered “securities” under the federal securities laws. The
test for determining whether a particular digital asset is a “security” is
complex and difficult to apply, and the outcome is difficult to predict. Public,
though non-binding, statements by senior officials at the SEC have indicated
that the SEC did not consider Bitcoin or Ether to be securities, and does not
currently consider Bitcoin to be a security. The SEC staff has also provided
informal assurances via no-action letter to a handful of promoters that their
digital assets are not securities. On the other hand, the SEC has brought
enforcement actions against the issuers and promoters of several other digital
assets on the basis that the digital assets in question are securities and has
not formally or explicitly confirmed that it does not deem Ether to be a
security.
If
SUI is determined to be a “security” under federal or state securities laws by
the SEC or any other agency, or in a proceeding in a court of law or otherwise,
it may have material adverse consequences for SUI. For example, it may become
more difficult for SUI to be traded, cleared and custodied as compared to other
digital assets that are not considered to be securities, which could, in turn,
negatively affect the liquidity and general acceptance of SUI and cause users to
migrate to other digital assets. As such, any determination that SUI is a
security under federal or state securities laws may adversely affect the value
of SUI and, as a result, an investment in the Shares.
In
addition, if SUI is in fact a security, the Trust could be considered an
unregistered “investment company” under the Investment Company Act of 1940,
which could necessitate the Trust’s liquidation. In this case, the Trust and the
Sponsor may be deemed to have participated in an illegal offering of investment
company securities and there is no guarantee that the Sponsor will be able to
register the Trust under the Investment Company Act of 1940 at such time or take
such other actions as may be necessary to ensure the Trust’s activities comply
with applicable law, which could force the Sponsor to liquidate the
Trust.
To
the extent a private key required to access a SUI address is lost, destroyed or
otherwise compromised and no backup of the private keys are accessible, the
Trust may be unable to access the SUI controlled by the private key and the
private key will not be capable of being restored by the Sui Network. The
processes by which SUI transactions are settled are dependent on the SUI
peer-to-peer network, and as such, the Trust is subject to operational risk. A
risk also exists with respect to previously unknown technical vulnerabilities,
which may adversely affect the value of SUI.
The
Trust relies on third-party service providers to perform certain functions
essential to its operations. Any disruptions to the Trust’s service providers’
business operations resulting from business failures, financial instability,
security failures, government mandated regulation or operational problems could
have an adverse impact on the Trust’s ability to access critical services and be
disruptive to the operations of the Trust.
The
Sponsor and the Trust may be subject to various litigation, regulatory
investigations, and other legal proceedings that arise in the ordinary course of
its business.
8.
Financial Highlights Per Share Performance
|
|
|
|
|
|
|
|
August
1, 2024 (the Commencement of the Trust’s Operations) to December 31,
2024 |
|
|
Per
Share Data: |
|
|
|
|
Principal
market net asset value, initial creation |
|
$ |
10.37 |
|
|
Net
increase in net assets from investment operations: |
|
|
|
|
Net
investment loss |
|
|
(0.44 |
) |
|
Net
realized and unrealized gain |
|
|
51.97 |
|
|
Net
increase in net assets resulting from operations |
|
|
51.53 |
|
|
Principal
market net asset value, end of period |
|
$ |
61.90 |
|
|
Total
return |
|
|
496.91 |
% |
|
Ratios
to average net assets: |
|
|
|
|
Net
investment loss |
|
|
-2.50 |
% |
|
Expenses |
|
|
-2.50 |
% |
Ratios
of net investment loss and expenses to average net assets have been
annualized.
An
individual shareholder’s return, ratios, and per Share performance may vary from
those presented above based on the timing of Share transactions. The amount
shown for a Share outstanding throughout the period may not correlate with the
Statement of Operations for the period due to the number of Shares issued in
Creations occurring at an operational value derived from an operating metric as
defined in the Trust Agreement.
Total
return is calculated assuming an initial investment made at the Principal Market
NAV at the beginning of the period and assuming redemption on the last day of
the period and has not been annualized.
9.
Indemnifications
In
the normal course of business, the Trust enters into certain contracts that
provide a variety of indemnities, including contracts with the Sponsor and
affiliates of the Sponsor, DCG and its officers, directors, employees,
subsidiaries and affiliates, and the Custodian as well as others relating to
services provided to the Trust. The Trust’s maximum exposure under these and its
other indemnities is unknown. However, no liabilities have arisen under these
indemnities in the past and, while there can be no assurances in this regard,
there is no expectation that any will occur in the future. Therefore, the
Sponsor does not consider it necessary to record a liability in this
regard.
10.
Subsequent Events
On
December 31, 2024, the Trust received 19,298.58152898 SUI from a liquidity
provider after 4:00 pm, New York time, related to a creation order received on
December 31, 2024 for Shares to be issued on January 1, 2025. In accordance with
the Trust’s accounting policy, the 19,298.58152898 SUI were recognized and
included in the Trust’s NAV on January 1, 2025, the Share issuance
date.
On
January 1, 2025, Grayscale Investments, LLC (“GSI”) consummated an internal
corporate reorganization (the “Reorganization”), pursuant to which Grayscale
Investments, LLC, the Sponsor of the Trust prior to the Reorganization, merged
with and into Grayscale Operating, LLC (“GSO”), a Delaware limited liability
company and a wholly owned indirect subsidiary of DCG, with GSO continuing as
the surviving company (the “Merger”). As a result of the Merger, GSO succeeded
by operation of law to all the rights, powers, privileges and franchises and
became subject to all of the obligations, liabilities, restrictions and
disabilities of GSI, including with respect to the Sponsor Contracts (as defined
below), all as provided under the Delaware Limited Liability Company Act. The
Reorganization is not expected to have any material impact on the operations of
the Trust.
In
connection with the Reorganization, on January 1, 2025, and promptly following
the effectiveness of the Merger, GSO assigned certain contracts pertaining to
its role as Sponsor (as such term is defined in the Trust Agreement) of the
Trust (such contracts, the “Sponsor Contracts”) to Grayscale Investments
Sponsors, LLC, a Delaware limited liability company and a wholly owned direct
subsidiary of GSO (“GSIS”), whereby GSIS assumed all of the rights and
obligations of GSO under the Sponsor Contracts. Other than the assumption of the
Sponsor Contracts by GSIS, the Reorganization does not alter the rights or
obligations under any of the Sponsor Contracts.
In
connection with the Reorganization, on January 1, 2025, and promptly following
the effectiveness of the Merger, GSO and GSIS executed a Certificate of
Admission, pursuant to which GSIS was admitted as an additional Sponsor of the
Trust under the Trust Agreement, by and among GSO (as successor in interest to
GSI), the Trustee, and the shareholders from time to time thereunder, as amended
from time to time. GSIS shall be subject to the rights and obligations of a
Sponsor under the Trust Agreement.
On
January 3, 2025, GSO voluntarily withdrew as a Sponsor of the Trust pursuant to
the terms of the Trust Agreement, and, effective May 3, 2025, GSIS shall be the
sole remaining Sponsor of the Trust.
As
of the close of business on April 2, 2025, the fair value of SUI determined in
accordance with the Trust’s accounting policy was $2.48 per SUI.
Subsequent
events have been evaluated through April 7, 2025, the date the financial
statements were available to be issued.
GRAYSCALE
SUI TRUST (SUI)
PRELIMINARY
PROSPECTUS
,
2025