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The information contained in this Crypto Asset Statement was last updated on March 15, 2024.

No securities regulatory authority in Canada has expressed an opinion about Compound or any of the other Crypto Contracts or Crypto Assets made available through Newton Crypto Ltd. (Newton) on the Newton Platform, including an opinion that Compound itself is not a security and/or derivative.  Changes to applicable law may adversely affect the use, transfer, exchange, or value of any of your crypto assets, and such changes may be sudden and without notice.

Newton is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Newton Crypto Ltd. dated March 8, 2024.  The statutory rights of action for damages and the right of rescission in section 130.1 of the Securities Act (Ontario) and similar legislation in the other provinces and territories of Canada would not apply in respect of a misrepresentation in this Crypto Asset Statement or the Newton Platform Risk Statement.

This overview provides a summary of certain risks associated with Compound and is not an exhaustive description or summary of these risks and, in addition, does not take into account an individual’s particular situation or risk tolerance.  Investors are encouraged to conduct their own research prior to trading any crypto asset.

Newton users should read the Newton Platform Risk Statement for additional discussion of general risks associated with crypto assets made available through the Newton platform.  A copy of the Newton Platform Risk Statement acknowledged by you is available in your account in the “Statements & Reports” section.

Token Description & Project Background

Compound was created in 2017 by Robert Leshner, the founder of Compound Labs, and Geoffrey Hayes. The Compound platform is a decentralized, non-custodial protocol built on the Ethereum blockchain. Compound provides access to a series of decentralized interest rate markets that deploy smart contracts to facilitate lending and borrowing of Ethereum tokens by users at differing interest rates.  The interest rates for each Compound market are dynamic and based purely on supply and demand, such that the more liquidity exists in a market, the lower the interest rate.  When a user deposits crypto assets into Compound, an equivalent amount of cTokens are generated which begin earning interest immediately and can be exchanged for the deposited assets at any time, with accrued interest. Compound also rewards lenders with COMP tokens based on the amount of cTokens held in their wallet and a varying interest rate dependent on the available supply of that asset.

COMP is the native currency and governance token of the Compound, which grants COMP holders the ability to propose and vote on changes to the protocol.

* Currently, Newton does not provide its users with the ability to participate in the governance functions of COMP.

Risks of Compound

Like an investment in other crypto assets, an investment in Compound includes the following general risks:  (i) volatility risk and liquidity risk, (ii) short history risk, (iii) demand risk, (iv) forking risk, (v) code defects, (vi) regulatory risk, (vii) electronic trading risk, and (viii) cyber security risk.

For additional information of general risks associated with crypto assets, you may refer to the Newton Platform Risk Statement.  In terms of specific risks, as Compound is one of the longest-standing crypto assets and its community base is widely decentralized, there is no central working group or authority to disclose material information to the public regarding Compound.

Please note that these risks and the associated summaries or overviews provided for each herein are not intended to be an exhaustive discussion pertaining to all such risks and, in addition, there may be other risks that come with exposure to Compound.  We encourage all Newton users to perform their own due diligence to assess the risks associated with Compound and to determine whether this level of risk is acceptable to them.  Neither Compound nor Newton guarantees the value of Compound, and holders of Compound will not have any recourse to Compound or Newton if the value of Compound declines for any reason whatsoever.

Newton’s Evaluation Process

Newton has reviewed and assessed Compound prior to making it available on the Newton Platform and has concluded that Compound is not a security or derivative under Canadian securities legislation; however, there is a risk that this conclusion could change in the future and that, in such event, Newton will be required to halt, suspend, and then remove Compound from its platform as described in the Newton Platform Risk Statement.

Further, as indicated above, no Canadian securities regulatory authority has expressed an opinion about Compound, including an opinion that Compound is not itself a security and/or derivative.

Based on publicly available information Newton has reviewed Compound, including, but not limited to, a review of the following:

• The creation, governance, usage, and design of Compound, including the source code, security, and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created Compound.
• The supply, demand, maturity, utility, and liquidity of Compound.
• Material technical risks associated with Compound, including any code defects, security breaches and other threats concerning Compound and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them.
• Legal and regulatory risks associated with Compound, including (i) any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of Compound, and (ii) statements made by any securities regulatory authorities in Canada, other regulators in IOSCO-member jurisdictions, or the regulator with the most significant connection to Compound about whether Compound, or generally about whether the type of crypto asset, is a security and/or derivative.

A link to the Compound White Paper is available at the following link.