⚠ Document Status
FINAL DRAFT · AWAITING FOUNDATIONAL COUNSEL REVIEW
This document is a final draft. Algonet's full legal framework has been drafted and submitted for foundational counsel review under the Algonet BH LLC / CFTC Rule 4.7 structure. Formal confirmation is expected within six weeks. Until that review is returned, this document is not yet executed and existing client engagements remain governed by the prior version signed at onboarding. Published here in full for transparency and for the review of prospective qualified investors and their counsel.
Working draft v0.1 — 2026-04-22. Cautionary Statement verbatim from NFA 'Disclosure Documents — A Guide for CTAs' (Page 4, reflecting CFTC Rule 4.7(b)(2)). Crypto-specific risk language adapted from 3Commas Client Terms of Use §8.4 (18 Dec 2025) + Coinrule Terms §10 (31 May 2024). Traditional CTA risk factors adapted from Goldenwise CTA Disclosure Document (Principal Risk Factors, 2017) and NFA 2018 Virtual Currency Interpretive Notice.
Legal · V
The risks you accept when you activate the Algonet execution service.
The following statement is delivered to every Client before execution of the Engagement Agreement and is re-acknowledged annually. It is not a substitute for the Client's own diligence. A prospective Client who does not understand or accept any risk disclosed here must not activate the Services.
0 — Chapter
CFTC-Required Cautionary Statement
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS ACCOUNT DOCUMENT.
This Cautionary Statement is required under CFTC Rule 4.7(b)(2) and must be provided to each Qualified Eligible Person prior to any trading on the Client's behalf.
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Speculative and Volatile
Trading in cryptocurrency perpetual futures is a speculative activity. You may lose some or all of the capital you commit to the Algonet execution service. No level of return is guaranteed, expected, or even typical. Past performance is not indicative of future results — the cumulative, monthly, and per-strategy results presented in the Algonet factsheet and monthly statements are the historical realization of a statistical process and may not persist.
Cryptocurrency prices are materially more volatile than traditional asset classes. Daily moves of 5% to 15% in either direction are common; occasional moves of 30% or more occur in a single trading session. This volatility is amplified by the perpetual-futures wrapper we trade, which accrues funding rates that can further erode or augment returns. You must be financially and psychologically prepared for substantial swings in your account equity on a daily basis.
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Leverage
The Mother System operates on perpetual futures that permit leverage — you hold a position notionally larger than the capital you have posted as margin. Leverage magnifies both gains and losses. A small adverse price move can result in a loss larger than your initial margin and, in an extreme case, result in liquidation of the entire position.
The Exchange, not Algonet, determines your margin requirements, maintenance ratios, and liquidation mechanics. The Exchange may adjust these rules at any time and without notice. If your available margin falls below the Exchange's maintenance threshold, the Exchange will automatically liquidate your position at the prevailing market price; that price may be materially worse than the price you would have received with voluntary exit.
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Drawdown and Historical Statistics
The Mother System has historically experienced drawdowns. The maximum drawdown observed in internal live and shadow testing across the 2022–2026 period has been approximately 6.4% of account equity; but future drawdowns may be substantially deeper and more prolonged. The Client should not select a Risk Group on the assumption that historical drawdown bounds will be honored.
Monthly return distributions have historically included losing months. Strings of three to five consecutive losing months have occurred and may recur. The Client must be prepared to hold the account through extended drawdown periods without redeeming; the Client may of course terminate the Services at any time, but doing so during drawdown will lock in the realized loss.
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Counterparty and Exchange Risk
The Exchange on which you maintain your capital — currently Binance Futures, with others potentially approved on request — is the counterparty to every trade and the sole custodian of your capital. Algonet holds no capital on your behalf. This means:
(a) If the Exchange becomes insolvent, is hacked, suspends withdrawals, suffers a trading halt, experiences an API outage, or is subject to regulatory enforcement, your capital is exposed to that event regardless of how the Mother System performs;
(b) You accept the Exchange's own terms of service, margin rules, and risk practices. The Exchange may change these at any time. You are responsible for understanding and complying with them.
(c) Algonet has no capacity to protect, recover, or substitute for capital lost to an Exchange event. The Exchange is independent of Algonet and not controlled by Algonet.
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Execution, Slippage, and Technology
The Algonet execution pipeline is software running on cloud infrastructure. Software fails. Networks fail. Exchange APIs impose rate limits, reject orders during stress, and occasionally return stale or inaccurate data. All of these conditions produce execution slippage — the difference between the price at which the Mother System intended to enter or exit a position and the price at which the position was actually filled.
Realized slippage varies by market condition, contract liquidity, order size, and exchange-side infrastructure, and can materially widen during extreme volatility, liquidity stress, or infrastructure failure. The Client bears the full economic impact of execution slippage; Algonet does not guarantee or indemnify execution quality.
During an infrastructure outage, positions already open may remain open and exposed to market movement without active management by the Mother System's normal risk-control logic. Algonet maintains a drawdown-breaker kill switch that will attempt to close all open positions if account equity falls below a configured threshold, but this mechanism depends on the same infrastructure that may be in distress; it is not an absolute guarantee.
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Liquidity Risk
In extreme market conditions — flash crashes, exchange freezes, weekend liquidity voids, or coordinated market events — the liquidity on any given contract can evaporate within seconds. Bid-ask spreads can widen by an order of magnitude, stop-loss orders may fill at prices dramatically worse than the trigger level, and reversal orders may not fill at all. These are well-documented events in the cryptocurrency markets.
The Mother System's backtesting methodology incorporates assumptions for slippage, commission, and funding costs. These assumptions are conservative under normal conditions but are not guarantees of future live execution. Realized slippage in stressed markets will materially exceed the model, and Client losses in such events can be several multiples of what backtested results suggest. The Client must not rely on backtested returns as a forecast of future performance.
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Regulatory Risk
The legal and regulatory framework for cryptocurrency perpetual derivatives is evolving. Changes in U.S. CFTC, SEC, or state-level rules, in Israeli ISA or tax-authority guidance, in the Exchange's jurisdiction of registration, or in the jurisdictions where Clients reside, may at any time:
(a) Prohibit or restrict the Services in your jurisdiction;
(b) Impose new tax, withholding, or reporting obligations on you or on Algonet;
(c) Force the Exchange to delist products, suspend services in your region, or impose KYC/AML requirements that retroactively apply to your account;
(d) Subject Algonet or the Exchange to enforcement action, the effects of which may include suspension of services or freezing of assets.
Algonet monitors the U.S. and Israeli regulatory environment but cannot guarantee that a regulatory event will not abruptly terminate or modify the Services. The Client accepts the risk of regulatory change as part of the engagement.
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Operational and Key-Person Risk
Algonet is operated principally by Toi Campbell. In the event of his incapacitation or death, or in the event of a material operational disruption at Algonet, the Mother System may be unable to continue operating normally for a period of time. Algonet maintains a Business Continuity Plan and a kill-switch procedure that can be invoked by designated backup personnel; these controls are described in Algonet's Disclosure Document but do not eliminate key-person risk.
The Client should not allocate to the Services any capital that the Client cannot afford to see remain open in the market during a 24- to 72-hour Algonet operational outage. The Client can at any time directly access the Exchange and manage the Client's own positions, including closing them, if the Client concludes that Algonet is not operating normally.
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Operator Conflicts of Interest
Algonet's principal and affiliated persons trade the same strategy on their own personal capital. Algonet maintains a commitment that all client accounts and the principal's account receive signals at the same time via the same API routing infrastructure (pari-passu execution). Notwithstanding this commitment, the principal's personal trading creates a structural conflict of interest — the principal may, for example, have an incentive to deploy a new unproven strategy on clients before it is fully validated on personal capital, or vice versa.
Algonet's Conflicts of Interest Policy (summarized in the Disclosure Document) describes how this conflict is monitored and mitigated. The Client acknowledges the conflict and the mitigation measures.
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No Guaranteed Returns; No Suitability Determination
Algonet does not guarantee any level of return. Algonet has not evaluated whether the Services are suitable for the Client's individual financial circumstances, investment objectives, risk tolerance, or tax position. The Client has made the Client's own independent determination that the Services are appropriate based on the Client's own analysis and consultation with the Client's own advisers.
The fact that a Client qualifies as a Qualified Eligible Person is a regulatory threshold and does not constitute Algonet's determination that the Client is suited to this specific product. The Client must independently decide whether the Services fit the Client's portfolio.
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Client Acknowledgment
By signing the Engagement Agreement, the Client expressly acknowledges: YOU MAY LOSE SOME OR ALL OF YOUR FUNDS. CRYPTOCURRENCIES AND CRYPTO-PERPETUAL FUTURES ARE A NEW AND INSUFFICIENTLY TESTED TECHNOLOGY, AND VARIOUS FACTORS — INCLUDING BUT NOT LIMITED TO MARKET CONDITIONS, INFRASTRUCTURE FAILURES, REGULATORY CHANGES, AND EXCHANGE COUNTERPARTY RISK — MAY RESULT IN SUBSTANTIAL LOSSES.
The Client acknowledges having read this Risk Disclosure Statement in full and having had the opportunity to ask questions and receive answers before activating the Services. The Client's signature on the Engagement Agreement constitutes affirmation of that acknowledgment.
Risk Disclosure Statement v0.1 · 2026-04-22 · Delivered prior to each Engagement Agreement and re-acknowledged annually or on any material amendment. Algonet BH LLC · אלגונט — פתרונות אלגוריתמים.
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