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Thursday, November 2, 2023

Tidal Preps a Crypto ETF Adoption

by: Neil Anderson, Managing Editor

A Midwestern ETF-in-a-box shop is slated to adopt a cryptocurrency-focused fund, powered by a five year-old, $370-million-AUM (as of October 16) Brazilian asset manager. The target fund is sponsored by a New England shop.

Guillermo Trias
CEO, Partner
Tidal Investments LLC
Today, the Tidal Financial Group team filed updates on their deal to take over the Hashdex Bitcoin Futures ETF (DEFI). The new preliminary prospectus is subject to completion and dated November 2022, though the target closing date listed for the deal is now January 3, 2024. (Per a prior filing, the adoption deal was previously expected to close sometime this year.)

DEFI is a commodity pool (aka '33 Act fund), not a '40 Act open-end mutual fund like some ETFs. The fund debuted on September 15, 2022, and today it has about $2.1 million in AUM.

Per the latest filing, DEFI will merge into a newly created Tidal fund with the same name. Milwaukee, Wisconsin-based Tidal FG's Tidal Investments LLC (fka Toroso Investments, LLC) will become the ETF's commodity pool operator (CPO) and sponsor, succeeding Burlington, Vermont-based Teucrium Trading, LLC.

The adopting fund will continue to use the DEFI ticker and trade on the NYSE Arca, with an expense ratio of 94 basis points. It will become a series of the Tidal Commodities Trust I, where the current fund is a series of the Teucrium Commodity Trust.

Hashdex Asset Management Ltd. (a Cayman Islands-based subsidiary of a similarly named parent based in Rio de Janeiro) will remain as the fund's digital asset advisor. Like its target, the adopting fund will continue to track the Hashdex U.S. Bitcoin Futures Fund Benchmark. K&L Gates LLP (KLG) will succeed Carlton Fields, P.C. as DEFI's counsel.

Tidal FG's Tidal ETF Services LLC will succeed U.S. Bancorp Fund Services, LLC (dba U.S. Bank Global Fund Services) as DEFI's administrator, though U.S. Bank Global Fund Services will become subadministrator. ACA's Foreside Fund Services, LLC will remain the fund's distributor and will succeed Tidal ETF Services, Toroso, and Victory Capital Management Inc. as the fund's marketing agent.

Yet the adopting fund will keep some of its predecessors' service providers on in the same roles, too, according to the latest filing. Those repeat providers will include: Grant Thornton LLP as independent accounting firm; Phillip Capital Inc. as a clearing broker; StoneX Financial, Inc. as a clearing broker; U.S. Bank Global Fund Services as fund accountant and transfer agent; U.S. Bank, N.A. as custodian; and Wilmington Trust as trustee. 

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