FETH 10-K & 10-Q changes, risk factors and insider trading
Fidelity Ethereum Fund · CBOE · Finance Services · CIK 2000046 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risk Factors Related to Digital Assets”
New heading “The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading prices of ether, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.”
New heading “Digital assets such as ether are a relatively new asset class, 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.”
New heading “Digital assets represent a new and rapidly evolving industry, and the value of the Shares depends on the acceptance of ether.”
New heading “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.”
New heading “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.”
New heading “It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries.”
New heading “Risks Associated with Ether and the Ethereum Network”
New heading “The Ethereum network and its native digital asset, ether, are a relatively new technological innovation with a limited operating history.”
New heading “Changes in the governance of a digital asset network may not receive sufficient support from users and validators, which may negatively affect that digital asset network’s ability to grow and respond to challenges.”
New heading “Digital asset networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.”
New heading “If a malicious actor or botnet obtains control of more than 50% of the validating stake on the Ethereum network, or otherwise obtains control over the Ethereum network through its influence over core developers or otherwise, such actor or botnet could manipulate the Ethereum blockchain, which could adversely affect the value of the Shares or the ability of the Trust to operate.”
New heading “Any name change and any associated rebranding initiative by the core developers of ether may not be favorably received by the digital asset community, which could negatively impact the value of ether and the value of the Shares.”
New heading “Smart contracts, including those relating to DeFi applications, are a new technology and their ongoing development and operation may result in problems, which could reduce the demand for ether or cause a wider loss of confidence in the Ethereum network, either of which could have an adverse impact on the value of ether.”
New heading “Validators may suffer losses due to staking, which could make the Ethereum network less attractive.”
New heading “Proof-of-stake blockchains are a relatively recent innovation and have not been subject to as widespread use or adoption over as long of a period of time as proof-of-work blockchains.”
New heading “Centralization concerns around a single person or entity controlling a large percentage of the validating stake.”
New heading “Spot markets on which ether trades are relatively new and largely unregulated or may not be complying with existing regulations and, therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments, which could have a negative impact on the performance of the Trust.”
New heading “Momentum pricing.”
New heading “Irrevocable nature of blockchain-recorded transactions.”
New heading “The loss or destruction of a private key required to access ether may be irreversible.”
New heading “A disruption of the internet may affect Ethereum network operations, which may adversely affect the ether industry and an investment in the Trust.”
New heading “Potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, adversely affect an investment in the Trust.”
New heading “The open-source structure of the Ethereum network protocol means that the core developers and other contributors are generally not directly compensated for their contributions in maintaining and developing the Ethereum network protocol. A failure to properly monitor and upgrade the Ethereum network protocol could damage the Ethereum network and an investment in the Trust.”
New heading “Decentralized governance of the Ethereum network could have a negative impact on the performance of the Trust.”
New heading “A temporary or permanent “fork” could adversely affect the value of the Shares.”
New heading “The inability to recognize the economic benefit of a “fork” or an “air drop” could adversely impact an investment in the Trust.”
New heading “In the event of a hard fork of the Ethereum network that results in the spinoff of another network, the Sponsor will, as 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.”
New heading “Malicious actors may “double spend” ether by altering the formation of the blockchain.”
New heading “Flaws in source code for digital asset networks could adversely affect the value of ether and other digital assets.”
New heading “Mathematical or technological advances could undermine the Ethereum network’s consensus mechanism.”
New heading “Competition from central bank digital currencies (“CBDCs”) could adversely affect the value of ether and other digital assets.”
New heading “Prices of ether may be affected by stablecoins, the activities of stablecoin issuers and their regulatory treatment.”
New heading “Competition from the emergence or growth of other digital assets or methods of investing in ether could have a negative impact on the price of ether and adversely affect the value of the Shares.”
New heading “Large-scale sales or distributions could significantly reduce the price of ether and adversely affect the value of the Shares.”
New heading “Congestion or delay in the Ethereum network may delay purchases, sales or transfers of ether by the Trust.”
New heading “If the digital asset award or transaction fees for recording transactions on the Ethereum network are not sufficiently high to incentivize validators may demand high transaction fees, which could negatively impact the value of ether and the value of the Shares.”
New heading “If the Ethereum network is used to facilitate illicit activities or evade sanctions, businesses that facilitate transactions in ether could be at increased risk of criminal or civil lawsuits, or of having services cut off, which could negatively affect the price of ether and the value of the Shares.”
New heading “Risks Associated with Investing in the Trust”
New heading “Investment-Related Risks.”
New heading “The NAV may not always correspond to the market price of ether.”
New heading “Different from directly owning ether.”
New heading “Index tracking risk.”
New heading “Liquidity risk.”
New heading “The value of the Shares may be influenced by a variety of factors unrelated to the value of ether.”
New heading “An Authorized Participant’s, or its Authorized Participant Designee’s, buying and selling activity associated with the creation and redemption of Baskets may adversely affect an investment in the Shares.”
New heading “The inability of Authorized Participants and market makers to hedge their ether exposure may adversely affect the liquidity of Shares and the value of an investment in the Shares.”
New heading “Arbitrage transactions intended to keep the price of Shares closely linked to the price of ether may be problematic if the process for the creation and redemption of Baskets encounters difficulties, which may adversely affect an investment in the Shares.”
New heading “The use of cash creations and redemptions, to the extent used by Authorized Participants, may adversely affect the arbitrage transactions by Authorized Participants intended to keep the price of the Shares closely linked to the price of ether and, as a result, the price of the Shares may fall or otherwise diverge from NAV.”
New heading “The Authorized Participants serve in such capacity for several competing exchange-traded ether products, which could adversely affect the Trust’s operations and the secondary market for the Shares.”
New heading “Security threats and cyber-attacks could result in the halting of Trust operations and a loss of Trust assets or damage to the reputation of the Trust, each of which could result in a reduction in the price of the Shares.”
New heading “The Trust’s risk management processes and policies may prove to not be adequate to prevent any loss of the Trust’s ether.”
New heading “The Trust’s Custodian could become insolvent or become subject to a receivership or bankruptcy proceeding, which may result in a loss of or delay in access to Trust assets.”
New heading “Loss of a critical banking relationship for, or the failure of a bank used by, the Trust could adversely impact the Trust’s ability to create or redeem Baskets, or could cause losses to the Trust.”
New heading “The Trust is subject to risks due to its concentration of investments in a single asset class.”
New heading “The lack of active trading markets for the Shares may result in losses on Shareholders’ investments at the time of disposition of Shares.”
New heading “Several factors may affect the Trust’s ability to achieve its investment objective on a consistent basis.”
New heading “The amount of ether represented by the Shares will decline over time.”
New heading “The Sponsor may need to find and appoint a replacement custodian quickly, which could pose a challenge to the safekeeping of the Trust’s ether.”
New heading “Limited recourse.”
New heading “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.”
New heading “Intellectual property rights claims may adversely affect the Trust and the value of the Shares.”
New heading “Unforeseeable risks.”
New heading “The Sponsor’s policies and procedures may not fully mitigate the risk of conflicts of interest.”
New heading “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.”
New heading “Risks Associated with the Index and Index Pricing”
New heading “Right to change index.”
New heading “Risks related to pricing.”
New heading “Regulatory Risk”
New heading “Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or commodity pools under the Commodity Exchange Act.”
New heading “Future and current regulations by a United States or foreign government or quasi-governmental agencies could have an adverse effect on an investment in the Trust.”
New heading “Future regulations may require the Trust or the Sponsor to become registered, which may cause the Trust to liquidate.”
New heading “The ongoing activities of the Trust may generate tax liabilities for Shareholders.”
New heading “The tax treatment of ether and transactions involving ether for United States federal income tax purposes may change.”
New heading “The tax treatment of ether and transactions involving ether for state and local tax purposes is not settled.”
New heading “A hard “fork” of the Ethereum Blockchain could result in Shareholders incurring a tax liability.”
New heading “The intended tax treatment of the Trust will limit the flexibility of the Trust’s investment decisions.”
New heading “The Exchange on which the Shares are listed may halt trading in the Trust’s Shares, which would adversely impact a Shareholder’s ability to sell Shares.”
New heading “The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares.”
New heading “The market infrastructure of the ether spot market could result in the absence of active Authorized Participants able to support the trading activity of the Trust.”
New heading “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 Shareholders’ investment in the Shares.”
New heading “The Sponsor relies heavily on key personnel.”
New heading “The Trust is new, and if it is not profitable, the Trust may terminate and liquidate at a time that is disadvantageous to Shareholders.”
New heading “Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights.”
New heading “Shareholders may be adversely affected by creation or redemption orders that are subject to postponement, suspension or rejection under certain circumstances.”
New heading “Shareholders may be adversely affected by an overstatement or understatement of the NAV calculation of the Trust due to the valuation methodology employed on the date of the NAV calculation.”
New heading “The Trust Agreement includes provisions that limit Shareholders’ voting rights and restrict Shareholders’ right to bring a derivative action.”
Largest changes
“In addition, over the past several years, some digital asset trading platforms have been closed due to fraud and manipulative activity, business failure 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. …”see in full comparison
“Thereafter, in November 2022, FTX Trading Ltd. (“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 numerous 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. …”see in full comparison
“This risk is present in traditional financial markets and is not unique to ether. If such employees or others affiliated with the Sponsor engage in illegal conduct or conduct which fails to meet applicable regulatory standards, the Sponsor and its affiliates could be the target of civil or criminal fines, penalties, punishments, or other regulatory sanctions or lawsuits or could be the target of an investigation. Any of these outcomes could cause the Trust and Shareholders to suffer harm.”see in full comparison
“These events resulted in calls for heightened scrutiny and regulation of the digital asset industry, with a specific focus on digital asset trading platforms, and custodians. 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. …”see in full comparison
“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 decide to seek the required licenses, there is no guarantee that they will receive them in a timely manner. …”see in full comparison
“For example, in the United States, the SEC has been active in asserting its jurisdiction over digital assets. Specifically, the SEC and its staff have taken the position that certain digital assets fall within the definition of a security under the U.S. federal securities laws, beginning with the June 2017 Report of Investigation that concluded that “DAO Tokens” were investment contracts, because they were issued with the purpose of raising funds for investing in digital assets. …”see in full comparison
Full comparison: every changed paragraph (325)
Risk Factors Related to Digital Assets
The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further declines in the trading prices of ether, 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 ether, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for ether. These drawdowns notwithstanding, digital asset prices, including ether, increased significantly again during 2019, decreased significantly again in the first quarter of 2020 and increased significantly again over the remainder of 2020 and the first quarter of 2021. Beginning in the fourth quarter of 2021 and continuing to date, digital asset prices have fluctuated widely.
Extreme volatility in the future, including further declines in the trading prices of ether, 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 ether 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 ether.
Digital assets such as ether are a relatively new asset class, 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 ether are a relatively new asset class, 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 recentness of their development, their dependence on the internet and other technologies, usership, developers and node operators (as described below) 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, including the Ethereum network, and the software used to operate them are in the early stages of development. Given the recentness of the development of blockchain networks, their associated digital assets may not function as intended and, in turn, parties may be unwilling to use digital assets, which would dampen the potential growth of blockchain networks. Because ether is a digital asset, the value of the Shares is subject to a number of factors relating to the fundamental investment characteristics of digital assets, including the fact that digital assets are bearer instruments and loss, theft, compromise, or destruction of the associated private keys could result in permanent loss of the asset.
Blockchains are dependent upon the internet. A disruption of the internet or a digital asset network, such as the Ethereum network, could affect the ability to transfer digital assets, including ether, and, consequently, their value.
The acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the node operators in a digital asset network, such as the Ethereum network, could result in a “fork” in such network’s blockchain, including the Ethereum blockchain, resulting in the operation of multiple separate networks.
Governance of the Ethereum network is by voluntary consensus and open competition. As a result, there may be a lack of consensus or clarity on the governance of the Ethereum network, which may stymie the Ethereum network’s utility and ability to grow and face challenges or serve as a catalyst for a hard fork of the network. In particular, it may be difficult to find solutions or martial sufficient effort to overcome any future problems on the Ethereum network, especially long-term problems.
The foregoing notwithstanding, the Ethereum network’s protocol is informally overseen by a collective of core developers who, along with members of the Ethereum community, can introduce proposals, known as Ethereum Improvement Proposals (“EIPs”), for updating the Ethereum network. The core developers evolve over time, largely based on self-determined participation. An Ethereum Client is a software application that implements the Ethereum network specification and communicates with the Ethereum network. A “node” is a computer or other device that has downloaded the Ethereum Client and is connected to other computers also running the Ethereum Client software, together forming the Ethereum network. To the extent that a significant majority of node operators update their individual Ethereum Client to the new specification, the Ethereum network could be subject to new protocols that may adversely affect the value of ether. In addition, if a digital asset network has high-profile contributors, a perception that such contributors will no longer contribute to the network could have an adverse effect on the market price of the related digital asset.
To the extent that any validators cease to process transactions that do not include the payment of a transaction fee in validated blocks, such transactions will not be recorded on the Ethereum blockchain. Any widespread delays in the processing of transactions could result in a loss of confidence in a digital asset network.
Many digital asset networks, including the Ethereum network, face significant scaling challenges and are being upgraded with various features designed to increase the speed of digital asset transactions and the number of transactions that can be processed in a given period (known as “throughput”). These attempts to increase the volume of transactions may not be effective, and such upgrades may fail, resulting in potentially irreparable damage to the Ethereum network and the value of ether. Furthermore, successful improvements to the scalability of digital asset networks often come at the expense of decentralization and/or security.
Moreover, in the past, flaws in the source code for blockchains, their respective native assets, and digital assets they host 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 ether could prove to be breakable 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 compromise the security of the Ethereum network or take the Trust’s ether, which would adversely affect the value of the Shares. Moreover, functionality of the Ethereum network may be negatively affected such that it is no longer attractive to users, thereby dampening demand for ether. Even if another digital asset other than ether were affected by similar circumstances, any reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for digital assets and therefore adversely affect the value of the Shares.
The Ethereum network has been in the process of implementing a series of software upgrades and other changes to its protocol, which were previously referred to collectively as “Ethereum 2.0” and some of which were implemented during 2022, such as “the Merge” that transitioned the Ethereum network from a proof-of-work consensus mechanism to a proof-of-stake consensus mechanism. These upgrades will result in new iterations of the Ethereum network. Many of the contemplated upgrades to the Ethereum network will include updates to material aspects of its source code. Although some of these upgrades have been successfully implemented, such as “the Merge” and the “Pectra” upgrade, which were completed in September 2022 and May 2025, respectively, there is no guarantee that there are not undiscovered flaws that will emerge in the future even in upgrades previously considered successful, and previously successful upgrades do not guarantee that future upgrades will be successful. Any such undiscovered flaws, or the failure to properly implement future changes, could have a material adverse effect on the value of ether and the value of the Shares. One completed upgrade is known as the “Shanghai” upgrade, which allows users to unstake their ether and remove it from the relevant smart contract. As a result of this or future upgrades, it is possible that significant volumes of currently locked and illiquid ether may become unlocked and sold, which could increase volatility in ether prices or have a material adverse effect on the value of ether and the value of the Shares. Upgrades currently being considered, such as “sharding” or so-called “Layer 2” solutions, could have effects that are difficult to anticipate at this time, but could—if unsuccessfully implemented, or if they contain undiscovered flaws—materially adversely impact or even effectively eliminate the value of ether, and therefore impact the price of the Shares. In addition, the acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the users and validators in a digital asset network could result in a “fork” in such network’s blockchain, resulting in the operation of multiple separate networks. See “A temporary or permanent “fork” could adversely affect the value of the Shares” for additional information.
The Ethereum network is still in the process of developing and making significant decisions that will affect policies that govern the supply and issuance of ether as well as other Ethereum network protocols. For example, the Ethereum network has on three separate occasions reduced the quantity of ether rewarded per block and may make additional changes in the future. See “Ether, Ether Markets and Regulation of Ether” for additional information. The open-source nature of many digital asset network protocols, such as the protocol for the Ethereum 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 they may lack the resources to adequately address emerging issues. Alternatively, some developers may be funded by companies whose interests are at odds with those of other participants in a particular digital asset network. If the Ethereum network does not successfully develop its policies on supply and issuance, or does so in a manner that is not attractive to network participants, there may not be sufficient network level support for such network, which could lead to a decline in the support and price of ether.
Decentralized application and smart contract developers depend on being able to obtain ether to be able to run their programs and operate their businesses. In particular, decentralized applications and smart contracts require ether in order to pay the gas fees needed to power such applications and smart contracts and execute transactions. Thus, they represent a significant source of demand for ether. Ether’s price volatility (particularly where ether prices increase), or the Ethereum network’s wider inability to meet the demands of decentralized applications and smart contracts in terms of inexpensive, reliable, and prompt transaction execution (including during congested periods), or to solve its scaling challenges or increase its throughput, may discourage such decentralized application and smart contract developers from using the Ethereum network as the foundational infrastructure layer for building their applications and smart contracts. If decentralized application and smart contract developers abandon the Ethereum blockchain for other blockchain or digital asset networks or protocols for whatever reason, the value of ether could be negatively affected.
Moreover, because digital assets, including ether, have been in existence for a relatively short period of time and are continuing to develop, there may be additional risks in the future that are impossible to predict as of the date of this Annual Report.
Digital assets represent a new and rapidly evolving industry, and the value of the Shares depends on the acceptance of ether.
The first digital asset, bitcoin, was launched in 2009. The Ethereum network launched in 2015 (though some ether was sold in a pre-mine in 2014). Ether, along with bitcoin, was one of the first cryptographic digital assets to gain global adoption and critical mass. In general, digital asset networks, including the Ethereum network and other cryptographic and algorithmic protocols governing the issuance of digital assets, 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:
Ether is only selectively accepted as a means of payment by retail and commercial outlets, and use of ether by consumers to pay such retail and commercial outlets remains limited. Banks and other established financial institutions may refuse to process funds for ether transactions; process wire transfers to or from digital asset exchanges, ether-related companies or service providers; or maintain accounts for persons or entities transacting in ether. As a result, the prices of ether may be influenced to a significant extent by speculators, thus contributing to price volatility that makes retailers less likely to accept ether in the future.
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 ether, and their or its utility as a payment system, which could decrease the price of digital assets generally or individually. Further, the lack of availability of banking services could prevent the Trust from being able to complete creations and redemptions of Baskets, the timely liquidation of ether and withdrawal of assets from the Ether Custodian even if the Sponsor determined that such liquidation was appropriate or suitable, or otherwise disrupt the Trust’s operations.
Certain privacy-preserving features have been or are expected to be introduced to digital asset networks, including the Ethereum network. For example, some prominent contributors to the Ethereum network have proposed the concept of “privacy pools,” zero-knowledge proofs, and other privacy-preserving features. If any such features are introduced to the Ethereum network, any exchanges or businesses that facilitate transactions in ether 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 or facilitate illicit financing or crime.
Users, protocol and application developers and validators may otherwise switch to or adopt certain digital assets at the expense of their engagement with other digital asset networks, which may negatively impact those networks, including the Ethereum network.
The Trust is not actively managed and will not have any formal strategy relating to the development of the Ethereum network.
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.
Beginning in the fourth quarter of 2021 and continuing to date, digital asset prices have fluctuated widely. This has led 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 declared bankruptcy, and the stablecoin TerraUSD collapsed. These events caused 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 Trading Ltd. (“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 numerous 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. FTX is also under investigation by the SEC, the Justice Department, and the Commodity Futures Trading Commission, as well as by various regulatory authorities in the Bahamas, Europe and other jurisdictions. In response to these events, the digital asset markets have experienced extreme price volatility and declines in liquidity, and regulatory and enforcement scrutiny has increased, including from the DOJ, the SEC, the CFTC, the White House and Congress. 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. The SEC also brought charges against Genesis Global Capital, LLC and Gemini Trust Company, LLC on January 12, 2023 for their alleged unregistered offer and sale of securities to retail investors. In October 2023, the New York Attorney General brought charges against Gemini, Genesis Global Capital and numerous affiliates of Genesis Global Capital, and Digital Currency Group alleging violations of law relating to the Gemini Earn program. In May 2024, the Bankruptcy Court of the Southern District of New York approved a settlement of the charges with the Genesis entities.
These events resulted in calls for heightened scrutiny and regulation of the digital asset industry, with a specific focus on digital asset trading platforms, and custodians. 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 led to further volatility in digital asset prices. In January 2025, the SEC launched the 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. In February 2025, a 60-day stay was granted in the SEC’s lawsuit against Binance in response to a joint request by both the SEC and Binance, which acknowledged that the SEC’s newly formed Crypto Task Force’s focus on developing a federal securities law framework for digital assets may resolve the case. In February 2025, Coinbase and the SEC entered into a joint stipulation to dismiss the SEC’s lawsuit with prejudice, subject to the court’s approval. Kraken has also announced that it reached an agreement in principle with the SEC to dismiss the SEC’s lawsuit, subject to formal approval by the SEC’s Commissioners. Several other digital asset market participants have also announced that the SEC informed them that the SEC was terminating its investigation or enforcement action into their firm. The final outcome of these lawsuits (to the extent not yet dismissed), their effect on the broader digital asset ecosystem and the reputational impact on industry participants, remain uncertain.
The U.S. regulatory regime—namely the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the SEC, the CFTC, FinCEN, the Office of the Comptroller of the Currency, the FDIC and the Federal Bureau of Investigation) as well as the White House have issued reports and releases concerning digital assets, including ether and digital asset markets. However, the extent and content of any forthcoming laws and regulations are not yet ascertainable with certainty, and it may not be ascertainable in the near future. It is possible that new laws and increased regulation and regulatory scrutiny may require the Trust to comply with certain regulatory regimes, which could result in new costs for the Trust. The Trust may have to devote increased time and attention to regulatory matters, which could increase costs to the Trust. New laws, regulations and regulatory actions could significantly restrict or eliminate the market for, or uses of, digital assets including ether, which could have a negative effect on the value of ether, which in turn would have a negative effect on the value of the Trust’s Shares.
These events are continuing to develop 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 to the digital asset industry as a whole.
Continued disruption and instability in the digital asset markets as these events develop, including further declines in the trading prices and liquidity of ether, could have a material adverse effect on the value of the Shares and the Shares could lose all or substantially all of their value.
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.
A concentrated number of ether wallets is believed to hold, in aggregate, a significant percentage of the ether in circulation. Moreover, it is possible that other persons or entities control multiple wallets that collectively hold a significant number of ether, 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 ether.
It may be illegal now, or in the future, to acquire, own, hold, sell or use digital assets in one or more countries.
Countries such as China, India and Russia have previously taken regulatory action to prohibit certain activities relating to digital assets and may take additional steps to prohibit or otherwise limit the use of digital assets in the future. In addition, countries may impose new or existing regulatory regimes on digital assets that are inconsistent with their intended operation. The imposition of such regulatory regimes on digital assets may have wide ranging implications on the offer, sale, trading, clearing and use of such assets, which may impede their continued adoption. Such regulatory regimes may adversely affect an investment in the Shares.
For example, in the United States, the SEC has been active in asserting its jurisdiction over digital assets. Specifically, the SEC and its staff have taken the position that certain digital assets fall within the definition of a security under the U.S. federal securities laws, beginning with the June 2017 Report of Investigation that concluded that “DAO Tokens” were investment contracts, because they were issued with the purpose of raising funds for investing in digital assets. The bankruptcy filings of FTX, the third largest digital asset trading platform by volume at the time of its filing, and other bankruptcy filings of crypto companies throughout calendar year 2022 increased the regulatory scrutiny of the digital asset industry. In 2023, the SEC charged each of Coinbase and Binance with operating its digital asset trading platform as an unregistered national securities exchange, broker and clearing agency, asserting that certain assets supported on each trading platform are securities. The SEC also brought similar charges against Kraken, alleging that it operated as an unregistered securities exchange, brokerage and clearing agency. While the SEC has entered into joint stipulations with Coinbase, Binance and Kraken to dismiss the SEC’s lawsuits with prejudice, subject to court approval, the final outcome of these lawsuits, and other investigations or enforcement actions with other digital asset market participants (to the extent not yet dismissed), their effect on the broader digital asset ecosystem and the reputational impact on industry participants remain uncertain. Furthermore, 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 list.
In addition, Congress continues to consider potential legislation designed to comprehensively regulate the digital asset industry in the U.S. If enacted, such new legislation could dramatically restructure the regulatory framework within which digital assets may be offered, sold, traded, cleared and used in the U.S. Such a restructuring could affect the viability of digital assets in the U.S. and accordingly adversely affect an investment in the Shares.
Risks Associated with Ether and the Ethereum Network
The Ethereum network and its native digital asset, ether, are a relatively new technological innovation with a limited operating history.
Ether has a relatively limited history of existence and operations compared to traditional commodities. There is a limited established performance record for the price of ether and, in turn, a limited basis for evaluating an investment in ether. Although past performance is not necessarily indicative of future result, if ether had a more established history, such history might (or might not) provide investors with more information on which to evaluate an investment in the trust.
Changes in the governance of a digital asset network may not receive sufficient support from users and validators, which may negatively affect that digital asset network’s ability to grow and respond to challenges.
The governance of decentralized networks, such as the Ethereum network, is by voluntary consensus and open competition. As a result, there may be a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network’s utility and ability to grow and face challenges. The foregoing notwithstanding, the protocols for some decentralized networks, such as the Ethereum network, are informally managed by a group of core developers that propose amendments to the relevant network’s source code. Core developers’ roles evolve over time, largely based on self-determined participation. If a significant majority of users and validators adopt amendments to a decentralized network based on the proposals of such core developers, such network will be subject to new protocols that may adversely affect the value of the relevant digital asset.
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, including the Ethereum network, face significant scaling challenges due to the fact that public blockchains generally face a tradeoff between security, scalability, and decentralization. This is commonly known as the Blockchain Trilemma under which only two of the three ideal blockchain features have been attainable. One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. This is one reason why security and decentralization is the most popular pairing. In practice, this typically means that every single validator on a given digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible for maintaining a copy of the entire state of the network. As a result, a digital asset network may be limited in the number of transactions it can process by the fact that all validators participate in validating in each block and the capabilities of each single fully participating node.
As of December 31, 2025, the Ethereum network handled approximately 24.7 transactions per second. 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. For example, the Ethereum network has been, at times, at capacity, which has led to increased transaction fees. In December 2017, the popularity of the blockchain-based game Cryptokitties led to significant network congestion on the Ethereum network. The game, which allows players to trade and create virtual kitties, represented by NFTs, was reported by some sources to have accounted for more than 10% of the entire Ethereum network traffic at the time causing increases in transaction fees and delays in transaction processing times, and driving Ethereum network traffic to a reported then all-time high. Since January 1, 2020, ether transaction fees have increased from $0.08 average daily transaction fees per ether transaction, to a high of up to approximately $200 (in ether) average daily transaction fees per transaction on April 30, 2022. Transaction fees on the Ethereum network have fluctuated significantly over time and may continue to do so, including during periods of network congestion. Elevated fees and slower settlement can reduce demand for network usage and adversely affect ether’s price. Increased fees and decreased settlement speeds could preclude certain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether, which could adversely impact the value of the Shares.
In the second half of 2020, the Ethereum network began the first of several stages of an upgrade culminating in the Merge. The Merge amended the Ethereum network’s consensus mechanism to include a process known as proof-of-stake, and was intended to address the perceived shortcomings of the proof-of-work consensus mechanism in terms of labor intensity and duplicative computational effort expended by validators (known under proof-of-work as “miners”) who did not win the race, under proof-of-work, to be the first in time to solve the cryptographic puzzle that would allow them to be the only validator permitted to validate the block and receive the resulting block reward (which was given only to the first validator to successfully solve the puzzle and hash a given block, and not to others). Instead, under proof-of-stake, a single validator is randomly selected to solve the cryptographic puzzle needed to validate a block, which it proposes to a committee of other validators, who vote for whether to include the block (or not), which reduces the computational work performed—and energy expended—to validate each block compared to proof-of-work. See “Ether, Ether Markets and Regulation of Ether” for additional information.
Following the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput and scalability and also to improve existing or next generation uses. Future upgrades to the Ethereum protocol and Ethereum blockchain to address scaling issues—such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network demand—have been discussed by network participants, such as sharding. The purpose of sharding is to increase scalability of the Ethereum blockchain by splitting the blockchain into subsections, called shards, and dividing validation responsibility so that a defined subset of validators would be responsible for each shard, rather than all validators being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. However, there appears to be uncertainty and a lack of existing widespread consensus among network participants about how to solve the scaling challenges faced by the Ethereum network.
The rapid development of other competing scalability solutions, such as those that would rely on handling the bulk of computational work relating to transactions or smart contracts and DApps outside of the main Ethereum network and Ethereum blockchain, has caused alternatives to sharding to emerge. “Layer 2” is a collective term for solutions that are designed to help increase throughput and reduce transaction fees by processing or executing transactions off the main Ethereum network (known as “Layer 1”) and then attempting to take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by posting the transactions executed on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer 2 technologies and implementations. For example, “rollups” perform transaction execution outside the Layer 1 blockchain and then post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. “Zero knowledge rollups” are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactions themselves). By contrast, “optimistic rollups” assume transactions are valid by default and only run computation in the event of a challenge. Other proposed Layer 2 scaling solutions include, among others, “state channels,” which are designed to allow participants to run a large number of transactions on the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening the state channel, and the transaction closing the channel); and “side chains,” in which an entire Layer 2 blockchain network with capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum blockchain and allows smart contracts and DApps to run on the Layer 2 side chain without burdening the main Layer 1 network. To date, the Ethereum network community has not coalesced overwhelmingly around any particular Layer 2 solution, though this could change.
There is no guarantee that any of the mechanisms in place or being explored for increasing the speed and throughput of settlement of Ethereum network transactions will be effective, or how long these mechanisms will take to become effective, which could cause the Ethereum network to not adequately resolve scaling challenges and could adversely impact the adoption of ether and the Ethereum network and the value of the Shares. There is no guarantee that any potential scaling solution, whether a change to the Layer 1 blockchain like sharding or the introduction of a Layer 2 solution like rollups, state channels or side chains, will achieve widespread adoption. It is possible that proposed changes to the Layer 1 Ethereum network could divide the community, potentially even causing a hard fork, or that the decentralized governance of the Ethereum network could cause network participants to fail to coalesce overwhelmingly around any particular solution, resulting in the Ethereum network suffering reduced adoption or causing users or validators to migrate to other blockchain networks. It is also possible that scaling solutions could fail to work as intended or could introduce bugs, coding defects or flaws, security risks, or other problems that could cause the Ethereum network to suffer operational disruptions. Any of the foregoing could adversely affect the price of ether or the value of the Shares of the Trust.
If a malicious actor or botnet obtains control of more than 50% of the validating stake on the Ethereum network, or otherwise obtains control over the Ethereum network through its influence over core developers or otherwise, such actor or botnet could manipulate the Ethereum blockchain, which could adversely affect the value of the Shares or the ability of the Trust to operate.
All networked systems are vulnerable to various kinds of attacks. As with any computer network, the Ethereum network contains certain flaws. For example, the Ethereum 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 staked ether, a malicious actor could 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 staked ether, a malicious actor would be able to gain full control of the network and the ability to manipulate the blockchain, potentially for an extended period or even permanently.
“>66% attack” where, if a validator or group of validators acting in concert were to gain control of more than 66% of the staked ether, a malicious actor could permanently and irreversibly manipulate the blockchain.
The success of these types of attacks depends on the malicious actor’s ability to gather an enormous amount of ether and other resources, which serves as the primary practical defense of the network. If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the validating power on the Ethereum network, it may be able to alter the Ethereum blockchain on which transactions in ether rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could also control, exclude or modify the ordering of transactions. Although the malicious actor or botnet would not be able to generate new tokens or transactions using such control, it could “double-spend” its own tokens (i.e., spend the same tokens in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such malicious actor or botnet did not yield its control of the validating power on the Ethereum network or the Ethereum community did not reject the fraudulent blocks as malicious, reversing any changes made to the Ethereum blockchain may not be possible. Further, a malicious actor or botnet could create a flood of transactions in order to slow down the Ethereum 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 $5.0 million and $1.0 million.
In addition, in May 2019, the Bitcoin Cash network experienced a 51% 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 proof-of-stake Ethereum network, which could negatively impact the value of ether and the value of the Shares.
Although there are no known reports of malicious activity on, or control of, the Ethereum network, it is believed that certain groups of coordinating or connected ether holders may together have more than 50% of outstanding ether which, if staked and if the users run validators, would permit them to exert authority over the validation of ether transactions. This risk is heightened if over 50% of the processing 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 ether, the feasibility of a malicious actor obtaining control of the validating power on the Ethereum network will increase, which may adversely affect the value of the Shares.
Management's Discussion & Analysis (MD&A)
New heading “The Year Ended December 31, 2025”
Largest changes
The Administrator calculates the Trust’s NAV once each Exchange trading day. The Trust’s NAV for a normal trading day is released after 4:00 p.m. Eastern time (“EST”). Trading during the core trading session on the Exchange typically closes at 4:00 p.m. EST. However, the Trust’s NAVs are not officially struck until after 4:00 p.m. EST. The pause after 4:00 p.m. EST provides an opportunity for the Sponsor to algorithmically detect, flag, investigate, and correct unusual pricing should it occur. The Sponsor has established a Valuation and Liquidity Committee to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Valuation and Liquidity Committee. If the Valuation and Liquidity Committee determines in good faith that the Index does not reflect an accurate ether price, then the Valuation and Liquidity Committee instructs the Administrator to employ an alternative method to determine the fair value of the Trust’s assets. In determining an alternative fair value method, the Valuation and Liquidity Committee generally considers such criteria as observable market-based inputs, including market quotations and last sale information from third-party pricing services and/or trading platforms on which ether are traded. The Valuation and Liquidity Committee’s selection of third-party pricing services used considers the qualifications, experience, and history of the pricing services and whether their valuation methodologies and procedures are reasonably designed to produce prices that reflect fair value under the prevailing market conditions.see in full comparison
“In addition, in order to provide updated information relating to the Trust for use by Shareholders and market professionals, a third-party financial data provider calculates and disseminates throughout the core trading session on each trading day an updated intraday indicative value (“IIV”). The IIV is calculated based on the Trust’s ether holdings and any other assets expected to comprise that day’s Trust’s NAV calculation. The third-party financial data provider uses the Blockstream Crypto Data Feed Streaming Level 1 as the pricing source for the spot ether. …”see in full comparison
The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of Ether and Computation of Net Asset Value” sections of Item 7 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share As of 4:00 p.m., EST, on the last business day of the quarter ended December 31,see in full comparison2024,2025, the Trust’s total value of ether based on the Index Price (non-GAAP methodology) was$1,577,725,418$2,204,520,518, a difference of $5,704,911 to the GAAP value, which was $2,210,225,429, and the total market value of the Trust’s ether based on the price of an ether at 4:00 p.m., EST, in the principal market (non-GAAP methodology) was$1,575,833,700.$2,210,515,510, a difference of $290,081 to the GAAP value, which was $2,210,225,429.
“Prior to July 23, 2024, the Trust had no operations other than matters relating to the sale and issuance of one share of the Trust to an affiliate for an aggregate purchase price of $40 on May 24, 2024. On June 4, 2024, the seed share was redeemed for cash and the Seed Capital Investor purchased 125,000 Shares at a per-Share price of $38 (the “Seed Baskets”). On June 4, 2024, the Trust purchased 1,250 ether with the proceeds of the Seed Baskets. On July 22, 2024, the Trust’s registration statement was declared effective. …”see in full comparison
“The Trust’s net assets increased from $1.6 billion as of December 31, 2024, to $2.2 billion as of December 31, 2025. …”see in full comparison
Full comparison: every changed paragraph (33)
• taking the fair market value of its total assets based on the volume-weighted median price of ether used for the calculation of the Index;
• subtracting any liabilities; and
•subtracting any liabilities; and dividing that total by the total number of outstanding Shares.
The Administrator calculates the Trust’s NAV once each Exchange trading day. The Trust’s NAV for a normal trading day is released after 4:00 p.m. Eastern time (“EST”). Trading during the core trading session on the Exchange typically closes at 4:00 p.m. EST. However, the Trust’s NAVs are not officially struck until after 4:00 p.m. EST. The pause after 4:00 p.m. EST provides an opportunity for the Sponsor to algorithmically detect, flag, investigate, and correct unusual pricing should it occur. The Sponsor has established a Valuation and Liquidity Committee to carry out the day-to-day fair valuation responsibilities and has adopted policies and procedures to govern the fair valuation process and the activities of the Valuation and Liquidity Committee. If the Valuation and Liquidity Committee determines in good faith that the Index does not reflect an accurate ether price, then the Valuation and Liquidity Committee instructs the Administrator to employ an alternative method to determine the fair value of the Trust’s assets. In determining an alternative fair value method, the Valuation and Liquidity Committee generally considers such criteria as observable market-based inputs, including market quotations and last sale information from third-party pricing services and/or trading platforms on which ether are traded. The Valuation and Liquidity Committee’s selection of third-party pricing services used considers the qualifications, experience, and history of the pricing services and whether their valuation methodologies and procedures are reasonably designed to produce prices that reflect fair value under the prevailing market conditions.
In addition, in order to provide updated information relating to the Trust for use by Shareholders and market professionals, a third-party financial data provider calculates and disseminates throughout the core trading session on each trading day an updated intraday indicative value (“IIV”). The IIV is calculated based on the Trust’s ether holdings and any other assets expected to comprise that day’s Trust’s NAV calculation. The third-party financial data provider uses the Blockstream Crypto Data Feed Streaming Level 1 as the pricing source for the spot ether. The Blockstream Crypto Data Feed Streaming Level 1 calculates an average of current ether price levels of the ether trading platforms that are available on its feed. The Trust will provide an IIV per Share updated every 15 seconds, as calculated by the Exchange or a third-party financial data provider during the Exchange’s regular trading hours of 9:30 a.m. to 4:00 p.m. EST (“Regular Trading Hours”). The IIV disseminated during Regular Trading Hours should not be viewed as an actual real-time update of the Trust’s NAV, which will be calculated only once at the end of each trading day as described herein.
Results of OperationsOperation
The Trust’s commencement of operations was July 23, 2024. The Trust had no operations prior to July 23, 2024, other than matters relating to its organization and the registration of the Shares under the 1933 Act.
The Year Ended December 31, 2025
The Trust’s net assets increased from $1.6 billion as of December 31, 2024, to $2.2 billion as of December 31, 2025. The change in the Trust's net assets resulted primarily from an increase in outstanding Shares, which rose from 47,175,000 as of December 31, 2024 to 74,550,000 as of December 31, 2025, as a result of 126,050,000 Shares (5,042 Baskets), being issued exceeding 98,675,000 Shares (3,947 Baskets) being redeemed during the year ended December 31, 2025, partially offset by a decrease in the price of ether, which fell 10.86% from $3,333.60 as of December 31, 2024 to $2,971.55 as of December 31, 2025.
The NAV per Share decreased 11.08% from $33.34 as of December 31, 2024 to $29.64 as of December 31, 2025. The Trust’s NAV per Share decreased 11.60% from $33.44 as of December 31, 2024 to $29.56 as of December 31, 2025.
The Trust’s NAV per Share of $48.12 at August 22, 2025, was the highest during the year ended December 31, 2025, compared with a low of $14.64 at April 8, 2025.
During the year ended December 31, 2025, the quantity of ether owned by the Trust and held by the ether custodian increased from 471,750 as of December 31, 2024, to 743,795 as of December 31, 2025. The increase in quantity is the result of the net increase from capital share transactions.
The net decrease in net assets resulting from operations for the year ended December 31, 2025, was $0.4 billion, resulting from a net unrealized appreciation on investment in ether of $0.1 billion and a net realized loss of $0.5 billion from the sale of the investment in ether for the redemption of Shares.
Prior to July 23, 2024, the Trust had no operations other than matters relating to the sale and issuance of one share of the Trust to an affiliate for an aggregate purchase price of $40 on May 24, 2024. On June 4, 2024, the seed share was redeemed for cash and the Seed Capital Investor purchased 125,000 Shares at a per-Share price of $38 (the “Seed Baskets”). On June 4, 2024, the Trust purchased 1,250 ether with the proceeds of the Seed Baskets. On July 22, 2024, the Trust’s registration statement was declared effective. On July 23, 2024, the Trust commenced operations and Shares commenced trading on the Exchange.
The Trust’s net assets increased from $4.4 million onas of June 30, 2024, to $1.6 billion onas of December 31, 2024. The change in the Trust’s net assets was driven by an increase in outstanding Shares, which rose from 125,000 onas of June 30, 2024 to 47,175,000 onas of December 31, 2024 as a result of 54,575,000 Shares (2,183 Baskets) being issued and 7,525,000 Shares (301 Baskets) being redeemed during the period July 23, 2024 (commencement of operations) through December 31, 2024 offset by a decrease in the price of ether, which fell 3.34% from $3,448.77 onas of July 23, 2024 to $3,333.60 onas of December 31, 2024.
The NAV per Share decreased 4.39% from $34.87 as of July 23, 2024 to $33.34 as of December 31, 2024. The Trust’s NAV per Share decreased 3.88% from $34.79 onas of July 23, 2024 to $33.44 onas of December 31, 2024 (last business day).2024.
During the period ended December 31, 2024, the quantity of ether owned by the Trust and held by the ether custodian increased from 1,250 onas of June 30, 2024, to 471,750 onas of December 31, 2024. The increase in quantity resultedis the result of the net increase from using net cash proceeds received from the increase in capital transactionsshare to purchase ether.transactions.
In exchange for the Sponsor Fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. The Sponsor contractually waived the Sponsor Fee until December 31, 2024,2024. andOn willJanuary accrue1, 2025, the Sponsor Fee began accruing at an annual rate of 0.25% of the Trust’s Ether Holdings after the Waiver period ends.Holdings.
(1) The Trust performed an assessment of the principal market at 11:59:59 p.m., EST, on December 31, 2024.2025.
(2) The NAV per Share was calculated using the fair value of ether based on the principal market price at 11:59:59 p.m., EST, on December 31, 2024.
(3) The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of Ether and Computation of Net Asset Value” sections of Item 7 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share. The ether spot markets included in the Index as of the last business day of the quarterperiod were Bitstamp, Coinbase, Crypto.com, Gemini, itBit, Kraken, and LMAX Digital.
The NAV per Share was calculated using the fair value of ether based on the principal market price at 11:59:59 p.m., EST, on December 31, 2025.
(4)
The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of Ether and Computation of Net Asset Value” sections of Item 7 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share.
The Trust performed an assessment of the principal market at 11:59:59 p.m., EST, on December 31, 2024.
Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The ether spot markets included in the Index as of the last business day of the period were Bitstamp, Coinbase, Gemini, itBit, Kraken, and LMAX Digital.
The NAV per Share was calculated using the fair value of ether based on the principal market price at 11:59:59 p.m., EST, on December 31, 2024.
(4)
The Trust’s NAV per Share is derived from the Index Price as represented by the Index as of 4:00 p.m., EST, on the last business day of the period. The Trust’s NAV per Share is calculated using a non-GAAP methodology. Refer to the “Overview of the Trust” and “Valuation of Ether and Computation of Net Asset Value” sections of Item 7 herein for a description of the Index methodology and calculation of the Trust’s NAV per Share As of 4:00 p.m., EST, on the last business day of the quarter ended December 31, 2024,2025, the Trust’s total value of ether based on the Index Price (non-GAAP methodology) was $1,577,725,418$2,204,520,518, a difference of $5,704,911 to the GAAP value, which was $2,210,225,429, and the total market value of the Trust’s ether based on the price of an ether at 4:00 p.m., EST, in the principal market (non-GAAP methodology) was $1,575,833,700.$2,210,515,510, a difference of $290,081 to the GAAP value, which was $2,210,225,429.
The following chart illustrates the movement in the Index Price, the principal market price, and the Trust’s NAV per Share fromduring Julythe 23,year 2024 (commencement of operations) toended December 31, 2024.2025.
During the periodyear from July 23, 2024, toended December 31, 2024,2025, the Index Price has ranged from $2,224.34$1,465.30 on SeptemberApril 6,8, 2024,2025, to $4,075.14$4,822.31 on DecemberAugust 6,24, 2024.2025. The Sponsor has not observed a material difference between the Index Price and average prices from the constituent ether spot markets individually or as a group.
During the periodyear from July 23, 2024, toended December 31, 2024,2025, the 11:59:59 p.m. EST market price of ether, as reported on the Trust’s principal market, has ranged from $2,237.641,417.92 on SeptemberApril 6,8, 2024,2025, to $4,005.79$4,787.51 on DecemberAugust 16,23, 2024.2025.
Shares trade in the secondary market on the Exchange. Shares may trade in the secondary market at prices that are lower or higher relative to the Trust’s NAV per Share. The amount of the discount or premium in the trading price relative to the Trust’s NAV per Share may be influenced by various factors, including the number of Shareholders who seek to purchase or sell Shares in the secondary market and the liquidity of ether. The following chart sets out the historical closing prices for the Shares as reported by the Exchange and the Trust’s NAV per Share fromduring Julythe 23,year 2024, toended December 31, 2024.2025.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A. Risk Factors of the Fund's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 25, 2026.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Results of Operations”
New heading “The Six Months Ended June 30, 2026”
New heading “The Six Months Ended June 30, 2025”
Largest changes
“The Trust’s net assets decreased from approximately $2.2 billion as of December 31, 2025, to $0.8 billion as of June 30, 2026. The change in the Trust’s net assets was driven by a decrease in outstanding Shares, which decreased from 74,550,000 as of December 31, 2025 to 47,800,000 as of June 30, 2026 as a result of 46,075,000 Shares (1,843 Baskets) being created and 72,825,000 Shares (2,913 Baskets) being redeemed, coupled with a decrease in the price of ether, which decreased 46.39% from $2,971.55 as of December 31, 2025 to $1,593.01 as of June 30, 2026.”see in full comparison
The Trust’s net assetssee in full comparisondecreasedincreased from approximately$1.6 billion as of December 31, 2024, to$0.7 billion as of March 31, 2025, to $1.2 billion as of June 30, 2025. The change in the Trust’s net assets was driven byaandecreaseincrease in outstanding Shares, whichfellrose from47,175,000 as of December 31, 2024 to40,025,000 as of March 31, 2025 to 49,925,000 as of June 30, 2025 as a result of19,500,00024,200,000 Shares (780968 Baskets) beingredeemedcreated and12,350,00014,300,000 Shares (494572 Baskets) beingcreated,redeemed, coupled withaandecreaseincrease in the price of ether, whichfellrose44.96%35.48% from$3,333.60 as of December 31, 2024 to$1,834.80 as of March 31, 2025 to $2,485.81 as of June 30, 2025.
“The Trust’s net assets decreased from approximately $1.6 billion as of December 31, 2024, to $1.2 billion as of June 30, 2025. The change in the Trust’s net assets was driven by an increase in outstanding Shares, which rose from 47,175,000 as of December 31, 2024 to 49,925,000 as of June 30, 2025 as a result of 36,550,000 Shares (1,462 Baskets) being created and 33,800,000 Shares (1,352 Baskets) being redeemed, coupled with a decrease in the price of ether, which fell 25.43% from $3,333.60 as of December 31, 2024 to $2,485.81 as of June 30, 2025.”see in full comparison
Full comparison: every changed paragraph (36)
The Trust is passively managed and does not pursue active management investment strategies.strategies, utilize leverage, or invest in derivatives in seeking to meet its investment objective. The Sponsor believes that the Shares are designed to provide investors with a cost-effective and convenient way to invest in ether without purchasing, holding and trading ether directly. The Trust sells and redeems Shares only with Authorized Participants in exchange for ether or cash and only in blocks of 25,000 Shares.Shares (a "Basket").
Results of Operations
The Quarter Ended MarchJune 31,30, 2026
The Trust’s net assets decreased from approximately $2.2 billion as of December 31, 2025, to $1.2 billion as of March 31, 2026, to $0.8 billion as of June 30, 2026. The change in the Trust’s net assets was driven by a decrease in outstanding Shares, which felldecreased from 74,550,000 as of December 31, 2025 to 57,850,000 as of March 31, 2026 to 47,800,000 as of June 30, 2026 as a result of 29,000,00017,075,000 Shares (1,160683 Baskets) being created and 45,700,00027,125,000 Shares (1,8281,085 Baskets) being redeemed, coupled with a decrease in the price of ether, which felldecreased 29.27%24.21% from $2,971.55 as of December 31, 2025 to $2,101.84 as of March 31, 2026 to $1,593.01 as of June 30, 2026.
The NAV per Share decreased 29.31%24.25% from $29.64 as of December 31, 2025 to $20.95 as of March 31, 2026 to $15.87 as of June 30, 2026. The Trust’s NAV per Share decreased 29.26%24.87% from $29.56 as of December 31, 2025 to $20.91 as of March 31, 2026 to $15.71 as of June 30, 2026.
The Trust’s NAV per Share of $33.67$24.21 at JanuaryApril 14,17, 2026, was the highest during the three months ended MarchJune 31,30, 2026, compared with a low of $18.49$15.47 at FebruaryJune 23,5, 2026.
The quantity of ether owned by the Trust and held by the ether custodian decreased from 743,795 as of December 31, 2025, to 576,821 as of March 31, 2026, to 476,311 as of June 30, 2026. The decrease in quantity resulted from net redemptions of Shares during the quarter which corresponded to net sales of ether.
The net decrease in net assets resulting from operations for the three months ended MarchJune 31,30, 2026, was approximately $0.7$0.3 billion, primarily resulting from a net change in unrealized depreciation on investment in ether of approximately $0.4$0.1 billion and a net realized loss of $0.3$0.1 billion from the sale of the investment in ether for the redemption of Shares.
The Quarter Ended MarchJune 31,30, 2025
The Trust’s net assets decreasedincreased from approximately $1.6 billion as of December 31, 2024, to $0.7 billion as of March 31, 2025, to $1.2 billion as of June 30, 2025. The change in the Trust’s net assets was driven by aan decreaseincrease in outstanding Shares, which fellrose from 47,175,000 as of December 31, 2024 to 40,025,000 as of March 31, 2025 to 49,925,000 as of June 30, 2025 as a result of 19,500,00024,200,000 Shares (780968 Baskets) being redeemedcreated and 12,350,00014,300,000 Shares (494572 Baskets) being created,redeemed, coupled with aan decreaseincrease in the price of ether, which fellrose 44.96%35.48% from $3,333.60 as of December 31, 2024 to $1,834.80 as of March 31, 2025 to $2,485.81 as of June 30, 2025.
The Trust’s NAV per Share increased 36.69% from $18.34 on March 31, 2025 to $25.07 on June 30, 2025.
The NAV per Share decreased 44.99% from $33.34 as of December 31, 2024 to $18.34 as of March 31, 2025. The Trust’s NAV per Share decreased 45.16% from $33.44 on December 31, 2024 to $18.34 on March 31, 2025.
The Trust’s NAV per Share of $36.93$28.13 at JanuaryJune 06,11, 2025, was the highest during the three months ended MarchJune 31,30, 2025, compared with a low of $18.34$14.64 at MarchApril 31,8, 2025.
The quantity of ether owned by the Trust and held by the ether custodian decreasedincreased from 471,750 as of December 31, 2024, to 400,086 as of March 31, 2025, to 498,722 as of June 30, 2025. The decreaseincrease in quantity resulted from using net redemptionscash ofproceeds Sharesreceived duringfrom the quarterincrease whichin correspondedcapital transactions to net sales ofpurchase ether.
The net decreaseincrease in net assets resulting from operations for the three months ended MarchJune 31,30, 2025, was $0.7approximately $0.3 billion, primarily resulting from a net unrealized depreciationappreciation on investment in ether of $0.5$0.4 billion and a net realized loss of $0.2approximately $0.1 billion from the sale of the investment in ether for the redemption of Shares.
The Six Months Ended June 30, 2026
The Trust’s net assets decreased from approximately $2.2 billion as of December 31, 2025, to $0.8 billion as of June 30, 2026. The change in the Trust’s net assets was driven by a decrease in outstanding Shares, which decreased from 74,550,000 as of December 31, 2025 to 47,800,000 as of June 30, 2026 as a result of 46,075,000 Shares (1,843 Baskets) being created and 72,825,000 Shares (2,913 Baskets) being redeemed, coupled with a decrease in the price of ether, which decreased 46.39% from $2,971.55 as of December 31, 2025 to $1,593.01 as of June 30, 2026.
The NAV per Share decreased 46.46% from $29.64 as of December 31, 2025 to $15.87 as of June 30, 2026. The Trust’s NAV per Share decreased 46.85% from $29.56 as of December 31, 2025 to $15.71 as of June 30, 2026.
The Trust’s NAV per Share of $33.67 at January 14, 2026, was the highest during the six months ended June 30, 2026, compared with a low of $15.47 at June 5, 2026.
The quantity of ether owned by the Trust and held by the ether custodian decreased from 743,795 as of December 31, 2025, to 476,311 as of June 30, 2026. The decrease in quantity is the result from net redemptions of Shares during the six months which corresponded to net sales of ether.
The net decrease in net assets resulting from operations for the six months ended June 30, 2026, was $0.9 billion, primarily resulting from a net unrealized depreciation on investment in ether of $0.5 billion and a net realized loss of approximately $0.4 billion from the sale of the investment in ether for the redemption of Shares.
The Six Months Ended June 30, 2025
The Trust’s net assets decreased from approximately $1.6 billion as of December 31, 2024, to $1.2 billion as of June 30, 2025. The change in the Trust’s net assets was driven by an increase in outstanding Shares, which rose from 47,175,000 as of December 31, 2024 to 49,925,000 as of June 30, 2025 as a result of 36,550,000 Shares (1,462 Baskets) being created and 33,800,000 Shares (1,352 Baskets) being redeemed, coupled with a decrease in the price of ether, which fell 25.43% from $3,333.60 as of December 31, 2024 to $2,485.81 as of June 30, 2025.
The Trust’s NAV per Share decreased 25.03% from $33.44 on December 31, 2024 to $25.07 on June 30, 2025.
The Trust’s NAV per Share of $36.93 at January 6, 2025, was the highest during the six months ended June 30, 2025, compared with a low of $14.64 at April 8, 2025.
The quantity of ether owned by the Trust and held by the ether custodian increased from 471,750 as of December 31, 2024, to 498,722 as of June 30, 2025. The increase in quantity resulted from the issuances of Shares, which were partially offset from ether transferred to pay the Sponsor fee during the six months ended June 30, 2025.
The net decrease in net assets resulting from operations for the six months ended June 30, 2025, was $0.4 billion, primarily resulting from a net unrealized depreciation on investment in ether of $0.1 billion and a net realized loss of $0.3 billion from the sale of the investment in ether for the redemption of Shares.
Sponsor Fee payments made to the Sponsor are calculated as a fixed percentage of 0.25% of the Trust’s Ether Holdings. As such, the Sponsor cannot anticipate the payment amounts that will be required under these arrangements for future periods as the Trust’s Ether Holdings are not known until a future date.
The Trust performed an assessment of the principal market at 11:59:59 p.m., EST, on MarchJune 31,30, 2026.
The NAV per Share was calculated using the fair value of ether based on the principal market price at 11:59:59 p.m., EST, on MarchJune 31,30, 2026.
As of 4:00 p.m., EST, on the last business day of the three monthsquarter ended MarchJune 31,30, 2026, the Trust’s total value of ether based on the Index Price (non-GAAP methodology) was $1,209,767,694,$751,090,460, a difference of $2,618,770$7,678,137 to the GAAP value, which was $1,212,386,464,$758,768,597, and the total market value of the Trust’s ether based on the price of ether at 4:00 p.m., EST, in the principal market was $1,208,567,905,$751,871,611, a difference of $3,818,559$6,896,986 to the GAAP value, which was $1,212,386,464.$758,768,597.
As of 4:00 p.m., EST, on the last business day of the year ended December 31, 2025, the Trust’s total value of ether based on the Index Price (non-GAAP methodology) was $2,204,520,518, a difference of $5,704,911 to the GAAP value, which was $2,210,225,429, and the total market value of the Trust’s ether based on the price of an ether at 4:00 p.m., EST, in the principal market (non-GAAP methodology) was $2,210,515,510, a difference of $290,081 to the GAAP value, which was $2,210,225,429.
The following chart illustrates the movement in the Index Price, the principal market price, and the Trust’s NAV per Share during the threesix months ended MarchJune 31,30, 2026.
During the threesix months ended MarchJune 31,30, 2026, the Index Price has ranged from $1,853.94$1,553.00 on FebruaryJune 23,5, 2026, to $3,375.83 on January 14, 2026. The Sponsor has not observed a material difference between the Index Price and average prices from the constituent ether spot markets individually or as a group.
During the threesix months ended MarchJune 31,30, 2026, the 11:59:59 p.m. EST market price of ether, as reported on the Trust’s principal market, has ranged from $1,830.25$1,556.21 on FebruaryJune 23,25, 2026, to $3,337.73 on January 14,13, 2026.
Shares trade in the secondary market on the Exchange. Shares may trade in the secondary market at prices that are lower or higher relative to the Trust’s NAV per Share. The amount of the discount or premium in the trading price relative to the Trust’s NAV per Share may be influenced by various factors, including the number of Shareholders who seek to purchase or sell Shares in the secondary market and the liquidity of ether. The following chart sets out the historical closing prices for the Shares as reported by the Exchange and the Trust’s NAV per Share during the threesix months ended MarchJune 31,30, 2026.
FETH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding FETH (13F)
None of the 59 investors we track reported a position in their latest 13F.