QETH 10-K & 10-Q changes, risk factors and insider trading

An investment in Shares involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Report and the Trust’s prospectus dated JulyOctober 22,1, 20242025 (the “Prospectus”), before making a decision to invest in Shares. If any of the following risks occur, the business, financial condition and results of operations of the Trust may be adversely affected.

In addition,While, regulatory and enforcement scrutiny increased through the end of digital assets has increased,2024, including from, among others, the Department of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities.authorities, Developmentsthe current U.S. presidential administration has signaled its desire to strengthen U.S. leadership in the regulationdigital assets space through the issuance of executive orders and the establishment of an interagency working group that is tasked with proposing a regulatory framework governing the issuance and operation of digital assets arein ongoing.the ForUnited example,States in Julyearly 2023,2025. Meanwhile, the U.S.SEC Districtofficially Courtrescinded forStaff theAccounting SouthernBulletin District121 ofand Newestablished Yorka rulednew “Crypto Task Force” focused on providing clarity on the SEC’sapplication actionof againstthe Ripplefederal Labs,securities Inc.laws Theto courtdigital found that offersassets and salescollaborating with the digital assets industry and the public towards establishing an appropriate regulatory framework. Certain members of XRP,Congress have also outlined a proposed bicameral roadmap for digital token,asset legislation to institutionsaddress andinconsistencies sophisticatedin individualsdigital constitutedasset securitiesclassifications. transactions,In but that offers and sales of XRP on crypto trading platforms, distributions to employees, and other third-party developers were not securities transactions. More recently,2023 the D.C. Circuit Court found that the SEC’s denial of the Grayscale Bitcoin Trust’s listing was “arbitrary and capricious” under the Administrative Procedures Act in light of the SEC’s approval of two similar bitcoin futures-based exchange-traded products (“ETPs”). In the immediate aftermath of this court decision, the price of bitcoin increased from nearly $26,000 to over $28,100. ItBitcoin and other digital assets, including ether, continued to reach record highs during 2025 before retreating. The exact timeline and impact of these recent regulatory developments on the Trust’s business is uncertain and it is not possible to predict at this time allwhat ofrisks, theif risksany, that regulatory developments may pose to the Trust, its service providers or to the digital asset industry as a whole.

Given the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact on the broader digital asset market, including the market for ether. Because a large portion of the digital asset market still depends on stablecoins such as Tether and USDC, there is a risk that a disorderly de-pegging or a “run” on Tether or USDC could lead to dramatic market volatility in digital assets more broadly. VolatilityIn the United States, the GENIUS Act, which establishes a federal regulatory framework for stablecoins, was passed by the U.S. Congress and signed into law by President Trump on July 18, 2025. Although increasing regulatory clarity for stablecoins is generally viewed in a positive light, volatility in stablecoins, operational issues with stablecoins (for example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins or potential manipulative activity when unbacked stablecoins are used to pay for other digital assets (including ether), or regulatory compliance concerns about stablecoin issuers or intermediaries, such as trading platforms, that support stablecoins, could impact individuals’ willingness to trade on trading platforms that rely on stablecoins, reduce liquidity in the ether market, and affect the value of ether, and in turn impact an investment in the Shares.

ItAt this time, it is not possible to predict with certainty whether, or when, any of these legislative and regulatory developments will lead to Congress granting additional authorities to the SEC or other regulators, what the nature of such additional authorities might be, how they might impact the ability of digital asset markets to function or how any new regulations or changes to existing regulations might impact the value of digital assets generally and etherbitcoin held by the Trust specifically. The consequences of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on the Trust and the Shares.

While the Sponsor, its management team, and the Execution Agent operate other investment vehicles that, like the Trust, specifically invest in digital assets, including a spot bitcoin and spot solana exchange-traded product,products, they have a limited track record. This limited experience poses several potential risks to the effective management and operation of the Trust. Digital assets, such as ether, are known for their high volatility, unique technical, legal and regulatory challenges, and rapidly evolving market dynamics. The Sponsor’s limited experience in this specific field may not fully equip them to navigate these complexities effectively.

The SEC has not asserted regulatory authority over ether or trading or ownership of ether and has not expressed the view that ether should be classified or treated as a security for purposes of U.S. federal securities laws. In fact, senior members of the staff of the SEC have expressed the view that ether is not a security under the federal securities laws. However, the SEC has commented on ether and ether-related market developments and has taken action against investment schemes involving ether. In a recent letter regarding the SEC’s review of proposed rule changes to list and trade shares of certain bitcoin-related investment vehicles on public markets, the SEC staff stated that it has significant investor protection concerns regarding the markets for digital assets, including the potential for market manipulation and fraud. In March 2018, it was reported that the SEC was examining as many as 100 investment funds with strategies focused on digital assets. The reported focus of the examinations is on the accuracy of risk disclosures to investors in these funds, digital asset pricing practices, and compliance with rules meant to prevent the theft of investor funds, as well as on information gathering so that the SEC can better understand new technologies and investment products. It has further been reported that some of these funds have received subpoenas from the SEC’s Enforcement Division. The SEC also has determined that certain digital assets are securities under the U.S. securities laws. In these determinations, the SEC reasoned that the unregistered offer and sale of digital assets can, in certain circumstances, including ICOs, be considered illegal public offering of securities. A significant amount of funding for digital asset startups has come from ICOs, and if ICOs are halted or face obstacles, or companies that rely on them face legal action or investigation, it could have a negative impact on the value of digital assets, including ether. However, the SEC’s “Crypto Task Force” has indicated that it is re-examining how digital assets are considered “securities” under the federal securities laws and the timeline and outcome of such action is uncertain at this time. Finally, the SEC’s Division of Examinations (“Examinations”) has stated that digital assets are an examination priority. In particular, Examinations has expressed its intent to focus its examination on portfoliothe managementoffer, ofsale, digitalrecommendation, assets,advice, safety of client fundstrading, and assets,other pricingactivities involving crypto assets that are offered and valuationsold ofas clientsecurities portfolios,or compliancerelated andproducts, internalsuch controls,as andspot supervisionbitcoin ofor employeeether outside business activities.ETPs.

Investors should consult their personal tax advisors before making any decision to purchase the Shares of the Trust. Additionally, the tax considerations contained herein are in summary form and may not be used as the sole basis for the decision to invest in the Shares from a tax perspective, since the individual situation of each investor must also be taken into account. Accordingly, the considerations regarding taxation contained herein should not be used as any sort of material information or tax advice nor are they in any way to be construed as a representation or warranty with respect to specific tax consequences.

The Ethereum blockchain may be subject to forks or airdrops that create new digital assets. Shareholders may not receive the benefits of any forks, the Trust may not choose, or be able, to participate in an airdrop, and the timing of receiving any benefits from a fork, airdrop or similar event is uncertain. The Sponsor refers to the right to receive any such benefit as an “Incidental Right” and any such virtual currency acquired through an Incidental Right as “IR Assets.” If a hard fork, airdrop or similar event occurs in the Ethereum blockchain, the Sponsor will instruct the Trust to immediately and irrevocably disclaim all rights to the IR Assets so created. Ether is the only digital asset that will beis held by the Trust. In the event the Trust seeks to change its treatment of Incidental Rights or IR Assets, an application would need to be filed with the SEC by the Exchange seeking approval to amend its listing rules.

An Authorized Participant may be able to create or redeem a Creation Basket at a discount or a premium to the public trading price per Share. To the extent creations or redemptions take place in kind in, theit future,is unlikely that the Trust’s operations will therefore not be directly impacted by any discount or premium in the market price of its Shares.Shares, however, there is no guarantee that the Trust will not be negatively affected by slippage.

The use of cash creations and redemptions, as opposed to in-kind creations and redemptions, could cause delays in trade execution due to potential operational issues arising from implementing a cash creation and redemption model, which involves greater operational steps (and therefore execution risk) than the originally contemplated in-kind creation and redemption model. Such delays could cause the execution price associated with such trades to materially deviate from the Benchmark price used to determine the NAV. Even though the Authorized Participant is responsible for the dollar cost of such difference in prices, Authorized Participants could default on their obligations to the Trust, or such potential risks and costs could lead to Authorized Participants, who would otherwise be willing to purchase or redeem Baskets to take advantage of any arbitrage opportunity arising from discrepancies between the price of the Shares and the price of the underlying ether, to elect to not participate in the Trust’s Share creation and redemption processes. This may adversely affect the arbitrage mechanism 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. If the arbitrage mechanism is not effective, purchases or sales of Shares on the secondary market could occur at a premium or discount to NAV, which could harm Shareholders by causing them buy Shares at a price higher than the value of the underlying ether held by the Trust or sell Shares at a price lower than the value of the underlying ether held by the Trust, causing Shareholders to suffer losses. Further, if and when In-Kind Regulatory Approval is obtained, the Trust may not be able to successfully implement in-kind creation and redemption transactions, which could put the Trust at a disadvantage compared to other digital asset ETPs that are able to implement in-kind creations and redemptions.

The Trust will process all creations and redemptions of Shares in transactions with financial firms that are authorized to do so (known as “Authorized Participants”).Participants. Shareholders that are not Authorized Participants or who are unable to transact in Creation Baskets through 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. Although shares of the Trust are listed for trading on the Exchange, there can be no assurance that an active trading market for such shares will develop or be maintained. Secondary market trading in Shares may be halted by the Exchange because of market conditions or for other reasons. Shares of the Trust, similar to shares of other issuers listed on a stock exchange, may be sold short and are therefore subject to the risk of increased volatility and price decreases associated with being sold short. Shares trade on the Exchange at prices at, above or below the most recent NAV. The NAV is calculated at the end of each Business Day and fluctuates with changes in the market value of the Trust’s ether. The trading price of the Shares fluctuates continuously throughout trading hours based on both market supply of and demand for Shares and the underlying value of the Trust’s ether or the Trust’s NAV. As a result, the trading prices of Shares may deviate significantly from NAV during periods of market volatility. Any of these factors, among others, may lead to the Shares trading at a premium or discount to NAV. While the creation/redemption feature is designed to make it more likely that Shares normally will trade on the Exchange at prices close to the next calculated NAV, market prices are not expected to correlate exactly with the Trust’s NAV due to timing reasons, supply and demand imbalances and other factors. In addition, disruptions to creations and redemptions, including disruptions at Authorized Participants, or other market participants, and during periods of significant market volatility, may result in trading prices for Shares that differ significantly from its NAV. Authorized Participants may be less willing to create or redeem Shares if there is a lack of an active market for such Shares or its underlying investments, which may contribute to the Shares trading at a premium or discount to NAV. Buying or selling Shares on the Exchange involves two types of costs that apply to all securities transactions. When buying or selling Shares through a broker, Shareholders will likely incur a brokerage commission and other charges. In addition, Shareholders may incur the cost of the “spread”; that is, the difference between what investors are willing to pay for Shares (the “bid” price) and the price at which they are willing to sell Shares (the “ask” price). The spread, which varies over time for Shares based on trading volume and market liquidity, is generally narrower if the Trust has more trading volume and market liquidity and wider if the Trust has less trading volume and market liquidity. In addition, increased market volatility may cause wider spreads. There may also be regulatory and other charges that are incurred as a result of trading activity. Because of the costs inherent in buying or selling Shares, frequent trading may detract significantly from investment results and an investment in Shares may not be advisable for investors who anticipate regularly making small investments through a brokerage account.

An Authorized Participant may be able to create or redeem a Creation Basket at a discount or a premium to the public trading price per Share. To the extent creations or redemptions take place in-kind in the future,in-kind, the Trust will therefore maintain its intended fractional exposure to a specific amount of ether per Share.

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, the Trust and the Managing OwnerSponsor undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

FOR THE FISCALYEAR ENDED DECEMBER 31, 2025 AND THE PERIOD JULY 23, 2024 TO DECEMBER 31, 2024

The following graph illustrates the percentage changes in (i) the market price of the Shares (as reflected by the line “Market”), (ii) the Trust’s NAV (as reflected by the line “NAV”), and (iii) the closing levels of the Benchmark (as reflected by the line “Lukka Prime Ethereum Reference Rate (USD)”). There can be no assurances that the price of the Shares or the Trust’s NAV will exceed the Benchmark levels. No representation is being made that the Benchmark will or is likely to achieve closing levels consistent with or similar to those set forth herein.

FOR THE YEAR ENDED DECEMBER 31, 2025 AND FOR THE PERIOD JULY 23, 2024 TO DECEMBER 31, 2024

For the period July 23, 2024, through December 31, 2024, Ethereum (ETH)ether was initially pressured by broader risk aversion and generally lackluster ETP demand. The USU.S. equity market selloff to end July, reignited hard landing concerns in the US,U.S., the Chinese economic overhang, and rising geopolitical tensions in the Middle East all played a role. However, the start of the Federal Reserve’s interest rate easing cycle in September was a positive performance catalyst. Another influencing factor was expectations for a second Trump term, especially prior to Vice President Harris joining the race in August, as he was viewed as more pro-crypto. However, ETHether made a strong comeback in the fourth quarter following President Trump’s re-election as President of the United States. In addition to saying that he would be a “crypto president”, he also touted major plans for the crypto industry that, if implemented, could lead to significant regulatory progress, increased institutional adoption, and formal legitimization of the asset class in traditional finance, all of which would support prices. For ETHether specifically, the prospect of a crypto-friendly stance in the new administration sparked optimism that more innovation and capital could return to the United States.

There are no material changes from the risk factors as previously disclosed in the Trust’s Annual Report on Form 10-K for the periodyear ended December 31, 2025, filed with the SEC on March 2, 2026.

The Invesco Galaxy Ethereum ETF (the “Trust”) is a Delaware statutory trust that was formed on September 27, 2023. The Trust continuously issues common shares representing fractional undivided beneficial interest in and ownership of the Trust (“Shares”). The Trust operates pursuant to its Second Amended and Restated Declaration of Trust and Trust Agreement, dated as of June 21, 2024 (the “Trust Agreement”). The Shares began trading on the Cboe BZX Exchange, Inc. (the “Exchange”) under the ticker symbol “QETH” on July 23, 2024. The Trust offers Shares only to certain eligible financial institutions (“Authorized Participants”) in one or more blocks of 5,000 Shares (“Creation Baskets”) based on the quantity of ether attributable to each Share of the Trust.

The following discussion and analysis was prepared to supplement information contained in the accompanying financial statements and is intended to explain certain items regarding the Trust'sTrust’s financial condition as of MarchJune 31,30, 2026, and its results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025. It should be read in conjunction with the unaudited financial statements and related notes thereto contained in this Report.

The investment objective of the Trust is for the Shares to reflect the performance of the spot price of ether as measured using the Lukka Prime Ethereum Reference Rate (the “Benchmark”) less the Trust’s expenses and other liabilities. The Shares are intended to provide institutional and retail investors with a simple, cost-effective means of gaining investment benefits similar to those of holding ether.

In seeking to achieve its investment objective, the Trust will holdholds ether. The Trust will value its Shares each Business Day as of 4:00 p.m. ET. The Trust applies FASB ASC Topic 820, Fair Value Measurement, in the valuation of ether held by the Trust and for financial statement purposes. The value of ether held by the Trust is determined based on the FMV price for ether, reflecting the execution price of ether on its principal market as determined each day by the Benchmark Provider. The FMV price for ether reflects the price that would be received for ether in a current sale, which assumes an orderly transaction between market participants on the measurement date of ether on its “principal market,” generally, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The Trust determines its principal market (or in the absence of a principal market the most advantageous market) on a periodic basis to determine which market is its principal market for the purpose of calculating fair value for the creation of quarterly and annual financial statements. Issuer-specific events, market trends, bid/asked quotes of brokers and information providers and other data may be reviewed in the course of making a good faith determination of aan security’sinvestment’s fair value. The Benchmark is designed to provide an estimated fair market value price for ether, based on the execution price of ether on its principal market. In this regard, the Benchmark Provider seeks to identify a “principal market” for ether each day by evaluating eligible ether trading platforms across a variety of different criteria, including the trading platforms’ oversight and governance frameworks, microstructure efficiency, trading volume, data transparency and data integrity.

Net cash flow provided by (used in) operating activities was $(0.52.2) million and $(1.65.0) million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. During the threesix months ended MarchJune 31,30, 2026, $9.8$11.5 million was paid to purchase ether and $9.3 million was received from sales of ether for redemptions. During the threesix months ended MarchJune 31,30, 2025, $3.1$6.4 million was paid to purchase ether and $1.5 million was received from sales of ether for redemptions.

The Trust’s net cash flow provided by (used in) financing activities was $0.5$2.2 million and $1.6$5.0 million during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. This included $9.8$11.5 million and $3.1$6.4 million from Shares purchased by Authorized Participants and $9.3 million and $1.5 million from Shares redeemed by Authorized Participants during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

FOR THE THREE AND SIX MONTHS ENDED MARCHJUNE 31,30, 2026 AND 2025

FOR THE THREE AND SIX MONTHS ENDED MARCHJUNE 31,30, 2026 AND 2025

For the three months ended MarchJune 31,30, 2026, the Exchange market value of each Share decreased from $29.59$20.86 per Share to $20.86$15.70 per Share. The Share price low and high for the three months ended MarchJune 31,30, 2026 and related change from the Share price on JuneMarch 30,31, 20252026 was as follows: Shares traded at a low of $18.51$15.49 per Share (-37.45%-25.74%) on FebruaryJune 24,25, 2026, and a high of $33.73$24.19 per Share (+13.99%15.96%) on JanuaryApril 14,17, 2026. The total return for the Trust on a market value basis was -29.50%.-24.74%.

For the three months ended MarchJune 31,30, 2025, the Exchange market value of each Share decreasedincreased from $33.39$18.24 per Share to $18.24$25.13 per Share. The Share price low and high for the three months ended MarchJune 31,30, 2025 and related change from the Share price on DecemberMarch 31, 20242025 was as follows: Shares traded at a low of $18.24$14.60 per Share (-45.37%-19.96%) on MarchApril 31,8, 2025, and a high of $36.82$28.07 per Share (+10.27%53.93%) on JanuaryJune 6,11, 2025. The total return for the Trust on a market value basis was -45.37%.+37.77%.

For the three months ended MarchJune 31,30, 2025,2026, the NAV of each Share decreased from $33.37$20.86 per Share to $18.24$15.71 per Share. The falling price of ether during the three months ended MarchJune 31,30, 20252026 contributed to an overall 45.30%24.66% decrease in the level of the Benchmark. The total return for the Trust on a NAV basis was -45.34%.-24.69%.

Net income (loss) for the three months ended MarchJune 31,30, 20252026 was $(11.45.0) million, primarily resulting from net realized gain(loss) of $(0.9) million and net change in unrealized gain (loss) of $(10.65.0) million.

The preparation of financial statements in conformity with U.S. GAAP requires the Sponsor's managementSponsor to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period covered by this report. A description of the valuation of ether, a critical accounting policy that the Trust believes is important to understanding its results of operations and financial position, is provided in the section entitled “Valuation of Ether,” above. In addition, please refer to Note 2 to the financial statements of the Trust for further discussion of the Trust’s accounting policies and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 2, 2026.