WTIC Risk Disclosures

Last updated: April 29, 2026

The following discloses material risks associated with purchasing, holding, transferring, and redeeming WTIC, a WTI-backed digital commodity token issued by Energy Substantiation Partners, LLC (“ESP,” “we,” or “us”). You should read this document in full and consult your own legal, tax, and financial advisors before purchasing WTIC. Purchasing WTIC is speculative, involves significant risk, and is not suitable for all purchasers. You may lose some or all of the value of your token.

1. Commodity Price Risk

The reference value of WTIC is designed to equate to the spot price of West Texas Intermediate (“WTI”) crude oil, which is derived from futures market prices. Crude oil prices are highly volatile and have historically moved sharply, including intraday and over multi-day periods, in response to factors outside ESP’s control, including:

• Geopolitical events, armed conflicts, sanctions, and shipping disruptions;
• Decisions by OPEC, OPEC+, and other producer cartels regarding production quotas;
• Supply disruptions arising from weather, infrastructure failures, accidents, or strikes;
• Macroeconomic conditions, interest rates, currency movements, and changes in global demand;
• Inventory levels, refining margins, and seasonal consumption patterns;
• Government energy transition policies, tariffs, taxes, and environmental regulation.

WTI experienced trading at negative prices during the COVID-19 global pandemic (April 2020) and has experienced single-day moves in excess of 20%. The value of WTIC may decline rapidly and without warning. WTIC is not a hedge against inflation, currency debasement, or any other macroeconomic condition.

2. Liquidity Risk

Secondary markets for WTIC may be limited, illiquid, or non-existent. There is no guarantee that any centralized or decentralized exchange, market maker, over-the-counter desk, or counterparty will provide quotes, accept orders, or execute trades in WTIC at any particular price, in any particular size, or at all. Liquidity may deteriorate or disappear during periods of market stress — precisely when you may most want to exit a position, causing volatility in prevailing trading prices.

Bid-ask spreads, slippage, and price impact may be material, particularly for larger transactions. You should not assume you will be able to sell WTIC promptly or at a price reasonably related to the underlying WTI reference price.

3. Custody & Reserve Risk

The physical WTI crude oil constituting the reserve backing WTIC remains in the possession of oil producers and other energy market participants as evidenced by energy receipts issued by them and deposited with ESP’s custodian, which holds the receipts for the benefit of the holders of WTIC. The energy receipts embody a bailment arrangement which imposes common law standards of care on the oil producers and energy market participants as bailees.

The energy receipts, custodians, audit and attestation cadence, and segregation arrangements applicable to the reserve are contained in the reserve and custody documentation, which is subject to change.

Whatever specific arrangements apply at a given time, custodial and reserve structures expose holders to risks including:

• Insolvency, operational failure, fraud, theft, or sanctions designation of ESP, the oil producers and energy market participants possessing the physical crude oil under the energy receipts issued by them, and ESP’s custodian holding energy receipts;
• Regulatory seizure, freezing, or restriction of reserve WTI, including by U.S. or foreign authorities;
• Disputes over title to physical WTI crude oil, including challenges from customers, creditors and other claimants;
• Storage, transportation, contamination, and quality-grade risks specific to physical crude;
• Differences between the market value of the reserve WTI and the reference price of WTI, including basis risk on derivative positions, hedging slippage, and timing mismatches.

Holders of WTIC will have only a proportional undivided interest in the energy receipts held by ESP’s custodian for holders’ benefit, which creates complexity for recovery upon a custodian default or segregation failure. In the event of custodian failure or any of the above events, recovery of value may be delayed, partial, or unavailable, even if the energy receipts are legally segregated, and may depend on bankruptcy or receivership processes outside ESP’s control.

Any attestations or audits provided are point-in-time, are limited in scope to what the engaging firm has agreed to test, and do not guarantee future solvency, completeness, or accuracy. Auditors engaged to confirm the reserves of underlying WTI may engage in negligent and even fraudulent conduct leading to inaccurate verification of the underlying reserve.

4. Blockchain & Technology Risk

WTIC is implemented as a smart-contract token on a public blockchain. Risks include:

• Smart-contract vulnerabilities: Bugs, logic errors, or exploit vectors in the WTIC contract or its dependencies could result in permanent loss, freezing, or theft of tokens.
• Network risk: The underlying blockchain may experience congestion, fee spikes, forks, upgrades, reorganizations, validator collusion, or extended downtime, any of which could prevent or delay transfers, mints, or redemptions.
• Private key management: If you lose access to the private keys or recovery credentials controlling your wallet, your WTIC may be permanently inaccessible. ESP cannot recover lost keys or reverse unauthorized transactions. If custodied with a custodian, holders are exposed to the risk of hacking, phishing, or other compromise at the custodian which may lead to uncompensated loss.
• Cyber attacks: Wallets, exchanges, custodians, oracles, and infrastructure providers are targets for phishing, malware, social engineering, supply-chain attacks, and other intrusions. Compromise of any link in the chain may result in loss.
• Oracle and price-feed risk: Pricing, indexing, or settlement may rely on third-party data feeds whose failure or manipulation could affect WTIC’s trading price or trading behavior.

5. Regulatory Risk

The legal and regulatory framework governing tokenized commodities-backed digital tokens is unsettled and evolving in the United States and globally. Federal agencies (including the CFTC, SEC, FinCEN, OFAC, and the IRS), state regulators (including state money transmission and securities regulators), and foreign authorities have asserted, and may in the future assert, jurisdiction over tokenized commodity products in ways that affect WTIC’s legality, value, transferability, tax treatment, or availability in particular jurisdictions.

New legislation, rulemaking, enforcement actions, no-action positions, or judicial decisions could:

• Reclassify WTIC or impose new registration, licensing, or disclosure obligations;
• Restrict who may purchase, hold, or transfer WTIC;
• Impose transfer, custody, reserve, capital, or operational requirements that materially change product economics;
• Require ESP to delist, redeem, suspend, freeze, or wind down WTIC entirely in accordance with sanctions regimes and other regulatory or government imposed rules, regulations and orders.

WTIC is not a “payment stablecoin” as defined under the GENIUS Act and is not eligible for any safe harbor or framework specific to payment stablecoins.

6. Redemption Risk

Redemption of WTIC — the process by which an eligible holder burns tokens in exchange for USDC, fiat, or, as elected by the redeeming holder, physical delivery — is subject to mechanics, eligibility, timing, fees, and operational limits set out in the applicable redemption documentation. Material considerations include:

• Eligibility: Redemption may be restricted to verified, KYC’d holders that establish identity of the holder in compliance with regulatory standards.
• Timing: Redemption is not instantaneous and is subject to cut-offs, settlement windows, market hours, holidays, and operational delays. The applicable timing for any given redemption is set out in the redemption documentation in effect at the time the request is submitted and may be longer than holders expect, particularly during periods of market stress, custodial issues, or banking-system disruption.
• Fees and spreads: Redemption may carry fees resulting in redemption value that differs from prevailing spot prices.
• Suspension: ESP may suspend, limit, or modify redemption in response to market disruption, custodial issues, regulatory direction, or operational events. In such circumstances you may not be able to exit your position when desired.
• Physical delivery: When elected, physical delivery is subject to minimum sizes, delivery-point and logistical requirements (such as pipeline access, tanker nominations, availability of port facilities and ground transportation capacity), taxes, and additional documentation. The redeeming holder that elects physical delivery will be subject to the costs associated with physical delivery.

7. Counterparty Risk

ESP relies on third parties to operate the WTIC product, including oil suppliers and other market participants, custodians, banks, market makers, exchanges, oracle providers, smart-contract developers, auditors, and software vendors. Failure, insolvency, fraud, breach, sanctions designation, or termination by any of these counterparties could materially impair the value, redeemability, or availability of WTIC. ESP itself is a privately held company and is exposed to operational, business, financial, and key-personnel risk; ESP’s insolvency could result in significant or total loss to holders. In addition, while energy receipts held by ESP’s custodian evidence title to the underlying WTI that held as bailee by oil suppliers and other market participants and backs WTIC, recognition of ownership to the underlying WTI may rest on the interpretations of common law of the states within the U.S. where the WTI is located. The body of law applicable to tokenization and title to commodities underlying commodity backed tokens is not well developed and thus WTIC holders are subject legal uncertainty in cases where title to the underlying WTI is litigated. In addition, conflicts of law may arise between the jurisdiction in which a WTIC holder or ESP’s custodian is located and the jurisdiction in which the underlying WTI is located.

The bankruptcy or insolvency of an issuer of an energy receipt evidencing the underlying WTI may result in competing claims to the underlying WTI and such claims may be subordinate to claims of existing creditors, particularly where creditors’ benefit from security interests under collateral arrangements that confer priority.

WTI is located in particular fields and facilities owned and operated the issuers of energy receipts for specified quantities of underlying crude oil held as part of the reserve and may be experience loss from natural disasters, unforeseen casualties, contamination or hazardous waste transformation. The indemnity and loss sharing or shifting arrangements made by ESP with oil producers and other market participants may not be adequate to cover the losses experienced by such events which may impact the adequacy of the reserve of underlying WTI and the redemption value of WTIC.

8. No Guaranteed Value

Unlike a USD-pegged stablecoin, WTIC is not pegged to any fiat currency and offers no fixed or guaranteed value. Its reference value moves with the price of crude oil, the market price for which has at times undergone substantial fluctuation and may decline to zero. WTIC is not insured by the FDIC, SIPC, or any other government or private insurance scheme. No party guarantees any minimum redemption value, return, yield, or liquidity.