# Fidelity Ethereum Fund: Form 10-Q for the period ended Jun 30, 2024

- Company: [Fidelity Ethereum Fund](/companies/feth.md) (CIK 2000046)
- Form: 10-Q
- Filed: 2024-08-23
- Accepted by EDGAR: Aug 23, 2024, 14:34 ET
- Period: 2024-06-30
- Accession: 0000950170-24-100125
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/2000046/000095017024100125/ck0002000046-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/2000046/000095017024100125/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Total assets | at 2024-06-30 | $4.4m | us-gaap:Assets |
| Total liabilities | at 2024-06-30 | $0 | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $4.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 9,718 characters.

*The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our unaudited financial statements and related notes included elsewhere in this Quarterly Report, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The following discussion may contain forward-looking statements based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements.*

### Overview of the Trust

The Fidelity Ethereum Fund (the “Trust”) is an exchange-traded product that issues shares of beneficial interest (the “Shares”) that trade on the Cboe BZX Exchange, Inc. (the “Exchange”). The Trust’s investment objective is to seek to track the performance of ether, as measured by the performance of the Fidelity Ethereum Reference Rate (the “Index”), adjusted for the Trust’s expenses and other liabilities. The Index is constructed using ether price feeds from eligible ether spot markets and a volume-weighted median price (“VWMP”) methodology, calculated every 15 seconds based on VWMP spot market data over rolling sixty-minute increments. The Index is designed to reflect the performance of ether in U.S. dollars. In seeking to achieve its investment objective, the Trust will hold ether. The Trust is sponsored by FD Funds Management LLC (the “Sponsor”), a wholly owned subsidiary of FMR LLC.

The Trust is passively managed and does not pursue active management investment strategies. The Trust will not participate in the proof-of-stake validation mechanism of the Ethereum network (i.e., the Trust will not “stake” its ether) to earn additional ether or seek other means of generating income from its Ether Holdings. 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 Shareholders of the Trust take no part in the management or control, and have no voice in, the Trust’s operations or business. Except in limited circumstances, Shareholders will have no voting rights under the Trust Agreement.

### Valuation of Ether and Computation of Net Asset Value

For purposes of calculating the Trust’s NAV per Share, the Trust’s holdings of ether are valued using the same methodology as used to calculate the Index.

The Trust’s NAV per Share is calculated by:

- 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
- dividing that total by the total number of outstanding Shares.

The Administrator calculates the NAV of the Trust once each Exchange trading day. The NAV for a normal trading day will be released after 4:00 p.m. EST. Trading during the core trading session on the Exchange typically closes at 4:00 p.m. EST. However, 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 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 Committee. If the Valuation Committee determines in good faith that the Index does not reflect an accurate ether price, then the Valuation Committee will instruct 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 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 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 will calculate and disseminate throughout the core trading session on each trading day an updated intraday indicative value (“IIV”). The IIV will be calculated based on the Trust’s Ether Holdings and any other assets expected to comprise that day’s NAV calculation. The third-party financial data provider will use 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 ether trading platforms included in the Blockstream Crypto Data Feed Streaming Level 1 include Bitflyer, Bitfinex, Binance US, Bitso, Bitstamp, BTSE, CEX IO, Exmo, Gemini, itBit, LMAX Digital and OK Coin. 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 NAV, which will be calculated only once at the end of each trading day as described herein.

### Critical Accounting Policies and Estimates

### Principal Market and Fair Value Determination

The Trust’s periodic financial statements are prepared in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC Topic 820”). ASC Topic 820 requires the fair value measurement of ether to assume that transactions take place in the principal market or, in the absence of a principal market, the most advantageous market, for ether that the Trust has access to. The Trust may buy and sell ether through brokered, dealer, over-the-counter, exchange or other markets. The Sponsor determines in its sole discretion the valuation sources and policies used to prepare the Trust’s financial statements in accordance with GAAP. The Trust engaged a third-party pricing service to obtain an exchange-traded price from a principal market for ether, which was determined and designated based on its consideration of several exchange characteristics, including oversight, and the volume and frequency of trades. The exchange-traded price from the principal market on the periodic financial statements is as of 11:59:59 p.m. EST on the Trust’s financial statement measurement date.

### Results of Operations

Prior to June 4, 2024, the Trust has had no operations to date 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 23, 2024, the Trust commenced operations and Shares commenced trading on the Exchange.

On June 4, 2024, the Trust purchased 1,250 ether at an aggregate purchase price of $4.8 million. At June 30, 2024 the unrealized loss was $0.4 million.

Expenses incurred during the period May 24, 2024 (seeding date) to June 30, 2024 in connection with the organization of the Trust and the initial offering costs of the Shares were borne by the Sponsor and will not be subject to reimbursement by the Trust.

### Cash Resources and Liquidity

The Trust does not hold a cash balance except in connection with the creation and redemption of Baskets or to pay expenses not assumed by the Sponsor. To the extent the Trust does not have available cash to facilitate redemptions or pay expenses not assumed by the Sponsor, the Trust will sell ether. When selling ether on behalf of the Trust, the Sponsor endeavors to minimize the Trust’s holdings of assets other than ether. As a consequence, the Sponsor expects that the Trust will have an immaterial amount of cash flow from its operations and that its cash balance will be insignificant at the end of each reporting period. The Trust’s only sources of cash are proceeds from the sale of Baskets and ether.

### Off Balance Sheet Arrangements and Contractual Obligations

The Trust has not used, nor does it expect to use in the future, special purpose entities to facilitate off balance sheet financing arrangements and has no loan guarantee arrangements or off balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services for the Trust. While the Trust’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on a Trust’s financial position.

Sponsor Fee payments made to the Sponsor will be 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 net assets are not known until a future date.

## Controls and procedures

As filed, 1,020 characters.

### Disclosure Controls and Procedures

### (a) Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended, we, under the supervision and with the participation of our President (principal executive officer) and Treasurer (principal financial officer), carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report and determined that our disclosure controls and procedures are effective as of the end of the period covered by the Quarterly Report.

### (b) Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 188 characters.

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in our Prospectus dated July 22, 2024 (Registration No. 333-278249).

Filed Aug 23, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-100125. Last ingested by Listed: Oct 24, 2026, 15:16 ET. No prices; not investment advice.