Clearing of digital asset contracts involves several risks that are important to understand before entering into orders, trades or positions related to these contracts, and before depositing funds to the clearinghouse. Specifically, customer digital asset balances held at the clearinghouse - whether or not they are backing orders, trades or positions - can be stolen, hacked, or lost. Thus, customer funds may become non-recoverable and irretrievably lost.
To reduce these risks, LedgerX uses industry-standard digital asset custody practices, including:
Insurance: Hot and Warm Wallets
LedgerX maintains a primary crime insurance policy with Lloyd’s of London through USI Insurance Services, LLC, in the amount of $10MM USD. This policy covers funds stored in multi-signature hot and warm wallets. The policy covers certain but not all instances of theft, loss on premises, loss in transit, and third party computer and funds transfer fraud.
The exclusions listed in the policy include theft by a director or partner of LedgerX, a theft discovered by an employee but not disclosed to LedgerX, loss due to the giving of property in exchange or purchase, loss claimed solely due to inventory computation or accounting errors, loss due to breach of contract, loss due to war or acts of foreign enemies or terrorism, loss due to radioactive contamination of property, any loss arising out of or in connection with, any circumstances or occurrences which occurred prior to the inception of this policy, loss resulting from the non-payment or default of any loan, loss resulting from payments or withdrawals involving items received by LedgerX that are not finally paid for, any loss resulting solely from the network failure of a digital currency or digital asset cryptographic protocol, and certain other exclusions.Insurance: Cold Wallets
LedgerX stores the majority of customer digital assets at BitGo Trust. Information on BitGo's $250MM USD insurance policy, which applies to all BitGo Trust balances where keys are 100% held by BitGo Trust and not just LedgerX customer balances, is available here
BitGo's policy covers only copying or theft of private keys, insider theft or dishonest acts by BitGo employees or executives, or destruction of private keys due to certain physical perils. The physical perils listed in BitGo's policy include physical loss or physical damage caused by or resulting from certain natural events (such as fire, flood, earthquake, lightning, or volcanic action) as well as certain other events and objects (such as riots, vandalism, sprinkler leakage, aircraft, or vehicles).
LedgerX has obtained excess specie coverage, through Woodruff-Sawyer & Co., on top of this BitGo insurance policy. The excess declared customer limit applicable to LedgerX LLC as a dedicated Loss Payee is $50MM USD. This means that $50MM of insurance exists specifically for LedgerX customer balances in BitGo Trust cold wallets, after the $250MM described above has been used.