What are the risks?

There are minimal risks for both borrower and lender. Borrower does not lose ownership of the metals through collateralization but a lien is placed on the metals in favor of the lender. The collateralized metals is stored securely at The Safe House and retain all the protective features of S.T.A.R. Storage.

The lender’s loaned funds are always fully backed by physical metals stored under S.T.A.R. Storage. We typically require the borrower to pledge metals valued at least twice (200%*) of the loan amount when submitting the loan request. The collateralized metals is re-valued every five minutes based on spot prices. Should the value of the pledged collateral fall during the loan tenor to 110% or less and margin calls remain unfulfilled, a liquidation sale as per user agreement will occur to ensure the lender’s loan is always fully covered.

*Only the 1-month loans can be funded with a lower ratio of 160% (or about 62.5% loan to value ratio)

The other risk is during the loan period, the prices of the collateralised metals fall significantly for example, a drop by 50% in price overnight where the liquidation sale would occur as explained above. However, the chances of such an incident like a 50% drop in the price of metals overnight has a very low probability of happening.