> ## Documentation Index
> Fetch the complete documentation index at: https://docs.tori.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Risk Disclosures

> Important information about risks associated with Tori Finance

<Note>
  This page describes the material risks of using Tori Finance. Read it before depositing.
</Note>

## Overview

Like all DeFi products, Tori involves risk. The protocol is designed with multiple safeguards, but no system eliminates risk entirely.

**Key point:** trUSD is a synthetic dollar backed by trading positions. That is a different construction from fiat-backed stablecoins like USDC or USDT, and it carries different risks.

## Strategy risk

Rewards come from trading strategies with a long institutional track record. They still carry risk:

| Risk | Description | How it is managed |
| - | - | - |
| **Performance** | Strategies may underperform in certain conditions | Diversification across multiple low-correlation strategies |
| **Temporary drawdowns** | Positions may show paper losses before converging | Delta-neutral design aims to have positions resolve over time |
| **Execution** | Trades may not execute as intended | Professional execution and monitoring systems |
| **Capacity** | Returns may compress as AUM grows | Careful capacity management and strategy rotation |
| **Market conditions** | Extreme environments may affect whether and when positions converge | Risk limits and professional monitoring |
| **Hedging** | Delta-neutral strategies aim to minimize but may not fully eliminate directional exposure | Continuous monitoring and rebalancing |

<Note>
  Delta-neutral strategies may experience temporary fluctuations. These are expected and typically resolve as positions
  converge. This is normal behavior, not necessarily a permanent loss.
</Note>

Past performance does not guarantee future results. Rewards and returns are variable and depend on market conditions.

## Smart contract risk

Tori relies on smart contracts deployed on public blockchain networks:

| Risk | Mitigation |
| - | - |
| **Code vulnerabilities** | Audited by Sherlock and Nethermind ([reports](/security/audits)) |
| **Ongoing issues** | Active [bug bounty program](/security/audits) incentivizes discovery |
| **Real-time threats** | 24/7 monitoring by Hypernative and internal systems |
| **Upgrade risks** | Multi-signature approvals and a [24-hour timelock](/security/roles) |

Audits reduce risk substantially. They cannot guarantee the absence of vulnerabilities.

## Counterparty risk

The protocol works with outside partners, and each one is a dependency:

| Partner type | Approach |
| - | - |
| **Trading venues and institutional partners** | Established counterparties that pass due diligence |
| **Custodians** | Qualified institutional custodians |
| **Liquidity providers** | Rigorous due diligence standards |
| **Financial instruments** | Regulated products where appropriate |

Exposure is diversified across multiple partners to limit concentration. Custody arrangements are described in [Backing & Reserves](/solution/backing).

## Peg risk

trUSD is designed to track \$1.00, but its market price can deviate. Deviations create arbitrage opportunities that work to restore the peg, and the protocol may participate in that arbitrage itself. The larger the deviation, the greater the incentive to correct it. See [Peg Mechanism](/solution/peg-mechanism) for how this works.

## Liquidity risk

| Aspect | Details |
| - | - |
| **Unstaking cooldown** | 7 days, pacing redemptions so one user's exit does not degrade terms for others |
| **Market liquidity** | Varies with trading conditions |
| **Exit flexibility** | trUSD can be swapped on DEXs at prevailing market rates |

## Regulatory risk

Crypto regulation continues to evolve and may change in any jurisdiction. You are responsible for compliance with the laws that apply to you. The protocol monitors regulatory developments and adapts as they land.

## Technology risk

| Risk | Mitigation |
| - | - |
| **Protocol dependencies** | Careful selection and monitoring of external protocols |
| **Cross-chain transfers** | Run on Chainlink CCIP with Ethereum as the hub; any bridge carries inherent protocol risk |
| **Private key security** | Users must secure their own wallets; loss is irreversible |

## Important disclaimers

| Disclaimer | Details |
| - | - |
| **No insurance** | trUSD/strUSD are not insured by FDIC or any government agency |
| **No guaranteed returns** | Rewards and returns are variable and depend on market conditions |
| **As-is basis** | The protocol is provided without warranties |

## Security infrastructure

The audit history, bug bounty terms, and monitoring stack are documented in [Security](/security/overview). Reserve attestations are published at [tori.accountable.capital](https://tori.accountable.capital).

## Your responsibilities

By using Tori Finance, you acknowledge that you:

* Have read and understood the [Terms of Service](/legal/terms), including [General Risk Disclosures](/legal/risk)
* Are solely responsible for your decisions to use the protocol
* Are using amounts appropriate to your personal risk tolerance
* Have conducted your own research and due diligence
* Are complying with applicable laws in your jurisdiction

## Questions?

This document is informational and is not financial, legal, or tax advice. For questions about risks or how Tori works, join our [Discord](https://discord.gg/torifinance).

***

**Last Updated**: August 2026


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