S-4/A 1 tm2124445-21_s4a.htm S-4/A tm2124445-21_s4a - block - 174.2033633s
As filed with the Securities and Exchange Commission on November 14, 2022.
Registration No. 333-258582
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 7 to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CIRCLE INTERNET FINANCE PUBLIC LIMITED COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Ireland
(Jurisdiction of
Incorporation or Organization)
6199
(Primary Standard Industrial
Classification Code Number)
Not applicable
(I.R.S. Employer
Identification Number)
Circle Internet Finance Public Limited Company
c/o Circle Internet Financial Limited
99 High Street, Suite 1701
Boston, MA 02110
(617) 326-8326
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(302) 777-0200
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Gregg L. Katz, Esq.
John Mutkoski, Esq.
William Schnoor, Esq.
Aaron Berman, Esq.
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
(617) 570-1000
Alan I. Annex, Esq.
Jason Simon, Esq.
Greenberg Traurig, P.A.
333 S.E. 2nd Avenue
Miami, FL 33131
(305) 579-0500
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and on completion of the business combination described in the enclosed proxy statement/prospectus.
If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

PRELIMINARY PROXY STATEMENT AND PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 2022
CONCORD ACQUISITION CORP
477 Madison Avenue, 22nd Floor
New York, NY 10022
Dear Concord Acquisition Corp Stockholders:
Concord Acquisition Corp, a Delaware corporation (“Concord”), Circle Internet Finance Public Limited Company (f/k/a Circle Acquisition Public Limited Company), a public company limited by shares incorporated in Ireland (“Topco”), Topco (Ireland) Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Circle Internet Financial Limited, a private company limited by shares incorporated in Ireland (“Circle”) have entered into a Transaction Agreement dated as of February 16, 2022, as may be amended from time to time (the “Transaction Agreement”) pursuant to which, among other things, (i) pursuant to an Irish law court-approved scheme of arrangement, Circle’s shareholders will transfer their holdings of shares in the capital of Circle to Topco in exchange for the issuance of new shares in Topco, such that Circle will become a wholly-owned subsidiary of Topco, and (ii) Merger Sub will merge with and into Concord (the “Merger”), with Concord surviving the Merger as a wholly-owned subsidiary of Topco (collectively with the other transactions described in the Transaction Agreement, the “Business Combination”). See the section entitled “The Business Combination” on page 140 of the attached proxy statement/prospectus for further information on the consideration being paid to the shareholders of Circle.
Concord’s units, Class A common stock and warrants are currently listed on the New York Stock Exchange (“NYSE”) under the symbols “CND.U,” “CND,” and “CND WS,” respectively. We intend to apply to list Topco’s ordinary shares and warrants on the NYSE under the symbols “CRCL” and “CRCL WS”, respectively, upon the closing of the Business Combination. We cannot assure you that Topco’s ordinary shares and warrants will be approved for listing on the NYSE.
Concord is holding a special meeting of its stockholders in lieu of the 2022 annual meeting in order to obtain the stockholder approvals necessary to complete the Business Combination. At the Concord special meeting, which will be held on [•], 2022, at [•] a.m., Eastern time, at [•], unless postponed or adjourned to a later date, Concord will ask its stockholders to adopt the Transaction Agreement thereby approving the Business Combination and approve the other proposals described in this proxy statement/prospectus.
As described in this proxy statement/prospectus, certain shareholders of Circle are parties to a transaction support agreement with Concord whereby such stockholders agreed to vote all of their shares of Circle in favor of the Transaction Agreement and other proposed transactions (together, the “Proposed Transactions”) contemplated by the Transaction Agreement. In addition, Jeremy Allaire, Circle’s Chief Executive Officer, entered into a transaction support agreement with Concord pursuant to which Mr. Allaire further agreed not to vote in favor of any Alternative Transaction (as defined in the Transaction Agreement) (excluding for such purpose an initial public offering of Circle) for a period of six months following the termination of the Transaction Agreement under certain circumstances.
After careful consideration, the respective Concord and Circle boards of directors have unanimously approved the Transaction Agreement and the board of directors of Concord has approved the other proposals described in this proxy statement/prospectus, and each of the Concord and Circle board of directors has determined that it is advisable to consummate the Business Combination. The board of directors of Concord recommends that its stockholders vote “FOR” the proposals described in this proxy statement/prospectus.
More information about Concord, Circle and the Proposed Transactions is contained in this proxy statement/prospectus. Concord and Circle urge you to read the accompanying proxy statement/prospectus, including the financial statements and annexes and other documents referred to herein, carefully and in their entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 36 OF THIS PROXY STATEMENT/PROSPECTUS.
On behalf of our board of directors, I thank you for your support and look forward to the successful completion of the Business Combination.
Sincerely,
           [•], 2022
Jeff Tuder
Chief Executive Officer
This proxy statement/prospectus is dated [•], 2022 and is first being mailed to the stockholders of Concord on or about that date.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OR ANY OF THE SECURITIES TO BE ISSUED IN THE BUSINESS COMBINATION, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 
CONCORD ACQUISITION CORP
477 Madison Avenue, 22nd Floor
New York, NY 10022
NOTICE OF SPECIAL MEETING IN LIEU OF 2022 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON [], 2022
To the Stockholders of Concord Acquisition Corp:
NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2022 annual meeting of stockholders (the “special meeting”) of Concord Acquisition Corp, a Delaware corporation (“Concord,” “we,” “our” or “us”), will be held on [•], 2022, at [•] a.m., Eastern time, at [•]. You are cordially invited to attend the special meeting for the following purposes:
1.
The “Business Combination Proposal” — to approve and adopt the Transaction Agreement, dated as of February 16, 2022 (as may be amended from time to time, the “Transaction Agreement”), by and among Concord, Circle Internet Financial Limited, a private company limited by shares incorporated in Ireland (“Circle”), Circle Internet Finance Public Limited Company (f/k/a Circle Acquisition Public Limited Company), a public company limited by shares incorporated in Ireland (“Topco”) and Topco (Ireland) Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and the transactions contemplated thereby, pursuant to which, among other things, (i) pursuant to an Irish law court-approved scheme of arrangement, Circle’s shareholders will transfer their holdings of shares in the capital of Circle to Topco in exchange for the issuance of new shares in Topco, such that Circle will become a wholly-owned subsidiary of Topco, and (ii) Merger Sub will merge with and into Concord (the “Merger”), with Concord surviving the Merger as a wholly-owned subsidiary of Topco (collectively with the other transactions described in the Transaction Agreement, the “Business Combination”).
2.
The “Adjournment Proposal” — to approve a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote.
Your attention is directed to the proxy statement/prospectus accompanying this notice (including the financial statements and annexes attached thereto) for a more complete description of the proposed Business Combination and related transactions and each of our proposals. We encourage you to read this proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Morrow Sodali LLC, at (800) 662-5200; banks and brokers may reach Morrow Sodali LLC at (203) 658-9400 or by emailing CND.info@investor.morrowsodali.com.
By Order of the Board of Directors,
[•], 2022
Jeff Tuder
Chief Executive Officer
 

 
TABLE OF CONTENTS
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167
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193
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237
291
305
308
313
319
334
355
357
363
364
365
366
F-1
A-1
B-1
C-1
D-1
 
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ABOUT THIS PROXY STATEMENT/PROSPECTUS
This document, which forms part of a registration statement on Form S-4 filed with the SEC, by Topco (File No. 333-258582), constitutes a prospectus of Topco under Section 5 of the Securities Act, with respect to the shares of Topco Ordinary Shares to be issued if the Business Combination described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Exchange Act with respect to the special meeting of Concord stockholders at which Concord stockholders will be asked to consider and vote upon a proposal to approve the Business Combination by the approval and adoption of the Transaction Agreement, among other matters.
TRADEMARKS
This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this proxy statement/prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
 
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FREQUENTLY USED TERMS
In this document:
“Acquisition” means the proposed acquisition by Topco of the entire issued and to be issued shares in the capital of the Company, by means of the Scheme, pursuant to which, at the Scheme Effective Time, the Scheme Shareholders will transfer their Scheme Shares to Topco in exchange for their portion of the Aggregate Company Consideration.
“Adjournment Proposal” means a proposal to adjourn the special meeting of the stockholders of Concord to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote at such special meeting.
Aggregate Company Consideration” means an amount of Topco Ordinary Shares equal to the Circle Equity Value divided by ten dollars ($10.00) and rounded down to the nearest whole number of Topco Ordinary Shares.
“broker non-vote” means the failure of a Concord stockholder, who holds his, her or its shares in “street name” through a broker or other nominee, to give voting instructions to such broker or other nominee.
“Business Combination” or “Proposed Transactions” means pursuant to the Transaction Agreement, Topco will combine with Concord in a business combination that will result in each of the Company and Concord becoming a wholly-owned subsidiary of Topco.
“Business Combination Agreement” means the terminated Business Combination Agreement, dated as of July 7, 2021, as may be amended from time to time, by and among Concord, Topco, Merger Sub and Circle.
“Business Combination Proposal” means the proposal to approve the adoption of the Transaction Agreement and the Business Combination.
“CA Co-Investment” means CA Co-Investment, LLC (an affiliate of one of the underwriters of the IPO).
“Circle” means Circle Internet Financial Limited, a private company limited by shares incorporated in Ireland.
“Circle Convertible Notes” means the convertible unsecured promissory notes issued by Circle in accordance with the Circle Convertible Note Purchase Agreements.
“Circle Convertible Note Purchase Agreements” means the convertible note purchase agreement dated March 6, 2021, as amended, entered into between Circle and the Circle Convertible Note holders together with the Second Amended and Restated Side Letter entered into between Circle and the Circle Convertible Note holders dated May 11, 2021 as further amended by Amendment No. 1 dated July 7, 2021 and Amendment No. 2 dated February 16, 2022.
“Circle Equity Value” means $9,000,000,000 plus (i) the aggregate amount of the net proceeds of any equity or convertible debt issued by Circle after March 6, 2021, plus (ii) the proceeds from any Private Placement (as defined in the Transaction Agreement) completed by Topco or Circle after the date of the Transaction Agreement, plus (iii) the Net Equity Value (as defined in the Transaction Agreement) of any Acquisition Transaction (as defined in the Transaction Agreement) in which equity interests of Circle or Topco are issued or sold completed after the date of the Transaction Agreement, minus (iv) any indebtedness of Circle that will not convert into equity in connection with the Proposed Transactions.
“Circle Holders” means the holders of Circle Shares in issue from time to time.
“Circle Shares” means issued and to be issued shares of any class in the capital of Circle.
“Closing” means the consummation of the Business Combination.
“Closing Date” means the date on which the Closing occurs.
 
2

 
“Code” means the Internal Revenue Code of 1986, as amended.
“Concord” means Concord Acquisition Corp, a Delaware corporation.
“Concord Class A common stock” means Concord’s Class A common stock, par value $0.0001 per share.
“Concord Class B common stock” means Concord’s Class B common stock, par value $0.0001 per share.
“Concord common stock” means Concord’s Class A common stock and Class B common stock.
“Concord Units” means one share of Concord Class A common stock and one Concord Warrant.
“Concord Warrant Agreement” means the warrant agreement, dated as of December 7, 2020, by and between Concord and Continental Stock Transfer & Trust Company, governing Concord’s outstanding warrants.
“Concord Warrants” means warrants to purchase shares of Concord Class A common stock as contemplated under the Concord Warrant Agreement, with each whole warrant exercisable for one share of Concord Class A common stock at an exercise price of $11.50.
“Continental” means Continental Stock Transfer & Trust Company.
“COVID-19” means the novel coronavirus pandemic.
“DGCL” means the General Corporation Law of the State of Delaware.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Founders” means the Sponsor and CA Co-Investment.
“Founder Shares” means the 6,900,000 shares of Concord Class B common stock initially purchased by the Founders in a private placement in connection with the IPO.
“GAAP” means United States generally accepted accounting principles.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“IPO” means Concord’s initial public offering of units, consummated on December 10, 2020.
“Irish Companies Act” means the Companies Act 2014 of Ireland, as amended.
“Irish Takeover Rules” means the Irish Takeover Panel Act 1997, Takeover Rules 2022.
“IRS” means Internal Revenue Service.
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012, as amended.
“Merger” means the merging of Merger Sub with and into Concord, with Concord surviving the Merger as a wholly-owned subsidiary of Topco.
“Merger Effective Time” means the time the Merger becomes effective.
“Merger Sub” means Topco (Ireland) Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Topco.
“NYSE” means the New York Stock Exchange.
“PCAOB” means the Public Company Accounting Oversight Board.
“Private Shares” means the shares of Concord Class A common stock included in the Private Units.
“Private Units” means the Concord Units purchased in a private placement in connection with the IPO.
 
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“Private Warrants” means the warrants to purchase shares of Concord Class A common stock included in the Private Units.
“Proposed Transactions” means the Business Combination and other proposed transactions contemplated by the Transaction Agreement.
“prospectus” means the prospectus included in the Registration Statement on Form S-4 (Registration No. 333-258582) filed with the SEC.
“Public Shares” means shares of Concord Class A common stock issued as part of the units sold in the IPO.
“Public Stockholders” means the holders of shares of Concord Class A common stock.
“Public Warrants” means 13,800,000 redeemable warrants included in the units sold in the IPO, each of which is exercisable for one-half share of Concord Class A common stock, in accordance with its terms.
“Scheme” means the proposed scheme of arrangement under Chapter 1 of Part 9 of the Irish Companies Act to effect the Acquisition pursuant to the Transaction Agreement, including any revision thereof as may be agreed between the parties to the Transaction in writing, with or subject to any modifications, additions or conditions approved or imposed by the High Court of Ireland.
“Scheme Effective Date” means the date on which the Scheme becomes effective in accordance with its terms.
“Scheme Effective Time” means the time on the Scheme Effective Date at which the Court Order is delivered to the Irish Registrar of Companies.
“Scheme Record Time” means 11:59 p.m. Eastern Time on the second last Business Day before the Scheme Effective Date.
“Scheme Shareholders” means the holders of Scheme Shares.
“Scheme Shares” means the Circle Shares in issue at the Scheme Record Time.
“Scheme Voting Record Time” means the voting record time for the Scheme, as approved or directed by the High Court of Ireland.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Segregated Accounts” mean Circle’s unencumbered accounts which are eligible to fulfill the Circle’s obligations under the statutes and regulations applicable to Circle as a money transmitter licensed in various U.S. states and territories. Such accounts are held at U.S. regulated financial institutions, limited to cash and short-dated U.S. government obligations, and are segregated from Circle’s other accounts, including general corporate funds.
“Sponsor” means Concord Sponsor Group LLC, a Delaware limited liability company.
“sponsors” means the Sponsor and CA Co-Investment.
“Surviving Corporation” means the entity surviving the Merger as a wholly-owned subsidiary of Topco.
“Topco” means Circle Internet Finance Public Limited Company (f/k/a Circle Acquisition Public Limited Company), a public company limited by shares incorporated in Ireland.
“Topco Board” means the board of directors, from time to time, of Topco.
“Topco Constitution” means the constitution of Topco to be adopted prior to the Scheme Effective Time in the form, or substantially the form, contained in Exhibit 3.2.
 
4

 
“Topco Ordinary Shareholder” means a registered holder from time to time of Topco Ordinary Shares.
“Topco Ordinary Shares” means ordinary shares of $0.001 each (nominal value) in the capital of Topco, having the rights and being subject to the restrictions set out in the Topco Constitution.
“Topco Warrants” means warrants to subscribe for Topco Ordinary Shares, with each whole warrant exercisable for one Topco Ordinary Share at an exercise price of $11.50.
“Transaction Agreement” means the Transaction Agreement, dated as of February 16, 2022, as may be amended from time to time, by and among Concord, Topco, Merger Sub and Circle.
“Transaction Support Agreement” means the Transaction Support Agreement, dated as of February 16, 2022, by and among Concord and certain of Circle’s stockholders and by and between Concord and Circle’s Chief Executive Officer.
“Trust Account” means the trust account that holds a portion of the proceeds of the IPO and the concurrent sale of the Private Units.
“Warrant Amendment” means an assumption and amendment agreement with respect to the Concord Warrant Agreement to be entered into by and among Concord, Topco and Continental in connection with the Business Combination.
 
5

 
QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION
The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting of stockholders, including with respect to the proposed Business Combination. The following questions and answers may not include all the information that is important to Concord stockholders. Stockholders are urged to read carefully this entire proxy statement/prospectus, including the financial statements and annexes attached hereto and the other documents referred to herein.
Q.
Why am I receiving this proxy statement/prospectus?
A.
Concord has entered into the Transaction Agreement with Circle and the other parties thereto pursuant to which Merger Sub will merge with and into Concord, with Concord surviving the Merger as a wholly-owned subsidiary of Topco. A copy of the Transaction Agreement is attached to this proxy statement/prospectus as Annex A.
As a result of the Proposed Transactions, a) each share of Concord Class A common stock and each share of Concord Class B common stock (other than shares held by Concord as treasury stock or owned by Concord immediately prior to the Merger Effective Time) issued and outstanding immediately prior to the Merger Effective Time will be cancelled and automatically converted into and become the right to receive one Topco Ordinary Share (the “Merger Consideration”) and b) each Concord Warrant that is outstanding immediately prior to the Merger Effective Time will be converted in accordance with the terms of the Concord Warrant Agreement into a Topco Warrant on substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the Concord Warrant Agreement. See “Summary — Ownership of Topco Upon Completion of the Business Combination” and “Unaudited Condensed Combined Pro Forma Financial Information” for further information.
Concord stockholders are being asked to consider and vote upon the Business Combination Proposal to approve the adoption of the Transaction Agreement and the Business Combination, among other proposals.
The Concord Class A common stock, Concord Warrants and Concord Units are currently listed on the NYSE under the symbols “CND,” “CND WS” and “CND.U,” respectively. Topco intends to apply to list the Topco Ordinary Shares and Topco Warrants on the NYSE under the symbols “CRCL” and “CRCL WS” in connection with the Closing. All outstanding Concord Units will be separated into their underlying securities immediately prior to the Merger Effective Time. Accordingly, Topco will not have any units following consummation of the Proposed Transactions.
This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the proposals to be acted upon at the special meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety. This document also constitutes a prospectus of Topco with respect to the Topco Ordinary Shares and Topco Warrants issuable in connection with the Business Combination.
Q.
What matters will stockholders consider at the special meeting?
A.
At the Concord special meeting of stockholders, Concord will ask its stockholders to vote in favor of the following proposals (the “Concord Proposals”):

The Business Combination Proposal — a proposal to approve and adopt the Transaction Agreement and the Business Combination.

The Adjournment Proposal — a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote.
Q.
Are any of the proposals conditioned on one another?
A.
The Adjournment Proposal does not require the approval of the Business Combination Proposal and Business Combination to be effective. It is important for you to note that in the event that the Business Combination Proposal is not approved, Concord will not consummate the Business Combination. If
 
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Concord does not consummate the Business Combination and fails to complete an initial business combination by December 10, 2022 or obtain the approval of Concord stockholders to extend the deadline for Concord to consummate an initial business combination, then Concord will be required to dissolve and liquidate.
Q.
What will happen upon the consummation of the Business Combination?
A.
On the Closing Date, Merger Sub will merge with and into Concord, with Concord surviving the Merger as a wholly-owned subsidiary of Topco. As consideration for the Business Combination, each share of Concord Class A common stock and each share of Concord Class B common stock (other than Concord treasury shares or shares owned by Concord) issued and outstanding immediately prior to the Merger Effective Time, and all rights in respect thereof, shall be cancelled and automatically converted into and become the right to receive one Topco Ordinary Share.
Q.
Why is Concord proposing the Business Combination Proposal?
A.
Concord was organized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Concord is not limited to any particular industry or sector.
Concord received $276,000,000 from its IPO (including net proceeds from the exercise by the underwriters of their over-allotment option) and sale of the Private Units, which was placed into the Trust Account immediately following the IPO. In accordance with Concord’s amended and restated certificate of incorporation, the funds held in the Trust Account will be released upon the consummation of the Business Combination. See the question entitled “What happens to the funds held in the Trust Account upon consummation of the Business Combination?
There currently are 28,352,000 shares of Concord Class A common stock, including 752,000 Private Shares, issued and outstanding, and 6,900,000 Founder Shares issued and outstanding. In addition, there currently are 14,176,000 Concord Warrants issued and outstanding, consisting of 13,800,000 Public Warrants and 376,000 Private Warrants. Each whole Concord Warrant entitles the holder thereof to purchase one share of Concord Class A common stock at a price of $11.50 per share. The Concord Warrants will become exercisable 30 days after the completion of a business combination, and expire at 5:00 p.m., New York City time, five years after the completion of a business combination or earlier upon redemption or liquidation. The Private Warrants, however, are non-redeemable so long as they are held by their initial purchasers or their permitted transferees. At the Merger Effective Time, each Concord Warrant that is outstanding immediately prior to the Merger Effective Time will cease to represent a right to acquire one share of Concord Class A common stock and will be converted in accordance with the terms of the Concord Warrant Agreement, at the Merger Effective Time, into a Topco Warrant on substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the Concord Warrant Agreement.
Under Concord’s amended and restated certificate of incorporation, Concord must provide all holders of Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of Concord’s initial business combination in conjunction with a stockholder vote.
Q.
Who is Circle?
A.
Circle is a global financial technology firm that provides internet-native payments and treasury infrastructure. Circle’s mission of raising global economic prosperity through the frictionless exchange of value is being met through a series of transaction and treasury services that help businesses and financial institutions globally take advantage of the shift to a digital asset and blockchain powered global financial system. Circle is the principal operator of the dollar digital asset USD Coin (“USDC”), and a recently launched euro digital asset, Euro Coin (“EUROC”) (together with USDC, “Circle stablecoins”).
 
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Q.
What equity stake will current Concord stockholders and Circle stockholders have in Topco after the Closing?
A.
It is anticipated that, upon the completion of the Business Combination, the ownership of Topco will be as follows:

the Circle Holders will own 902,415,352 Topco Ordinary Shares (of which 37,500,000 are escrow shares), representing approximately 88.7% of the total shares outstanding;

the holders of unexercised vested equity units will, assuming exercise in full of such equity units as assumed by Topco, own 79,629,873 Topco Ordinary shares, representing approximately 7.8% of the total shares outstanding;

the Public Stockholders will own 27,600,000 Topco Ordinary Shares, representing approximately 2.7% of the total shares outstanding; and

the holders of Founder Shares will own 7,652,000 Topco Ordinary Shares, representing approximately 0.8% of the total shares outstanding.
The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that none of the Public Stockholders exercise their redemption rights and that Circle does not issue any additional equity securities prior to the Merger. If the actual facts differ from our assumptions, the numbers of shares and percentage interests set forth above will be different.
Q:
What are the possible sources and the extent of dilution that holders of Concord Class A common stock that elect not to redeem their shares will experience in connection with the Business Combination?
A:
The following table illustrates the various sources and extent of dilution that Public Stockholders may be subject to if they elect not to redeem their shares in connection with the Business Combination. This table assumes that Circle does not issue any additional equity securities prior to the Merger.
Share Ownership Including Potential Sources of Dilution (As of June 30, 2022)(1)
Assuming No
Redemptions
% of
total
Assuming
33.3%
Redemption
% of
total
Assuming
66.6%
Redemption
% of
total
Assuming Max
Redemption
% of
total
Existing Circle shareholders (less escrow shares)(2)
864,915,352 85.0% 864,915,352 85.8% 864,915,352 86.5% 864,915,352 87.4%
Unexercised company vested equity units
79,629,873 7.8% 79,629,873 7.9% 79,629,873 8.0% 79,629,873 8.0%
Escrow shares(3)
37,500,000 3.7% 37,500,000 3.7% 37,500,000 3.8% 37,500,000 3.8%
Concord public shareholders
27,600,000 2.7% 18,409,200 1.8% 9,218,400 0.9% 0 0.0%
Sponsor and related parties
7,652,000 0.8% 7,652,000 0.8% 7,652,000 0.8% 7,652,000 0.8%
Total Topco Ordinary Shares outstanding at Closing
1,017,297,225 100.0% 1,008,106,425 100.0% 998,915,625 100.0% 989,697,225 100.0%
Potential sources of future
dilution
Unvested existing Circle shareholders(4)
112,119,305 112,119,305 112,119,305 112,119,305
Earnout shares(5)
225,883,306 224,045,146 222,206,986 220,363,306
Public warrants(6)
4,981,800 4,981,800 4,981,800 4,981,800
Private placement warrants
376,000 376,000 376,000 376,000
Total potential sources of
future dilution
343,360,411 341,522,251 339,684,091 337,840,411
 
8

 
Share Ownership Including Potential Sources of Dilution (As of June 30, 2022)(1)
Assuming No
Redemptions
% of
total
Assuming
33.3%
Redemption
% of
total
Assuming
66.6%
Redemption
% of
total
Assuming Max
Redemption
% of
total
Total shares including potential sources of dilution(7)
1,360,657,636 1,349,628,676 1,338,599,716 1,327,537,636
Dilution %(8)
Unvested existing Circle shareholders
8.2% 8.3% 8.4% 8.4%
Earnout shares
16.6% 16.6% 16.6% 16.6%
Public warrants
0.4% 0.4% 0.4% 0.4%
Private placement warrants
0.0% 0.0% 0.0% 0.0%
Public stockholder ownership after potential sources of dilution(9)
2.0% 1.4% 0.7% 0.0%
Total equity value post-redemptions (in millions)
1,017 1,008 999 990
Per share value
$ 10.00 $ 10.00 $ 10.00 $ 10.00
(1)
Table shows total ordinary shares at closing as well as potential sources of future dilution if all the contingent related shares (unvested shares of existing Circle shareholders, the Earnout Shares, and shares underlying the public warrants and the private placement warrants) were issued.
(2)
Includes all existing shareholders of Circle, including convertible note holders. Excludes 37,500,000 escrow shares.
(3)
Following the Closing, Topco and certain Topco shareholders will enter into an escrow agreement, pursuant to which an aggregate of 37,500,000 Topco Ordinary Shares included in the Scheme Consideration will be deposited with an escrow agent to serve as security for certain specified potential post-Closing liabilities of Circle. For more information, see “Risk Factors -- We may incur significant liability as a result of several ongoing disputes and investigations. The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.”
(4)
Includes Topco ordinary shares and underlying Company awards.
(5)
Topco will issue up to an aggregate number of Topco Ordinary Shares equal to 20% of the Topco Ordinary Shares outstanding at Closing (including unvested existing Circle Shareholders) following the Closing (the “Earnout Shares”) to certain of Circle’s existing equity holders, as follows: 25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $12.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the first anniversary of the Closing; 25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $14.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the third anniversary of the Closing; 25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $16.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the fifth anniversary of the Closing; and 25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $100.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the tenth anniversary of the Closing.
(6)
Warrants are subject to a cash redemption right if shares trade above $18 per share over a specified period of time.
(7)
Assumes the conversion/issuance of all sources of dilution into shares even though most have conditional requirements to be issued.
 
9

 
(8)
Dilution percentages calculated using total shares including potential sources of dilution (1,360,657,636 shares in the “Assuming No Redemption” scenario).
(9)
Reflects Concord public shareholders ownership % after potential sources of dilution.
Q.
Who will be the officers and directors of Topco if the Business Combination is consummated?
A.
The Transaction Agreement provides that, immediately following the consummation of the Business Combination, the Topco’s Board will be comprised of Jeremy Allaire, M. Michele Burns, Raj Date, P. Sean Neville, Danita K. Ostling, Anita Sands, Ph.D., and Bob Diamond (designated by Concord). Immediately following the consummation of the Business Combination, we expect that the following will be the officers of Topco: Jeremy Allaire, Jeremy Fox-Geen, Elisabeth Carpenter, Flavia Naves, Dante Disparte, Mandeep Walia, Kash Razzaghi and Nikhil Chandhok.
Q.
What conditions must be satisfied to complete the Business Combination?
A.
There are a number of closing conditions in the Transaction Agreement, including that Concord’s stockholders have approved and adopted the Transaction Agreement. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “The Business Combination Proposal — The Transaction Agreement — Conditions to Closing.”
Q.
What happens if I sell my shares of Concord Class A common stock before the special meeting of stockholders?
A.
The record date for the special meeting of stockholders will be earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Concord Class A common stock after the record date, but before the special meeting of stockholders, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting of stockholders. However, you will not be entitled to receive any Topco Ordinary Shares following the Closing because only Concord’s stockholders on the date of the Closing will be entitled to receive Topco Ordinary Shares in connection with the Closing.
Q.
What vote is required to approve the proposals presented at the special meeting of stockholders?
A.
The approval of the Business Combination Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of all then outstanding shares of Concord common stock entitled to vote thereon at the special meeting. Accordingly, a Concord stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting or a broker non-vote will have the same effect as a vote against this proposal.
The approval of the Adjournment Proposal requires the affirmative vote (in person or by proxy) of the holders of a majority of the shares of Concord common stock that are voted at the special meeting of stockholders. Accordingly, a Concord stockholder’s failure to vote by proxy or to vote in person at the special meeting of stockholders, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on this proposal.
Q.
Do Circle’s shareholders need to approve the Business Combination?
A.
Yes. The Scheme must be approved by a majority in number of shareholders of each class of Circle Holders as at the Scheme Record Time present and voting (either in person or by proxy) at each class meeting representing, at the Scheme Voting Record Time, at least 75% of the Circle Shares of that class held by Circle Holders present and voting at each such meeting. In addition to the approvals required at the class meetings (also referred to as court meetings), certain resolutions are to be put to an extraordinary general meeting of Circle Holders for the purposes of approving and implementing the Scheme. At that extraordinary general meeting certain resolutions will be proposed as ordinary resolutions, requiring the approval of at least a majority of the votes cast by Circle Holders present and voting, either in person or by proxy, while certain other resolutions will be proposed as special resolutions, requiring the approval of at least 75% of the votes cast by Circle Holders present and voting, either in person or by proxy.
 
10

 
Concurrently with the execution of the Transaction Agreement, on February 16, 2022, certain of Circle’s securityholders entered into a Transaction Support Agreement with Concord, pursuant to which, among other things, such securityholders agreed to vote their Circle Shares in favor of the Transaction Agreement, the Scheme and the Transaction Documents to which Circle is or will be a party. In addition, Jeremy Allaire, Circle’s Chief Executive Officer, entered into a Transaction Support Agreement with Concord pursuant to which Mr. Allaire further agreed not to vote in favor of any Alternative Transaction (as defined in the Transaction Agreement) (excluding for such purpose an initial public offering of Circle) for a period of six months following the termination of the Transaction Agreement under certain circumstances. Collectively, as of [•], 2022, such securityholders held approximately [•]% of Circle’s issued shares. For further information, please see the section entitled “Certain Agreements Related to The Business Combination — Transaction Support Agreement.”
Q.
May Concord or Concord’s directors, officers or advisors, or their affiliates, purchase shares in connection with the Business Combination?
A.
In connection with the stockholder vote to approve the proposed Business Combination, Concord may privately negotiate transactions to purchase shares prior to the Closing from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per share pro rata portion of the Trust Account without the prior written consent of Circle. None of the Sponsor, directors, officers or advisors, or their respective affiliates, will make any such purchases when they are in possession of any material non-public information not disclosed to the seller of such shares. Such a purchase would include a contractual acknowledgement that such stockholder, although still the record holder of such shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that the Sponsor, directors, officers or advisors, or their affiliates, purchase shares in privately negotiated transactions from Public Stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Pursuant to a letter agreement, the Sponsor has agreed, among other things, to vote all Concord shares held by it in favor of the Business Combination, and to not redeem such shares. Any such privately negotiated purchases may be effected at purchase prices that are not in excess of the per share pro rata portion of the Trust Account. The purpose of these purchases would be to increase the amount of cash available to Concord for use in the Business Combination.
Q.
Will Concord issue additional equity securities in connection with the consummation of the Business Combination?
A.
Concord may enter into an equity financing in connection with the proposed Business Combination with their respective affiliates or any third parties if Concord determines that the issuance of additional equity is necessary or desirable in connection with the consummation of the Business Combination. The Transaction Agreement provides that Circle has the right to raise capital pursuant to one or more private placements in an aggregate amount of no greater than $750 million and based on a valuation of Circle of no less than $7.65 billion. On May 9, 2022, Circle completed its Series F financing, issuing 9,563,891 Series F Preferred Shares for approximately $401 million in proceeds. Any further equity issuances could result in dilution of the relative ownership interest of the non-redeeming Public Stockholders or the former equity holders of Circle. As the amount of any such equity issuances is currently not known, if any, Concord cannot provide specific information as to percentage ownership that may result therefrom. If Concord enters into a binding commitment in respect of any such additional equity financing, Concord will file a Current Report on Form 8-K with the SEC to disclose details of any such equity financing.
Q.
How many votes do I have at the special meeting of stockholders?
A.
Concord’s stockholders are entitled to one vote at the special meeting for each share of Concord common stock held of record as of the record date. As of the close of business on the record date, there were [•] outstanding shares of Concord common stock.
 
11

 
Q.
What interests do Concord’s current officers and directors have in the Business Combination?
A.
Concord’s board of directors and executive officers may have interests in the Business Combination that are different from, in addition to or in conflict with, yours. These interests include:

the beneficial ownership of the Sponsor and certain of Concord’s board of directors and officers of an aggregate of 5,520,000 shares of Concord Class B common stock, 510,289 shares of Concord Class A common stock and 255,144 Concord Warrants, which shares and warrants would become worthless if Concord does not complete a business combination within the applicable time period, as Concord’s initial stockholders have waived any right to redemption with respect to these shares (such waiver entered into in connection with the IPO for which the initial stockholders received no additional consideration). Such shares and warrants have an aggregate market value of approximately $[•] million and $[•] million, respectively, based on the closing price of Concord Class A common stock of $[•] on the NYSE on [•], 2022, the record date for the special meeting of stockholders;

Concord’s board of directors will not receive reimbursement for any out-of-pocket expenses incurred by them on Concord’s behalf incident to identifying, investigating and consummating a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated; and

the anticipated continuation of Bob Diamond, Concord’s Chairman of the board of directors, as a director of Topco following the Closing.
In addition, entities controlled by Atlas Merchant Capital LLC, an entity affiliated with the Sponsor, invested an aggregate of $29 million in Circle’s $440 million convertible note financing completed in May 2021. These interests may influence Concord’s board of directors in making their recommendation that you vote in favor of the approval of the Business Combination Proposal. You should also read the section entitled “The Business Combination — Interests of Concord’s Directors and Officers in the Business Combination.” In addition to the foregoing, Concord’s amended and restated certificate of incorporation excludes the corporate opportunity doctrine, and any other analogous doctrine, from applying to directors and officers of Concord unless such corporate opportunity is offered to a director or officer solely in his or her capacity as a director or officer of Concord and such opportunity is one Concord is legally and contractually permitted to undertake and would otherwise be reasonable for Concord to pursue. The potential conflict of interest relating to the waiver of the corporate opportunities doctrine in Concord’s amended and restated certificate of incorporation did not impact its search for an acquisition target and Concord was not prevented from reviewing any opportunities as a result of such waiver.
Q.
Did Concord’s board of directors obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?
A.
No. Concord’s board of directors did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Transaction Agreement and the Business Combination. Concord’s board of directors believes that based upon the financial skills and background of its directors, it was qualified to conclude that the Business Combination was fair from a financial perspective to its shareholders. Accordingly, investors will be relying on the judgment of Concord’s board of directors in valuing the Circle business and assuming the risk that the board of directors may not have properly valued such business.
Q.
What happens if the Business Combination Proposal is not approved?
A.
If the Business Combination Proposal is not approved and Concord does not consummate a business combination by December 10, 2022, or amend its amended and restated certificate of incorporation to extend the date by which Concord must consummate an initial business combination, Concord will be required to dissolve and liquidate the Trust Account.
Q.
Do I have redemption rights?
A.
If you are a holder of Public Shares, you may redeem your Public Shares for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account, which holds the proceeds of
 
12

 
the IPO, as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account and not previously released to Concord to pay its franchise and income taxes and for working capital purposes, upon the consummation of the Business Combination. The per share amount Concord will distribute to holders who properly redeem their shares will not be reduced by the deferred underwriting commissions Concord will pay to the underwriters of its IPO if the Business Combination is consummated. Holders of the outstanding Public Warrants do not have redemption rights with respect to such warrants in connection with the Business Combination. Concord’s initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares that they may have acquired during or after the IPO in connection with the completion of Concord’s initial business combination (such waiver entered into in connection with the IPO for which the initial stockholders received no additional consideration). The Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on funds in the Trust Account (net of interest earned on the funds held in the trust account that may be released to us to pay our taxes) of approximately $278.8 million on June 30, 2022, the estimated per share redemption price would have been approximately $10.10 (which amount includes an increase of $0.10 per public share on June 7, 2022, when Circle deposited $2,760,000 into the Trust Account, which enabled Concord to extend the period of time it has to consummate its initial business combination by six months from June 10, 2022 to December 10, 2022). Additionally, Public Shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise, holders of such shares will only be entitled to a pro rata portion of the Trust Account, including interest (which interest shall be net of taxes payable by Concord and up to $100,000 of interest to pay dissolution expenses), in connection with the liquidation of the Trust Account.
Q.
Is there a limit on the number of shares I may redeem?
A.
A Public Stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” ​(as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to 15% or more of the Public Shares. Accordingly, all shares in excess of 15% of the Public Shares owned by a holder will not be redeemed. On the other hand, a Public Stockholder who holds less than 15% of the Public Shares may redeem all of the Public Shares held by him or her for cash.
Q.
Will how I vote affect my ability to exercise redemption rights?
A.
No. You may exercise your redemption rights whether you vote your Public Shares for or against the Business Combination Proposal or do not vote your shares. As a result, the Business Combination Proposal can be approved by stockholders who will redeem their Public Shares and no longer remain stockholders, leaving stockholders who choose not to redeem their Public Shares holding shares in a company with a less liquid trading market, fewer stockholders, less cash and the potential inability to meet the listing standards of NYSE.
Q.
How do I exercise my redemption rights?
A.
In order to exercise your redemption rights, you must, prior to 4:30 p.m. Eastern time on [•], 2022 (two business days before the special meeting), (i) submit a written request to Concord’s transfer agent that Concord redeem your Public Shares for cash, and (ii) deliver your stock to Concord’s transfer agent physically or electronically through the Depository Trust Company (“DTC”). The address of Continental Stock Transfer & Trust Company, Concord’s transfer agent, is listed under the question “Who can help answer my questions?” below. Concord requests that any requests for redemption include the identity as to the beneficial owner making such request. Electronic delivery of your stock generally will be faster than delivery of physical stock certificates.
A physical stock certificate will not be needed if your stock is delivered to Concord’s transfer agent electronically. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and Concord’s transfer agent will need to act to facilitate the request. It is Concord’s understanding that stockholders should generally allot at least one week to obtain physical certificates from the transfer agent. However, because Concord does not have any control over this process or
 
13

 
over the brokers or DTC, it may take significantly longer than one week to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.
Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Concord’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Concord’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that Concord’s transfer agent return the shares (physically or electronically). You may make such request by contacting Concord’s transfer agent at the phone number or address listed under the question “Who can help answer my questions?
Q.
If I hold Concord Warrants, what are the U.S. federal income tax consequences of my Concord Warrants converting to Topco Warrants?
A.
In connection with the Business Combination, each issued and outstanding Concord Warrant will cease to represent a right to acquire shares of Concord Class A common stock and will instead represent the right to acquire the same number of Topco Ordinary Shares, at the same exercise price and on the same terms as in effect immediately prior to the Merger Effective Time.
If the Merger qualifies as a “reorganization” under Section 368 of the Code, subject to Section 367(a) of the Code, a U.S. Holder (as defined in Material U.S. Federal Income Tax Considerations — U.S. Holders) of Concord Warrants generally should not recognize any gain or loss upon the conversion of the Concord Warrants to Topco Warrants; the aggregate tax basis of such U.S. Holder’s basis in the Topco Warrants will be the same as the aggregate tax basis of such U.S. Holder’s Concord Warrants immediately before the closing of the Business Combination; and the holding period of such warrants will continue, provided that the Concord Warrants are held as capital assets on the effective date of the closing of the Business Combination. However, it is unclear whether the requirements of Section 368 of the Code can be satisfied and such qualification is not a condition of the Business Combination.
If the Merger does not qualify as a “reorganization” under Section 368 of the Code, a U.S. Holder of Concord Warrants could be treated as transferring its Concord Warrants to Topco in exchange for Topco Warrants in an exchange governed only by Section 351 of the Code. If so treated, a U.S. Holder should be required to recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of gain realized by such holder (generally, the excess of (x) the sum of the fair market values of the Topco Warrants treated as received by such holder and the Topco Ordinary Shares received by such holder, if any, over (y) such holder’s aggregate adjusted tax basis in the Concord Warrants and Concord Class A common stock, if any, exchanged therefor) and (ii) the fair market value of the Topco warrants received by such holder in such exchange.
Greenberg Traurig, P.A. (“Greenberg”) is unable to opine with respect to the Merger’s qualification as a reorganization under Section 368 of the Code. For an additional discussion of the U.S. federal income tax treatment of Concord Warrants in connection with the Business Combination, see the section entitled “Material U.S. Federal Income Tax Considerations — U.S. Holders — The Business Combination.”
Q.
What are the U.S. federal income tax consequences of exercising my redemption rights?
A.
Redemptions will generally be taxable to U.S. Public Stockholders. See “Material U.S. Federal Income Tax Considerations — U.S. Holders — Redemption of Concord Class A Common Stock” for further information.
Q.
What are the U.S. federal income tax consequences of the Merger to holders of Concord Class A common stock?
A.
As described more fully under, and subject to the limitations and qualifications contained in, the section entitled “Material U.S. Federal Income Tax Considerations — U.S. Holders — The Business Combination,” the exchange by holders of Concord Class A common stock for Topco Ordinary Shares
 
14

 
should qualify as an exchange governed by Section 351(a) of the Code such that the exchange of Concord Class A common stock for Topco Ordinary Shares pursuant to the Merger generally qualifies as a tax-free exchange for U.S. federal income tax purposes.
Q.
If I hold Concord Warrants, can I exercise redemption rights with respect to my warrants?
A.
No. There are no redemption rights with respect to the Concord Warrants.
Q.
Do I have appraisal rights if I object to the proposed Business Combination?
A.
No. There are no appraisal rights available to holders of shares of Concord Class A common stock in connection with the Business Combination.
Q.
What happens to the funds held in the Trust Account upon consummation of the Business Combination?
A.
If the Business Combination is consummated, the funds held in the Trust Account will be released to pay Concord stockholders who properly exercise their redemption rights. Any additional funds available for release from the Trust Account will be used for general corporate purposes of Topco following the Business Combination.
Q.
What happens if the Business Combination is not consummated?
A.
There are certain circumstances under which the Transaction Agreement may be terminated. See the section entitled “The Business Combination Proposal — The Transaction Agreement — Termination” for information regarding the parties’ specific termination rights.
If, as a result of the termination of the Transaction Agreement or otherwise, Concord is unable to complete a business combination by December 10, 2022 (or January 31, 2023, if the Concord Charter Amendment (as defined herein) is approved by Concord’s stockholders), Concord’s amended and restated certificate of incorporation provides that Concord will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding Public Shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to Concord to pay taxes (less taxes payable and up to $100,000 of such net interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and Concord’s board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. See the sections entitled “Risk Factors — We may not be able to consummate an initial business combination within the required time period, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate” and “— Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them.” Holders of Founder Shares have waived any right to any liquidation distribution with respect to those shares (such waiver entered into in connection with the IPO for which the Sponsor and initial stockholders received no additional consideration).
In the event of liquidation, there will be no distribution with respect to outstanding Concord Warrants. Accordingly, the Concord Warrants will expire worthless.
Q.
When is the Business Combination expected to be completed?
A.
As of the date of this registration statement, the closing of the Business Combination is currently expected to be in the first quarter of 2023, if the Concord Charter Amendment is approved by Concord’s stockholders, and the parties intend to close the transaction as soon as reasonably practicable (subject to the satisfaction (or, to the extent applicable and lawful, waiver) of the conditions to the completion of the Business Combination. However, no assurance can be provided as to when or if the Business Combination will be completed. The required votes of Concord and Circle security holders to adopt
 
15

 
the required proposals at the security holder meetings must be obtained and the other conditions to the Business Combination must be satisfied or, to the extent applicable and lawful, waived.
For a description of the conditions to the completion of the Business Combination, see the section entitled “The Business Combination Proposal — The Transaction Agreement — Conditions to Closing.”
Q.
What do I need to do now?
A.
You are urged to carefully read and consider the information contained in this proxy statement/prospectus, including the financial statements and annexes attached hereto, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.
Q.
How do I vote?
A.
If you were a holder of record of Concord Class A common stock on [•], 2022, the record date for the special meeting of stockholders, you may vote with respect to the applicable proposals in person at the special meeting of stockholders or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the special meeting of stockholders and vote in person, obtain a proxy from your broker, bank or nominee.
Q.
What will happen if I abstain from voting or fail to vote at the special meeting?
A.
At the special meeting of stockholders, Concord will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote will have the same effect as a vote against the Business Combination Proposal and will have no effect on any of the other Proposals.
Q.
What will happen if I sign and return my proxy card without indicating how I wish to vote?
A.
Signed and dated proxies received by Concord without an indication of how the stockholder intends to vote on a proposal will be voted in favor of each proposal presented to the stockholders.
Q.
Do I need to attend the special meeting of stockholders to vote my shares?
A.
No. You are invited to attend the special meeting to vote on the proposals described in this proxy statement/prospectus. However, you do not need to attend the special meeting of stockholders to vote your shares. Instead, you may submit your proxy by signing, dating and returning the applicable enclosed proxy card(s) in the pre-addressed postage-paid envelope. Your vote is important. Concord encourages you to vote as soon as possible after carefully reading this proxy statement/prospectus.
Q.
If I am not going to attend the special meeting of stockholders in person, should I return my proxy card instead?
A.
Yes. After carefully reading and considering the information contained in this proxy statement/prospectus, please submit your proxy, as applicable, by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.
Q:
How will the COVID-19 pandemic impact in-person voting at the special meeting?
A:
We intend to hold the special meeting in person. However, we are sensitive to the public health and travel concerns our stockholders may have and recommendations that public health officials may issue in light of the evolving coronavirus pandemic situation. As a result, we may impose additional procedures or limitations on meeting attendees. We plan to announce any such updates in a press release filed with the SEC and on our proxy website at [•], and we encourage you to check this website prior to the meeting if you plan to attend.
 
16

 
Q:
What impact will the COVID-19 pandemic have on the Business Combination?
A:
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of COVID-19 on the business of Concord and Circle, and there is no guarantee that efforts by Concord and Circle to address the adverse impacts of COVID-19 will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others. If Concord or Circle is unable to recover from a business disruption on a timely basis, the Business Combination and Circle’s business, financial condition and results of operations following the completion of the Business Combination would be adversely affected. The Business Combination may also be delayed and adversely affected by COVID-19 and become more costly. Each of Concord and Circle may also incur additional costs to remedy damages caused by any such disruptions, which could adversely affect its financial condition and results of operations.
Q.
If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?
A.
No. If your broker holds your shares in its name and you do not give the broker voting instructions, under the applicable stock exchange rules, your broker may not vote your shares on any of the Concord Proposals. If you do not give your broker voting instructions and the broker does not vote your shares, this is referred to as a “broker non-vote.” Broker non-votes will be counted for purposes of determining the presence of a quorum at the special meeting of stockholders. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide. However, in no event will a broker non-vote have the effect of exercising your redemption rights for a pro rata portion of the Trust Account, and therefore no shares as to which a broker non-vote occurs will be redeemed in connection with the proposed Business Combination.
Q.
May I change my vote after I have mailed my signed proxy card?
A.
Yes. You may change your vote by sending a later-dated, signed proxy card to Concord’s secretary at the address listed below prior to the vote at the special meeting of stockholders, or attend the special meeting and vote in person. You also may revoke your proxy by sending a notice of revocation to Concord’s secretary, provided such revocation is received prior to the vote at the special meeting. If your shares are held in street name by a broker or other nominee, you must contact the broker or nominee to change your vote.
Q.
What should I do if I receive more than one set of voting materials?
A.
You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.
Q.
What is the quorum requirement for the special meeting of stockholders?
A.
A quorum will be present at the special meeting of stockholders if a majority of the Concord common stock outstanding and entitled to vote at the meeting is represented in person or by proxy. In the absence of a quorum, a majority of Concord’s stockholders, present in person or represented by proxy, and voting thereon will have the power to adjourn the special meeting.
As of the record date for the special meeting, [•] shares of Concord common stock would be required to achieve a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or your broker, bank or other nominee submits one on your behalf) or if you vote in person at the special meeting of
 
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stockholders. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, a majority of the shares represented by stockholders present at the special meeting or by proxy may authorize adjournment of the special meeting to another date.
Q.
What happens to the Concord Warrants I hold if I vote my shares of Concord Class A common stock against approval of the Business Combination Proposal and validly exercise my redemption rights?
A.
Properly exercising your redemption rights as a Concord stockholder does not result in either a vote “FOR” or “AGAINST” the Business Combination Proposal. If the Business Combination is not completed, you will continue to hold your Concord Warrants, and if Concord does not otherwise consummate an initial business combination by December 10, 2022, or obtain the approval of Concord stockholders to extend the deadline for Concord to consummate an initial business combination, Concord will be required to dissolve and liquidate, and your Concord Warrants will expire worthless.
Q.
Who will solicit and pay the cost of soliciting proxies?
A.
Concord will pay the cost of soliciting proxies for the special meeting. Concord has engaged Morrow Sodali LLC to assist in the solicitation of proxies for the special meeting. Concord has agreed to pay Morrow Sodali LLC a fee of $[•]. Concord will reimburse Morrow Sodali LLC for reasonable out-of-pocket expenses and will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. Concord also will reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Concord Class A common stock for their expenses in forwarding soliciting materials to beneficial owners of Concord Class A common stock and in obtaining voting instructions from those owners. Concord’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q.
Who can help answer my questions?
A.
If you have questions about the stockholder proposals, or if you need additional copies of this proxy statement/prospectus, the proxy card or the consent card you should contact, Morrow Sodali LLC, our proxy solicitor at:
Morrow Sodali LLC
333 Ludlow Street, 5th Floor, South Tower Stamford CT 06902
Shareholders may call toll free: (800) 662-5200
Banks and Brokers may call collect: (203) 658-9400
Email: CND.info@investor.morrowsodali.com
You may also contact Concord at:
Concord Acquisition Corp
477 Madison Avenue, 22nd Floor
New York, NY 10022
Telephone: (212) 883-4330
Attention: Secretary
To obtain timely delivery, Concord’s stockholders and warrant holders must request the materials no later than five business days prior to the special meeting.
You may also obtain additional information about Concord from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”
If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Concord’s transfer agent prior to 4:30 p.m., New York time, on the second business day prior to the special meeting of stockholders. If you have questions regarding the certification of your position or delivery of your stock, please contact:
Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, New York 10004
Attention: Mark Zimkind
E-mail: mzimkind@continentalstock.com
 
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy statement/prospectus and does not contain all of the information that is important to you. To better understand the Business Combination and the proposals to be considered at the special meeting, you should read this entire proxy statement/prospectus carefully, including the annexes. The Transaction Agreement is the primary legal document that governs the Business Combination and the other transactions that will be undertaken in connection with the Business Combination. See also the section entitled “Where You Can Find Additional Information.”
Parties to the Business Combination
Concord
Concord is a Delaware corporation formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, referred to throughout this proxy statement/prospectus as its initial business combination. While Concord may pursue a merger opportunity in any industry or sector, Concord has capitalized on the ability of our management team and Sponsor to identify, acquire and manage a business in the financial services and financial technology sectors, including payments, enterprise software, and data analytics, that can benefit from its differentiated deal flow and global network. Concord seeks to acquire established and growing businesses that it believes are fundamentally sound with an attractive financial profile and poised for continued and accelerating growth, but potentially in need of some form of financial, operational, strategic or managerial guidance to maximize value.
Concord Class A common stock, Concord Warrants and Concord Units, consisting of one share of Concord Class A Common Stock and one Concord Warrant, are traded on the NYSE under the ticker symbols “CND,” “CND WS” and “CND.U,” respectively. Concord Units will automatically separate into the component securities upon consummation of the Business Combination and, as a result, will no longer trade as a separate security.
The mailing address of Concord’s principal executive office is 477 Madison Avenue, 22nd Floor, New York, New York, 10022, and its telephone number is (212) 883-4330.
For more information about Concord, see the sections entitled “Information About Concord” and “Concord’s Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
Concord (Pre-combination)
[MISSING IMAGE: tm2124445d1-fc_directorbwlr.jpg]
Circle
Circle, a private company limited by shares incorporated in Ireland, is a global financial technology firm that provides internet-native payments and treasury infrastructure. Circle’s mission of raising global economic prosperity through the frictionless exchange of value is being met through a series of transaction and treasury services that help businesses and financial institutions globally to take advantage of the shift to a digital asset and blockchain powered global financial system. Circle is the principal operator of the dollar
 
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digital asset USD Coin (USDC), and the recently launched Euro Coin (EUROC). Customers of Circle are principally businesses and financial institutions that utilize Circle’s infrastructure and platforms to make payments and store funds in Circle stablecoins, as well as to allocate funds into our yield product. Additionally, customers utilize Circle stablecoins on cryptocurrency exchanges to engage in trading activity outside of the confines of the Circle Account. While not Circle customers, other users of Circle stablecoins include entities and individuals that are enabled by cryptocurrency exchanges and other parties in the global crypto ecosystem to purchase and hold Circle stablecoins. Transactions involving Circle stablecoins are principally related to making payments and settling onchain transactions through the Circle Account and API infrastructure. Businesses and financial institutions also use Circle stablecoins in trading activity on cryptocurrency exchanges and decentralized protocols. Circle estimates that, based on available blockchain-based data, which does not incorporate cold wallets and user wallets in centralized exchanges: (1) to date, USDC has been used by more than 8.5 million wallets and has over 1.1 million monthly active wallets; (2) USDC has been used in over $5 trillion in cumulative onchain settlements; (3) there are estimated over $6 billion of USDC held in the reserves of centralized exchanges and around $10 billion held in decentralized exchange and lending protocols; (4) over $4 billion is held in blockchain bridges and at least $1 billion is held in DAO treasuries and reserves; and (5) since the beginning of 2021, Circle has processed over $3.6 billion in USDC payments, with an average size of $400, and $1.7 billion in payouts.
For more information about Circle, see the sections entitled “Information About Circle” and “Circle’s Management’s Discussion and Analysis of Financial Condition and Results of Operation.”
Circle (Pre-combination)
[MISSING IMAGE: tm2124445d15-fc_01circle4c.jpg]
Regulation in U.S. and International Markets
Circle operates in a complex and rapidly evolving global regulatory environment and is subject to a wide range of laws and regulations enacted by U.S. federal, state, local and foreign governments, and regulatory authorities. The breadth of laws, rules, and regulations Circle is subject to include financial services and banking, consumer protection, money transmission, virtual currency, stored value and prepaid access, electronic payments, payment services, securities, commodities, and unclaimed property, as well as bespoke digital asset and cryptocurrency laws that have been promulgated in some jurisdictions. Regulators
 
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periodically review Circle’s compliance with its own policies and procedures and a variety of laws and regulations. Circle is subject to extensive regulation by regulators, including, but not limited to, U.S. state financial oversight bodies (such as the New York Department of Financial Services and the California Department of Financial Protection and Innovation), U.S. federal regulators (including the Financial Crimes Enforcement Network and Internal Revenue Service), The U.K. Financial Conduct Authority, and Bermuda Monetary Authority. If Circle fails to comply with applicable disclosure, reporting, anti-money laundering, capitalization, corporate governance or other requirements, it may be subject to fines or other enforcement action and such compliance failures could adversely affect Circle’s brand, reputation, business, operating results and financial condition. The regulatory environment applicable to non-traditional financial services such as commercialization of stablecoins is evolving and in many cases, regulatory interpretations suffer from a lack of specificity or unclear application. We use the term stablecoins in this proxy statement/prospectus to refer generally to the category of digital assets which are intended to maintain a stable value. However, there is no generally accepted definition of stablecoins, and stablecoins can refer to digital assets that may have materially different characteristics and risks. Additionally, some stablecoins have failed to maintain a stable value. Differences between stablecoins may also mean that certain stablecoins may be regulated differently than other stablecoins. Circle may incur significant legal and compliance costs and management time to assure compliance with applicable law and regulations. Failure to satisfy evolving and uncertain interpretations may result in legal and regulatory proceedings against Circle and its business, reputation, financial condition, results of operations and cash flow could be materially adversely affected. For more information, see the sections entitled “Risk Factors” and “Circle Management’s Discussion and Analysis — Key Factors Affecting Operating Results — Regulation in U.S. and International Markets.
Centre Consortium
Circle is a member of a joint-venture with Coinbase called the Centre Consortium. The Centre Consortium is owned 50% by Circle and 50% by Coinbase. The Centre Consortium sets policy and governance standards around stablecoin issuances, which includes treasury and liquidity management standards as well as management of the reserve assets standards. The Centre Consortium board of managers also has the authority to admit new members to the Consortium and to authorize issuances of new fiat-denominated stablecoins. To date, the board of managers has not admitted any new members into the Consortium. The Centre Consortium was originally conceived to authorize multiple issuers of a common fiat-denominated stablecoin; however, USDC is the sole stablecoin being overseen by the Centre Consortium, and Circle is the sole issuer of USDC. For more information, see the section entitled “USDC.”
Topco
Topco is a public company limited by shares incorporated in Ireland formed for the purpose of effecting the Business Combination. Topco does not own any material business assets or operate any business. Upon consummation of the Business Combination, both Concord and Circle will become wholly-owned subsidiaries of Topco, and Topco will be the publicly-listed entity whose shares are listed on NYSE.
Merger Sub
Merger Sub is a Delaware corporation and a wholly owned subsidiary of Topco formed for the purpose of effecting the Business Combination. Merger Sub does not own any material business assets or operate any business.
 
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The Business Combination
Post-combination structure
[MISSING IMAGE: tm2124445d15-fc_buscom4c.jpg]
The Transaction Agreement
Structure of the Proposed Transactions
The Business Combination is comprised of two separate transactions (collectively, the “Proposed Transactions”):
a)
Pursuant to the Scheme, Circle’s shareholders will transfer their holdings of shares in the capital of Circle to Topco in exchange for the issuance of Topco Ordinary Shares, with the result that, at the Scheme Effective Time, Circle will become a wholly-owned subsidiary of Topco; and
b)
On the first business day following the Scheme Effective Time, subject to the conditions of the Transaction Agreement and in accordance with the DGCL, Merger Sub will merge with and into Concord, with Concord surviving the Merger as a wholly-owned subsidiary of Topco.
Consideration
Pursuant to the Scheme, at the Scheme Effective Time, each holder of Scheme Shares will transfer all of his, her or its Scheme Shares to Topco in exchange for the allotment and issuance by Topco of that number of Topco Ordinary Shares comprising that Scheme shareholder’s pro rata portion of the Aggregate Company Consideration to which the Scheme shareholders will become entitled pursuant to the Scheme (the “Scheme Consideration”).
At the Merger Effective Time:

Each share of Concord Class A common stock and each share of Concord Class B common stock (other than shares held by Concord as treasury stock or owned by Concord immediately prior to the Merger Effective Time) issued and outstanding immediately prior to the Merger Effective Time will be cancelled and automatically converted into and become the right to receive one Topco Ordinary Share (the “Merger Consideration”); and

Each Concord Warrant that is outstanding immediately prior to the Merger Effective Time will be converted in accordance with the terms of the Concord Warrant Agreement into a Topco Warrant on
 
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substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the Concord Warrant Agreement.
Earnout
Following the Closing, Topco will issue up to an aggregate number of Topco Ordinary Shares equal to 20% of the Topco Ordinary Shares in issue (including unvested existing Circle shareholders) immediately following the Closing to certain of Circle’s existing equity holders, as follows:

25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $12.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the first anniversary of the Closing;

25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $14.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the third anniversary of the Closing;

25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $16.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the fifth anniversary of the Closing; and

25% of the Earnout Shares, in the aggregate, if the volume weighted average trading price of the Topco Ordinary Shares is $100.00 or greater for any 20 trading days within a period of 30 consecutive trading days prior to the tenth anniversary of the Closing.
Such Earnout Shares will also become issuable under certain circumstances if a “change of control” of Topco occurs prior to the applicable earnout expiration date and the price per share in the change of control equals or exceeds the applicable price target.
Escrow
In connection with the Closing, Topco and an independent, third-party shareholder representative will enter into an escrow agreement pursuant to which an aggregate of 37,500,000 Topco Ordinary Shares (the “Escrow Shares”) included in the Scheme Consideration will be deposited with an escrow agent. The Escrow Shares will serve as security for potential post-Closing liabilities of Circle that may arise solely from (i) Circle’s dispute with FT Partners regarding advisory fees in connection with consummation of the Business Combination and (ii) an OFAC investigation relating to a previously-owned business. For more information, please see “Risk Factors — We may incur significant liability as a result of several ongoing disputes and investigations. The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.”
Closing
The Closing will occur on a date to be agreed by the parties, but in no event later than three business days, following the satisfaction or waiver of all of the closing conditions, with the exception of those conditions that can only be satisfied at the Closing.
Representations, Warranties and Covenants
The Transaction Agreement contains customary representations and warranties of (a) Circle, (b) Topco and Merger Sub and (c) Concord relating to, among other things, their ability to enter into the Transaction Agreement and their outstanding capitalization. The Transaction Agreement also contains covenants by Circle, Topco, Merger Sub and Concord to conduct their businesses in the ordinary course and consistent with past practice during the period between the execution of the Transaction Agreement and consummation of the Proposed Transactions and to refrain from taking certain actions specified in the Transaction Agreement, subject to certain exceptions, including the right to raise capital pursuant to one or more private placements in an aggregate amount of no greater than $750 million and based on a valuation of Circle of no less than $7.65 billion (“Allowed Financing”), and the right to complete one or more Acquisition Transactions, subject to Concord’s consent in the event of any acquisition if financial statements of the
 
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acquired business would be required to be included in the Registration Statement on Form S-4 (“Allowed Acquisition”). Circle has agreed to customary “no shop” obligations.
Pursuant to the Transaction Agreement, prior to the Closing, the shareholders of Topco will pass a resolution adopting the Topco Constitution as a revised constitution. In addition to provisions that are customary for the constitution of an Irish-incorporated company that is listed on the NYSE, the Topco Constitution will contain a lock-up provision for the period commencing on the date on which the Scheme takes effect and ending on the earlier of (i) the period commencing on the second trading day immediately following Topco’s second quarterly release of earnings following the date of the Merger or (ii) the date on which a Change of Control is consummated, applicable to certain of the Topco Ordinary Shares (including the Earnout Shares, if and when issued) to be issued to Circle’s shareholders at the Closing, subject to customary exceptions and certain Topco Ordinary Shares price-based early release provisions. For more information about the lock-up provisions in the Topco Constitution, see the section entitled “Description of Topco’s Securities — Lock-Up”.
For more information about the Transaction Agreement and the Business Combination and other transactions contemplated thereby, see the sections entitled “Proposal No. 1 — The Business Combination Proposal” and “The Transaction Agreement.”
Conditions to Closing
General Conditions
The obligations of the parties to consummate the Proposed Transactions are subject to the satisfaction or waiver (where permissible and by the party for whose benefit such condition exists) at or prior to the Scheme Effective Time, of the following conditions:

The Concord Proposals will have been approved and adopted by the requisite affirmative vote of the stockholders of Concord in accordance with this proxy statement/prospectus, the DGCL, the Concord organizational documents and the rules and regulations of the NYSE and, if applicable, the Concord Extension Proposal shall have been approved and adopted by the requisite affirmative vote of the stockholders of Concord in accordance with the proxy statement;

No governmental authority will have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Proposed Transactions illegal or otherwise prohibiting consummation of the Proposed Transactions;

All required filings and/or notifications required: (i) under any application for authorization or regulatory process; (ii) under the applicable antitrust laws will have been completed and any applicable waiting period (and any extension thereof) applicable to the consummation of the Proposed Transactions under the applicable antitrust laws will have expired or been terminated; and (iii) any pre-Closing approvals or clearances reasonably required thereunder will have been obtained;

The Topco initial listing application with the NYSE in connection with the Proposed Transactions will have been approved and, immediately following the Merger Effective Time, Topco will satisfy any applicable initial and continuing listing requirements of the NYSE, and Topco will not have received any notice of non-compliance therewith that has not been cured or would not be cured at or immediately following the Merger Effective Time, and the Topco Ordinary Shares will have been approved for listing on the NYSE, or another national securities exchange mutually agreed to by the parties, as of the Closing Date (subject to the satisfaction of certain other requirements set forth in the Transaction Agreement);

The registration statement will have been declared effective under the Securities Act. No stop order suspending the effectiveness of the registration statement will be in effect, and no proceedings for purposes of suspending the effectiveness of the registration statement will have been initiated or be threatened in writing by the SEC; and

All required parties to the Registration Rights Agreement will have delivered, or cause to be delivered, copies of the Registration Rights Agreement duly executed by all such parties.
 
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Concord Conditions to Closing
The obligations of Concord to consummate the Proposed Transactions are subject to the satisfaction or waiver (where permissible and by the party for whose benefit such condition exists) at or prior to the Scheme Effective Time, of the following additional conditions:

The (A) representations and warranties of Circle contained in Sections 5.01, 5.03, 5.04, 5.07(d), and 5.22 shall each be true and correct in all material respects as of the date of the Transaction Agreement and the Scheme Effective Time and (B) the other representation and warranties of Circle contained in Article V shall be true and correct in all material respects as of July 7, 2021 (the “Reference Date”) and as of the Scheme Effective Time (except to the extent that any such representation or warranty expressly is made as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except, solely with respect to this subclause (B), where the failures of any such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on Circle;

The representations and warranties of Topco and Topco Merger Sub contained in (A) Section 6.01, Section 6.03 and Section 6.04 shall each be true and correct in all material respects as of the date of the Transaction Agreement and the Scheme Effective Time (except to the extent that any such representation or warranty expressly is made as of an earlier date, in which case such representation and warranty shall be true and correct as of such specified date) and (B) the other representations and warranties of Article V shall be true and correct in all respects as of the date of the Transaction Agreement and as of the Scheme Effective Time (except to the extent that any such representation or warranty expressly is made as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except, solely with respect to this subclause (B) where the failures of any such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on Topco;

Circle, Topco and Merger Sub will have performed or complied in all material respects with all agreements and covenants required by the Transaction Agreement; provided, that Topco will have performed or complied in all respects with certain specified agreements and covenants set forth in the Transaction Agreement;

Circle will have delivered to Concord a certificate, dated the date of the Closing, signed by an officer of Circle, certifying as to the satisfaction of certain conditions contained in the Transaction Agreement;

No Company Material Adverse Effect (as defined herein) will have occurred;

All required parties to the Shareholders Agreement (as defined herein) will have delivered, or caused to be delivered, to Concord copies of the Shareholders Agreement duly executed by all such parties;

Circle will have delivered to Concord all Circle permits and any additional notice, consent, approval, orders or authorization of, or registration, declaration or filing with, any governmental authority or other person;

Topco will have adopted the Topco Constitution; and

Topco will have entered into a composition agreement with the Irish Revenue Commissioners and a special eligibility agreement for securities with a depository trust company in respect of the Topco Ordinary Shares and Topco Warrants, both of which are in full force and effect.
Circle Conditions to Closing
The obligations of Circle to consummate the Proposed Transactions are subject to the satisfaction or waiver (where permissible and by the party for whose benefit such condition exists) at or prior to the Scheme Effective Time, of the following additional conditions:

The representations and warranties of Concord contained in the Transaction Agreement will each be true and correct in all material respects as of the date of the Transaction Agreement and the Scheme Effective Time (except to the extent that any such representation or warranty expressly is
 
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made as of an earlier date, in which case such representation and warranty must be true and correct as of such specified date), subject to certain exceptions where the failures of any such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on Concord;

Concord will have performed or complied in all material respects with all other agreements and covenants required by the Transaction Agreement to be performed or complied with by it on or prior to the Merger Effective Time; and

Concord will have delivered to Circle a certificate, dated the date of the Closing, signed by an executive officer of Concord, certifying as to the satisfaction of certain conditions contained in the Transaction Agreement.
The Transaction Agreement does not include a minimum cash closing condition
Scheme Conditions
The obligations of Circle, Concord, Topco and Merger Sub to consummate the Proposed Transactions are subject to the satisfaction of each of the following conditions:

The Scheme having been approved by a majority in number of members of each class of Circle Holders and Circle Convertible Note holders as at the Scheme Voting Record Time, including as may be directed by the High Court of Ireland pursuant to Section 450(5) of the Irish Companies Act, present and voting either in person or by proxy at each of the court meetings (or at any adjournment or postponement of any such meetings) representing, at the Scheme Voting Record Time, at least 75% in value of Circle Shares of that class or Circle Convertible Note holders (as the case may be) held by such Circle Holders or Circle Convertible Note holders (as the case may be) present and voting at that court meeting;

Each of the resolutions to be proposed at the extraordinary general meeting of Circle Holders for the purposes of approving and implementing the Scheme, having been duly passed by the requisite majority of Circle Holders at the extraordinary general meeting;

The High Court of Ireland having sanctioned (without material modification) the Scheme pursuant to Sections 449 to 455 of the Irish Companies Act; and

A copy of the court order sanctioning the Scheme pursuant to Irish law having been delivered to the Irish Registrar of Companies.
Termination
The Transaction Agreement may be terminated and the Merger and the other Proposed Transactions may be abandoned at any time prior to the Scheme Effective Time, as follows:

By mutual written consent of Concord and Circle;

By either Concord or Circle, if the Scheme Effective Time has not occurred prior to December 8, 2022 (the “Outside Date”); provided that (i) if a Concord Extension Proposal (as defined in the Transaction Agreement) to extend Concord’s deadline to consummate a business combination shall be approved at a relevant Concord stockholders’ meeting, the Outside Date will be the last day of the extended time period for Concord to consummate a business combination (but no later than January 31, 2023); provided, further, that (ii) the Transaction Agreement may not be terminated by or on behalf of any party that either directly or indirectly through its affiliates is in breach or violation of any representation, warranty, covenant, agreement or obligation contained in the Transaction Agreement and such breach or violation will have proximately caused the failure to consummate the Proposed Transactions on or prior to the Outside Date;

By either Concord or Circle if any governmental authority in the United States has enacted, issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether temporary, preliminary or permanent) that has become final and non-appealable and has the effect of making consummation of the Proposed Transactions illegal or otherwise preventing or prohibiting consummation of the Proposed Transactions;
 
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By either Concord or Circle if any of the Concord Proposals fail to receive the required Concord stockholder approval at the Concord stockholders’ meeting;

By either Concord or Circle if: (i) the court meetings or the extraordinary general meeting of Circle Holders have been completed and the court meeting resolution or the extraordinary general meeting of Circle Holders resolutions, as applicable, have not been approved by the requisite majorities in each case; or (ii) if the High Court of Ireland declines or refuses to sanction the Scheme, unless Circle and Concord agree that the decision of the High Court of Ireland will be appealed;

By either Concord or Circle if any law or injunction enacted, issued, promulgated, enforced or entered by a relevant governmental authority has been entered permanently restraining, enjoining or otherwise prohibiting the consummation of the Proposed Transactions and such law or injunction has become final and non-appealable, provided that the right to terminate the Transaction Agreement will not be available to a party whose breach of any provision of the Transaction Agreement has caused such injunction;

By Concord if any of Circle’s representations or warranties contained in the Transaction Agreement are not true and correct or if Circle, Topco or Merger Sub has failed to perform any covenant or agreement such that the conditions of the Transaction Agreement would not be satisfied (“Terminating Company Breach”) (as defined herein); provided Concord is not then in breach of its representations, warranties, covenants or agreements in the Transaction Agreement so as to prevent the condition to closing from being satisfied; provided further that, if such Terminating Company Breach is curable by Circle, Topco or Merger Sub, Concord may not terminate the Transaction Agreement for so long as Circle, Topco and Merger Sub continue to exercise their reasonable efforts to cure such breach, unless such breach is not cured by the earlier of (x) 30 days after written notice of such breach is provided by Concord to Circle and (y) the Outside Date; or

By Circle if any of Concord’s representations or warranties contained in the Transaction Agreement are not true and correct or if Concord has failed to perform any covenant or agreement such that the conditions of the Transaction Agreement would not be satisfied (“Terminating Concord Breach”); provided that none of Circle, Topco or Merger Sub is then in breach of its respective representations, warranties, covenants or agreements in the Transaction Agreement so as to prevent the condition to closing of the Transaction Agreement from being satisfied; provided, however, that, if such Terminating Concord Breach is curable by Concord, Circle may not terminate the Transaction Agreement for so long as Concord continues to exercise its reasonable efforts to cure such breach, unless such breach is not cured by the earlier of (x) 30 days after written notice of such breach is provided by Circle to Concord and (y) the Outside Date.
Effect of Termination; Termination Fee; Break-up Fee
If the Transaction Agreement is terminated, it will become void, and there will be no liability or obligation under the Transaction Agreement on the part of any party thereto, except as set forth in the Transaction Agreement or in the case of termination subsequent to a willful material breach of the Transaction Agreement or fraud by a party thereto.
Circle will be required to pay to Concord an amount equal to $112,500,000, in the event that (i) the Transaction Agreement is validly terminated as a result of the failure of the Scheme to receive the requisite approval of Circle’s equity holders or as a result of a breach by Circle, Topco or Merger Sub of certain of their covenants under the Transaction Agreement where such breach occurs as a result of the vote of Circle’s equity holders regarding the Scheme not occurring by the Outside Date in circumstances where (X) the Registration Statement on Form S-4 has been declared effective under the Securities Act (the date of such declaration the “SEC Effective Date”) and (Y) the period of time from the SEC Effective Date to the Outside Date would have been sufficient for the Company to convene the court meetings and the extraordinary general meeting; and (ii) at the time of such termination, Concord has not committed a breach of the Transaction Agreement giving Circle the right to terminate the Transaction Agreement. If the Transaction Agreement is validly terminated (i) by the mutual consent of the parties or by either Circle or Concord because the Outside Date shall have occurred and as of the date of such termination the Registration Statement on Form S-4 has not been declared effective under the Securities Act; and (ii) at the time of such
 
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termination, Concord has not committed a Terminating Concord Breach (as defined in the Transaction Agreement), then Circle shall issue to Concord a number of Company Ordinary Shares equal in value to $20,000,000. In no event will Circle be required to pay such a termination fee on more than one occasion.
For more information, see the section entitled “The Transaction Agreement — Termination,” “— Effect of Termination” and “— Termination Fee.”
Other Agreements Related to the Transaction Agreement
Transaction Support Agreement
Concurrently with the execution of the Transaction Agreement, on February 16, 2022, certain of Circle’s securityholders entered into a Transaction Support Agreement with Concord, pursuant to which, among other things, such securityholders agreed to vote their Circle Shares in favor of the Transaction Agreement, the Scheme and the Transaction Documents to which Circle is or will be a party. In addition, Jeremy Allaire, Circle’s Chief Executive Officer, entered into a Transaction Support Agreement with Concord pursuant to which Mr. Allaire further agreed not to vote in favor of any Alternative Transaction (as defined in the Transaction Agreement) (excluding for such purpose an initial public offering of Circle) for a period of six months following the termination of the Transaction Agreement under certain circumstances.
For more information about the Transaction Support Agreement, see the section entitled “Certain Agreements Related to the Business Combination — Transaction Support Agreement.”
Shareholders Agreement
In connection with the Proposed Transactions, Topco, Concord, the Sponsor, Mr. Allaire and certain other shareholders of Topco as of the Closing will enter into a shareholders agreement (the “Shareholders Agreement”) , pursuant to which, among other things, at the Closing, the Topco Board will consist of seven directors, one of whom will be designated by Mr. Allaire, one of whom will be designated by the Sponsor, and five of whom will be mutually agreed upon by the Mr. Allaire and the Sponsor.
For more information about the Shareholders Agreement, see the section entitled “Certain Agreements Related to the Business Combination — Shareholders Agreement.”
Registration Rights Agreement
In connection with the Proposed Transactions, Topco, certain Circle Holders and certain equityholders of Concord will enter into a Registration Rights Agreement, pursuant to which, among other things, Topco will be required to file, promptly after the Closing, a registration statement to register the resale of certain securities of Topco held by such Circle Holders and Concord equityholders, who will also have customary demand and “piggyback” registration rights, subject to certain requirements and customary conditions.
For more information about the Registration Rights Agreement, see the section entitled “Certain Agreements Related to the Business Combination — Registration Rights Agreement.”
Warrant Amendment
At the Merger Effective Time, the Concord Warrants will, by virtue of the Merger and without any action on the part of the parties or any of their respective shareholders, cease to represent a right to acquire one share of Concord Class A Common Stock and will automatically be converted in accordance with the terms of the existing Concord Warrant Agreement, at the Merger Effective Time, into a Topco Warrant on substantially the same terms as were in effect immediately prior to the Merger Effective Time under the terms of the existing Concord Warrant Agreement. In connection with the Proposed Transactions, Concord, Topco and Continental, as warrant agent, will enter into the Warrant Amendment in connection with the Closing, pursuant to which, Topco will assume, and agree to pay, perform, satisfy and discharge in full, all of Concord’s liabilities and obligations under the existing Concord Warrant Agreement arising from and after the Merger Effective Time.
 
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Waiver Agreement
On February 16, 2022, concurrently with the execution of the Transaction Agreement, the Sponsor, Topco and Circle executed a waiver agreement (the “Waiver Agreement”), pursuant to which, among other things, the Sponsor agreed to waive the receipt of certain Concord shares otherwise issuable in connection with the Proposed Transactions as a result of relevant anti-dilution provisions in the Concord’s amended and restated certificate of incorporation.
For more information about the Waiver Agreement, see the section entitled “Proposal No. 1 — The Business Combination Proposal — Certain Agreements Related to the Business Combination — Waiver Agreement.”
Proposals to be Put to the Stockholders of Concord at the Special Meeting
The following is a summary of the proposals to be put to the special meeting of Concord and certain transactions contemplated by the Transaction Agreement. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy statement/prospectus.

The Business Combination Proposal — a proposal to approve and adopt the Transaction Agreement and the Business Combination.

The Adjournment Proposal — a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote.
Interest of Certain Persons in the Business Combination
When you consider the recommendation of Concord’s board of directors in favor of approval of the Business Combination Proposal, you should keep in mind that certain of Concord’s board of directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder or warrant holder. These interests include, among other things:

the beneficial ownership of the Sponsor and certain of Concord’s board of directors and officers of an aggregate of 5,520,000 shares of Concord Class B common stock, 510,289 shares of Concord Class A common stock and 255,144 Concord Warrants, which shares and warrants would become worthless if Concord does not complete a business combination within the applicable time period, as Concord’s initial stockholders have waived any right to redemption with respect to these shares (such waiver entered into in connection with the IPO for which the initial stockholders received no additional consideration). Such shares and warrants have an aggregate market value of approximately $[•] million and $[•] million, respectively, based on the closing price of Concord Class A common stock of $[•] on NYSE on [•], 2022, the record date for the special meeting of stockholders;

Concord’s board of directors will not receive reimbursement for any out-of-pocket expenses incurred by them on Concord’s behalf incident to identifying, investigating and consummating a business combination to the extent such expenses exceed the amount not required to be retained in the Trust Account, unless a business combination is consummated; and

the anticipated continuation of Bob Diamond, Concord’s Chairman of the board of directors, as a director of Topco following the Closing.
In addition, entities controlled by Atlas Merchant Capital LLC, an entity affiliated with the Sponsor, invested an aggregate of $29 million in Circle’s $440 million convertible note financing completed in May 2021. These interests may influence Concord’s board of directors in making their recommendation that you vote in favor of the approval of the Business Combination Proposal. In addition to the foregoing, Concord’s amended and restated certificate of incorporation excludes the corporate opportunity doctrine, and any other analogous doctrine, from applying to directors and officers of Concord unless such corporate opportunity is offered to a director or officer solely in his or her capacity as a director or officer of Concord and such opportunity is one Concord is legally and contractually permitted to undertake and would otherwise be reasonable for Concord to pursue. The potential conflict of interest relating to the waiver of
 
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the corporate opportunities doctrine in Concord’s amended and restated certificate of incorporation did not impact its search for an acquisition target and Concord was not prevented from reviewing any opportunities as a result of such waiver.
Reasons for the Approval of the Business Combination
After careful consideration, our board of directors recommends that Concord stockholders vote “FOR” each Proposal being submitted to a vote of the Concord stockholders at the Concord special meeting.
For a description of Concord’s reasons for the approval of the Business Combination and the recommendation of our board of directors, see the section entitled “Proposal No. 1 — The Business Combination Proposal — Recommendation of the Concord Board of Directors and Reasons for the Combination.”
Redemption Rights
Pursuant to Concord’s amended and restated certificate of incorporation, any holders of Public Shares may demand that such shares be redeemed in exchange for a pro rata share of the aggregate amount on deposit in the Trust Account. If demand is properly made and the Business Combination is consummated, these shares, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account which holds the proceeds of the IPO as of two business days prior to the consummation of the Business Combination, net of any taxes payable, upon the consummation of the Business Combination. For illustrative purposes, based on funds in the Trust Account (net of interest earned on the funds held in the trust account that may be released to us to pay our taxes) of approximately $278.8 million on June 30, 2022, the estimated per share redemption price would have been approximately $10.10 (which amount includes an increase of $0.10 per public share on June 7, 2022, when Circle deposited $2,760,000 into the Trust Account, which enabled Concord to extend the period of time it has to consummate its initial business combination by six months from June 10, 2022 to December 10, 2022). Under Concord’s amended and restated certificate of incorporation, in connection with an initial business combination, a Public Stockholder, together with any affiliate or any other person with whom such stockholder is acting in concert of as a “group” ​(as defined under Section 13(d)(3) of the Exchange Act), is restricted from seeking redemption rights with respect to more than 15% of the Public Shares.
If a holder exercises its redemption rights, then such holder will be exchanging its shares of Class A common stock for cash and will no longer own shares of Concord Class A common stock and will not participate in the future growth of Topco, if any. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Concord’s transfer agent in accordance with the procedures described herein. See the section entitled “Special Meeting of Concord Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.
Ownership of Topco After the Closing
It is anticipated that, upon the completion of the Business Combination, the ownership of Topco will be as follows:

the Circle Holders will own 902,415,352 Topco Ordinary Shares (of which 37,500,000 are escrow shares), representing approximately 88.7% of the total shares outstanding;

the holders of unexercised vested equity units will, assuming exercise in full of such equity units as assumed by Topco, own 79,629,873 Topco Ordinary shares, representing approximately 7.8% of the total shares outstanding;

the Public Stockholders will own 27,600,000 Topco Ordinary Shares, representing approximately 2.7% of the total shares outstanding; and

the holders of Founder Shares will own 7,652,000 Topco Ordinary Shares, representing approximately 0.8% of the total shares outstanding.
 
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The numbers of shares and percentage interests set forth above are based on a number of assumptions, including that none of the Public Stockholders exercise their redemption rights and that Circle does not issue any additional equity securities prior to the Merger. If the actual facts differ from our assumptions, the numbers of shares and percentage interests set forth above will be different.
Please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for further information.
Recent Developments
Resignation of Goldman Sachs as Concord’s Placement Agent and Financial Advisor
On November 7, 2022, Goldman Sachs & Co. LLC (“Goldman Sachs”) notified Concord that it resigned and was ceasing to act as Concord’s placement agent and financial advisor in connection with the Business Combination and terminated its engagement letters in connection therewith. At no time prior to or after its resignation did Goldman Sachs communicate or indicate to Concord or Circle, and neither Concord nor Circle is aware of any reason to believe, that the resignation was the result of any dispute or disagreement with Concord or Circle, or any matters relating to Concord’s or Circle’s businesses, operations, prospects, policies, procedures or practices, or the contents of this proxy statement/prospectus. In connection with its resignation, Goldman Sachs waived any claim it may have to any fees under its engagement letters with Concord (despite completing or substantially completing its services as financial advisor to Concord) and, accordingly, Concord has not paid to Goldman Sachs, and is not liable for, any fees. Goldman Sachs did not provide a reason for its resignation and neither Concord nor Circle will speculate as to its motivations for resigning and forfeiting its fees. No other bank will be paid any additional fees that otherwise would have been payable to Goldman Sachs.
As is customary, certain provisions of Goldman Sachs’ engagement letters survived their termination following Goldman Sachs’ resignation. These surviving provisions include Concord’s obligations to reimburse certain expenses incurred as of and through the date of such resignation and termination and to indemnify Goldman Sachs from and against any losses and claims arising out of, or in connection with, the services provided under the engagement letters. These provisions are not expected to have any significant impact on Concord.
The resignation of Goldman Sachs, including its waiver of fees for services that had already been rendered, is unusual and some investors may find the Business Combination less attractive as a result. Goldman Sachs, having terminated its engagement with Concord, has no remaining role in the Business Combination and has disclaimed any responsibility for any portion of this proxy statement/prospectus or the Registration Statement of which this proxy statement/prospectus forms a part, despite having previously rendered services in connection with the Business Combination. Such actions indicate that Goldman Sachs, as financial advisor, does not want to be associated with the disclosure or the underlying business analysis related to the Business Combination and that it is not willing to have the liability associated with its work in connection with the Business Combination.
Prior to its resignation, Goldman Sachs assisted Concord’s management and board by providing general financial advisory services, providing market commentary, assisting Concord in negotiating the financial aspects of the transaction, and assisting with structuring the Business Combination transaction.
The Concord board of directors did not consider the potential impact of the resignation of Goldman Sachs on its assessment of the Business Combination, given the timing of the resignation, the fact that the services to be provided by Goldman Sachs were complete or substantially complete at the time of the resignation and with respect to Goldman Sachs acting as placement agent, given the fact that the PIPE had been previously terminated. In addition, Goldman Sachs did not participate in the preparation of any material underlying the disclosure in this proxy statement/prospectus and did not provide an opinion in connection with the transactions described in this proxy statement/prospectus. Neither Concord nor Circle believes that Goldman Sachs’ resignation will have any significant impact on the Business Combination other than reducing the amount of expenses associated with the Business Combination and potentially adversely affecting investors’ perception of the Business Combination. Goldman Sachs has declined to (i) review the disclosure in this proxy statement/prospectus pertaining to the resignation from and termination of its
 
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engagements with Concord or otherwise or (ii) provide any letter stating whether it agrees with such disclosure, and there can be no assurance that Goldman Sachs agrees with such disclosure and no inference should be drawn to such effect. Investors should not put any reliance on the fact that Goldman Sachs was involved with any aspect of the Business Combination. Except as described in this proxy statement/prospectus, neither Concord nor Circle are party to any other engagement with Goldman Sachs.
See the section titled “Proposal No. 1 — The Business Combination Proposal — Background of the Business Combination” and the section titled “Risk Factors — Risks Related to Concord’s Business and the Business Combination — The termination of Citi’s engagement as capital markets advisor to Concord and the resignation of Goldman Sachs as placement agent and financial advisor to Concord in connection with the Business Combination may indicate that each of Citi and Goldman Sachs is unwilling to be associated with the disclosure in this proxy statement/prospectus or the underlying business or financial analysis related to the Business Combination, and no shareholder or investor should place any reliance on the fact that Citi or Goldman Sachs was involved with any aspect of the Business Combination.”
SeedInvest Divestiture
SeedInvest offers a digital platform for companies to raise capital through equity offerings directly on the internet and seeks to capitalize on interest in the digitization of early-stage investing. SeedInvest scales from small-scale seed funding, through larger, later-stage capital raises and growth funding, allowing both accredited and unaccredited investors a streamlined and simple way to invest in private companies.
On October 24, 2022, as a result of Circle’s strategic decision to focus on its core businesses and drive Circle stablecoins adoption, Circle entered into an asset purchase agreement (“Purchase Agreement”) to sell substantially all of the assets and certain specified liabilities of SeedInvest to a subsidiary of StartEngine Crowdfunding, Inc. (“StartEngine”) in exchange for 960 thousand shares of common stock of StartEngine. The transactions contemplated by the Purchase Agreement is subject to customary closing conditions, including approval by the Financial Industry Regulatory Authority, Inc. (“FINRA”).
 
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Summary of Risk Factors
In evaluating the proposals set forth in this proxy statement/prospectus, you should carefully read this proxy statement/prospectus, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:
Concord

There can be no assurance that the combined company’s securities will be approved for listing on the NYSE or that the combined company will be able to comply with the continued listing standards of the NYSE.

Subsequent to the consummation of the Business Combination, the combined company may be required to take write-downs or write-offs, or the combined company may be subject to restructuring and impairment or other charges that could have a significant negative effect on the combined company’s financial condition, results of operations and the price of Topco Ordinary Shares, which could cause you to lose some or all of your investment.

If the Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of Concord’s securities or, following the Closing, the combined company’s securities, may decline.

The combined company’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that will be applicable to it after the Business Combination is consummated could have a material adverse effect on its business.

The unaudited pro forma financial information included herein may not be indicative of what the combined company’s actual financial position or results of operations would have been.

Circle’s management has limited experience in operating a public company.

Concord’s sponsors, executive officers and directors have agreed to vote in favor of the Business Combination, regardless of how the Public Stockholders vote.

Concord may not be able to consummate an initial business combination within the required time period, in which case it would cease all operations except for the purpose of winding up and it would redeem the Public Shares and liquidate.

Concord’s ability to successfully effect the Business Combination and the combined company’s ability to successfully operate the business thereafter will be largely dependent upon the efforts of certain key personnel of Circle, all of whom we expect to stay with the combined company following the Business Combination. The loss of such key personnel could negatively impact the operations and financial results of the combined business.

Concord’s board of directors did not obtain a fairness opinion in determining whether to proceed with the Transaction Agreement and the Business Combination and, as a result, the terms may not be fair from a financial point of view to the Public Stockholders.

Public Stockholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, Public Stockholders may be forced to sell their securities, potentially at a loss.

If third parties bring claims against Concord, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.10 per share.

Concord’s directors may decide not to enforce indemnification obligations against the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Stockholders.

Concord’s stockholders may be held liable for claims by third parties against Concord to the extent of distributions received by them.
 
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Circle

We have a limited operating history in an evolving and highly volatile industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have experienced rapid growth recently, and if we do not effectively manage our growth and the associated demands on our operational, risk management, sales and marketing, technology, compliance, and finance and accounting resources, our business may be adversely impacted.

Our growth may not be sustainable and depends on our ability to retain existing customers, attract new customers, expand product offerings, and increase processed volumes and revenue from both new and existing customers.

We face intense and increasing competition and, if we do not compete effectively, our competitive positioning and our operating results will be harmed.

Stablecoins may face periods of uncertainty, loss of trust or systemic shocks resulting in the potential for rapid redemption requests (or runs). Although Circle’s reserve management policy is designed to materially mitigate the risks of a run by restricting the USDC reserve assets to cash and short-dated U.S. government obligations, Circle’s reserve and other policies are not designed to limit significant redemption demand; extreme redemption scenarios, such as a simultaneous request to redeem 100% of USDC, may lead to redemption delays due to operational risks, or risks due to potential dislocations in the typically highly-liquid market for short-dated U.S. government obligations, in which case the USDC reserve might not be sufficient.

Increased government regulation of stablecoins, as well as the potential for government-issued central bank digital currencies (“CBDCs”), could limit the viability of Circle stablecoins.

Cyberattacks and security breaches of our systems, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results and financial condition.

We may incur significant liability as a result of several ongoing disputes and investigations. The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.

Any significant disruption in our technology could result in a loss of customers or funds and adversely impact our brand and reputation and our business, operating results, and financial condition.

Certain large customers provide a significant share of our revenue and the termination of such agreements or reduction in business with such customers could harm our business. If we lose or are unable to renew these and other marketplace and enterprise client contracts at favorable terms, or if an exchange, digital asset platform or Circle stablecoins compatible platform provider were to terminate affiliation with us or Circle stablecoins, our results of operations and financial condition may be adversely affected.

Fluctuations in interest rates could impact the interest income earned from the management of USDC.

There is regulatory uncertainty regarding the classification of Circle stablecoins. Any classification of Circle stablecoins as a security in the United States or in other jurisdictions likely would impose additional regulation and materially impact its adoption.

We incur certain risks as a result of our membership in the Centre Consortium, and our inability to continue to participate in the Centre Consortium could be materially detrimental to our ongoing financial performance and continued viability.

Issuing and redeeming Circle stablecoins from our platform involves risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this proxy statement/prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement/prospectus may include, for example, statements about:

our ability to consummate the Business Combination;

the benefits of the Business Combination;

Topco’s financial performance following the Business Combination;

Circle’s business strategy, future operations, financial position, estimated revenues and losses, projected or forecasted costs, prospects and plans;

expansion plans and opportunities; and

the outcome of any known and unknown litigation and regulatory proceedings.
These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, projections, forecasts and assumptions, and involve a number of judgments, risks and uncertainties (except as specifically noted herein where such statements were as of a date prior to the date of this registration statement/prospectus, based on information available as of such prior date). Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You should not place undue reliance on these forward-looking statements in deciding how to vote your proxy or instruct how your vote should be cast on the proposals set forth in this proxy statement/prospectus. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

the occurrence of any event, change or other circumstances that could delay the Business Combination or give rise to the termination of the Transaction Agreement;

the outcome of any legal proceedings that may be instituted against Concord following announcement of the proposed Business Combination and transactions contemplated thereby;

the inability to complete the Business Combination due to the failure to obtain approval of the stockholders of Concord or to satisfy other conditions to the Closing in the Transaction Agreement;

the ability to obtain or maintain the listing of Topco Ordinary Shares and Topco Warrants on the NYSE following the Business Combination;

the risk that the proposed Business Combination disrupts current plans and operations of Circle as a result of the announcement and consummation of the transactions described herein;

our ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of Circle to grow and manage growth profitably following the Business Combination;

costs related to the Business Combination;

changes in applicable laws or regulations;

the possibility that Concord or Circle may be adversely affected by other economic, business, and/or competitive factors, including interest rate fluctuations; and

other risks and uncertainties described in this proxy statement/prospectus, including those under the section entitled “Risk Factors.”
 
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RISK FACTORS
The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of stock. In addition, you should read and consider the risks associated with the business of Concord because these risks may also affect the combined company — these risks can be found in Concord’s Annual Report on Form 10-K for the year ended December 31, 2021, and as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus.
Unless the context otherwise requires, all references in this section to the “Company,” “Circle,” “we,” “us,” or “our” refer to Circle and its subsidiaries prior to the consummation of the Business Combination, which will be the business of Topco and its subsidiaries following the consummation of the Business Combination.
Risks Related to Circle’s Business and Industry
We have a limited operating history in an evolving and highly volatile industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We began our operations in 2013 and since then our business model has continued to evolve. In late 2019, we shifted away from certain retail consumer products, including a digital asset trading platform, to focus on the development and commercialization of USDC at the enterprise level. As such, the comparability of our results in prior quarterly or annual periods should not be viewed as indication of future performance.
Because we have a limited history operating our business at its current scale and scope, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth. For example, the recent launch of our EUROC product and other recently launched new services require substantial resources and there is no guarantee that such expenditures will result in profit or growth of our business. Our limited operating experience at this scale, combined with the rapidly evolving nature of the crypto asset market in which we operate, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our current and future growth effectively could have an adverse effect on our business, operating results, and financial condition.
We have experienced rapid growth recently, and if we do not effectively manage our growth and the associated demands on our operational, risk management, sales and marketing, technology, compliance, and finance and accounting resources, our business may be adversely impacted.
We have experienced recent rapid growth and, despite recent downward trends in the cryptocurrency market, we expect this trend to continue for the foreseeable future. Our historical growth has come in waves, mostly driven by innovation in the cryptoeconomy, which requires long-term perspective to evaluate our performance. In particular, our business has grown significantly since the Fall of 2020 as the issuance, usage and acceptance of Circle stablecoins has continued to grow alongside digital assets in general. We have expanded our headcount since January 2021 as we scale to capitalize on the market opportunity, growing from approximately 125 employees as of December 31, 2020 to 869 employees worldwide as of October 14, 2022, including hiring several key executives such as our Chief Strategy Officer and Head of Global Policy, Chief Technology Officer, Chief Financial Officer, Chief Compliance and Risk Officer, Chief Marketing Officer, and Chief Product Officer.
As we grow, our business becomes increasingly complex. To effectively manage and capitalize on our growth, we must continue to expand our information technology and financial, operating, and administrative systems and controls, and continue to manage headcount, capital, and processes efficiently. Our continued growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business as it expands across numerous jurisdictions, including difficulties in hiring, training, and managing a diffuse and growing employee base. Failure to scale and preserve our company culture with
 
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growth could harm our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. If we do not adapt to meet these evolving challenges, or if our management team does not effectively scale with our growth, we may experience erosion to our brand, the quality of our products and services may suffer, and our company culture may be harmed. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely, and reliable reports on our financial and operating results, including the financial statements provided herein, and could impact the effectiveness of our internal controls over financial reporting. In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud. Any of the foregoing operational failures could lead to noncompliance with laws, loss of operating licenses or other authorizations, or loss of bank relationships that could substantially impair or even suspend company operations.
Successful implementation of our growth strategy may also require significant expenditures before any substantial associated revenue is generated and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth.
Our growth may not be sustainable and depends on our ability to retain existing customers, attract new customers, expand product offerings, and increase processed volumes and revenue from both new and existing customers.
The future growth of our business depends on its ability to retain existing customers, attract new customers as well as getting existing customers and new customers to increase transaction volumes and therefore grow revenue. Under our standard API services agreement, our customers are not subject to any minimum volume commitments and they have no obligation to continue to use our services, and we cannot assure potential investors that customers will continue to use our services or that we will be able to continue to attract new volumes at the same rate as we have in the past.
A customer’s use of our services may decrease for a variety of reasons, including the customer’s level of satisfaction with our products and services, the expansion of business to offer new products and services, the effectiveness of our support services, the pricing of our products and services, the pricing, range and quality of competing products or services, the effects of global economic conditions, regulatory or financial institution limitations, trust, perception and interest in the cryptocurrency and digital asset industry and in our products and services, or reductions in the customer’s payment activity. Furthermore, the complexity and costs associated with switching to a competitor may not be significant enough to prevent a customer from switching service providers, especially for larger customers who commonly engage more than one financial services provider at any one time.
Any failure by us to retain existing customers, attract new customers, and increase revenue from both new and existing customers could materially and adversely affect our business, financial condition, results of operations and prospects. These efforts may require substantial financial expenditures, commitments of resources, developments of our processes, and other investments and innovations.
We face intense and increasing competition and, if we do not compete effectively, our competitive positioning and our operating results will be harmed.
We operate in a rapidly changing and highly competitive industry, and our results of operations and future prospects depend on, among others:

the continued growth of our customer base,

our ability to monetize our customer base,

our ability to acquire customers at a lower cost, and

our ability to increase the overall value to us of each of our customers while they use our products and services.
Despite the regulatory barriers to enter the markets we serve, we expect our competition to continue to increase. In addition to established enterprises, we may also face competition from early-stage companies attempting to capitalize on the same, or similar, opportunities as we are. Some of our current and potential competitors have longer operating histories, particularly with respect to our digital financial services products,
 
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significantly greater financial, technical, marketing and other resources, and a larger customer base than we do. This allows them, among others, to potentially offer more competitive pricing or other terms or features, a broader range of digital financial products, or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies and changes in customer preferences.
Our existing or future competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. This could attract new customers away from our services and reduce our market share in the future. Additionally, when new competitors seek to enter our markets, or when existing market participants seek to increase their market share, these competitors sometimes undercut, or otherwise exert pressure on, the pricing terms prevalent in that market, which could adversely affect our market share and/or ability to capitalize on new market opportunities.
We currently compete at multiple levels with a variety of competitors, including:

payment platforms;

asset-backed, crypto asset-collateralized and algorithmic tokens;

blockchain infrastructure services;

digital asset custody services;

banks and non-bank financial institutions;

digital wallet providers;

yield service providers; and

crowdfunding and other investing and capital raise platforms;
Particularly, we compete with traditional banks for many of the services we offer. Because we do not currently control a bank or a bank holding company, we are subject to regulation by a variety of state and federal regulators across our products and services and we rely on third-party banks to provide banking services to our customers. This regulation by federal, state and local authorities increases our compliance costs, as we navigate multiple regimes with different examination schedules and processes and varying disclosure requirements.
We believe that our ability to compete depends upon many factors, both within and beyond our control, including the following:

the size, diversity and activity levels of our customer base;

the timing and market acceptance of products and services, including developments and enhancements to those products and services offered by us and our competitors;

customer service and support efforts;

selling and marketing efforts;

the ease of use, performance, price and reliability of solutions developed either by us or our competitors;

changes in economic conditions, regulatory and policy developments;

our ability to successfully execute on our business plans;

our ability to enter new markets;

general digital payments, capital markets, blockchain and stablecoin market conditions;

the ongoing impact of the COVID-19 pandemic; and

our brand strength relative to our competitors.
Our current and future business prospects demand that we act to meet these competitive challenges but, in doing so, our revenue and results of operations could be adversely affected if we, for example,
 
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increase marketing expenditures or make other expenditures. All of the foregoing factors and events could adversely affect our business, financial condition, results of operations, cash flows and future prospects.
Stablecoin platforms and competition may limit the number of viable stablecoins or the viability of Circle stablecoins.
With significant growth in the stablecoin market, and an increasing understanding that it represents one of the largest potential new markets for financial and payments infrastructures, we expect to see and already see intense competition.
Stablecoins issued by crypto exchanges, major existing global payments companies and banks, and decentralized algorithmic tokens, are likely to increase competitive pressure on Circle stablecoins, and could slow our growth, or cause significant declines, negatively impacting the financial outlook of the company. Given the inherent network effects that accompany stablecoin usage, a rapidly growly competitor could gain enough market share to ultimately limit the viability of Circle stablecoins. An example of such an adverse impact was the auto conversion by Binance of several billions of USDC into BUSD held in Binance wallets, which contributed to a reduction in USDC in circulation during the quarter ended September 30, 2022.
Stablecoins may face periods of uncertainty, loss of trust or systemic shocks resulting in the potential for rapid redemption requests (or runs). Although Circle’s reserve management policy is designed to materially mitigate the risks of a run by restricting the USDC reserve assets to cash and short-dated U.S. government obligations, Circle’s reserve and other policies are not designed to limit significant redemption demand. Extreme redemption scenarios, such as a simultaneous request to redeem 100% of USDC, may lead to redemption delays due to operational risks, or risks due to potential dislocations in the typically highly-liquid market for short-dated U.S. government obligations, in which case the USDC reserve might not be sufficient.
Privately issued stablecoins, as a relatively new innovation, even in cases where they are fully reserved with high quality liquid assets such as cash and short-dated U.S. government obligations, may be subject to the risk of significant and concentrated redemption requests. Such requests could place significant financial and operating demands on our company. For example, we might need to liquidate significant reserve assets in order to meet large redemption demands. Further, a large number of such demands might require many operating transactions, adding to our operational risk. In extreme cases, the market for short-dated U.S. government obligations might not be sufficiently liquid for us to meet redemption demands in a timely manner, which could potentially lead to redemption delays. In the most extreme cases, such as a request to immediately redeem 100% of USDC, the market for short-dated U.S. government obligations might not be sufficiently price stable, leading to risk that the USDC reserve might not be sufficient to cover such redemption requests, requiring us to use our own capital to make up any shortfall. Our reserve management policy is designed to materially mitigate these risks by restricting the USDC reserve assets to cash and short-dated U.S. government obligations only, which are widely considered the highest quality cash equivalent assets. However, our reserve and other policies are not designed to limit, and therefore we cannot prevent, significant redemption demand from occurring. Currently, all EUROC reserve assets are held in cash only.
Given the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity can have a dramatic impact on the broader crypto asset market. Historically, stablecoin growth has been tied closely to both growth and declines in crypto asset markets. As digital asset values and usage have grown, there has been increased demand for stablecoins such as USDC and Tether, reflecting an overall increase in the amount of dollars operating in the crypto economy. Similarly, when crypto asset markets have seen significant contractions, there has also been a corresponding increase in demand for stablecoins as investors in digital assets seek to exit into price-stable dollar assets.
Market participants have increasingly shown concern about the actual underlying liquidity and reserves for dollar stablecoins such as Tether and USDC. We believe these concerns have been heightened due to multiple regulatory actions and settlements with Tether over possible misstatements about underlying reserves, and we have seen meaningful breaks with the dollar peg for Tether.
Furthermore, algorithmic tokens such as TerraUSD, Iron Finance, and others have promoted tokens that are backed by trading incentives and in some cases by subsidized yields. The recent collapse of TerraUSD and LUNA underscored the risks associated with these algorithmic tokens, and the contagion risks these
 
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pose to the broader crypto asset market, which are continuing to play out as trading firms and retail and institutional lenders are facing liquidation and insolvency in the aftermath, as recently reflected in the Voyager Digital Ltd. and Celsius Network LLC insolvency proceedings. Additionally, the recent collapse and subsequent insolvency proceedings of FTX also exposes the contagion risks related to the broader crypto market.
These recent market events have brought significantly more attention to risks with stablecoins, and led to the breaking of the peg for Tether, and in turn to significant and ongoing outflows from Tether into other assets, including USDC. We believe this trend has underscored the importance of robust transparency, audits, and having regulated stablecoins as building blocks for trust and the functioning of a well-regulated, orderly market for digital assets.
Because a large portion of the crypto asset market still depends on stablecoins such as Tether, there is a risk that a disorderly de-pegging or a run on Tether could lead to dramatic market volatility in crypto assets more broadly, leading to a collapse in confidence overall in crypto asset markets, and stablecoins specifically, which in turn could lead to sustained redemption demand for Circle stablecoins, negatively impacting our business.
The future development and growth of Circle stablecoins is subject to a variety of factors that are difficult to predict and evaluate and may be in the hands of third parties to a substantial extent. If Circle stablecoins do not grow as we expect, our business, operating results, and financial condition could be adversely affected.
Stablecoins built on blockchain technology were only introduced in 2014 and remain in the early stages of development. The further growth and development of any stablecoin and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer, and usage of such stablecoin represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including:

Circle maintains and secures crucial administrative cryptographic keys for the operation of Circle stablecoins protocols on public blockchains. Breaches in the custody, control and operations associated with these keys could lead to catastrophic failures in the operation of Circle stablecoins which could undermine confidence in Circle stablecoins, Circle, and our ability to reliably deliver financial services products.

Any stablecoin project, including USDC and EUROC, relies on third parties, like financial institutions and counterparties, to hold funds, cash equivalents, and other assets to back the stablecoins that are issued, outstanding and freely circulating. These parties have their own policies and may change their view and acceptance of any stablecoin at any time. This may result in delays and other barriers to redemption and issuance of Circle stablecoins. Additionally, the reserves backing Circle stablecoins held at or through financial institutions or intermediaries may be subject to the risk of loss, theft, insolvency, and governmental and regulatory freezes and seizures.

The various markets for stablecoins have varying degrees of liquidity. There is no assurance that there will continue to be an active and liquid market for any market participant to sell or buy Circle stablecoins, unless that participant is a Circle customer (as Circle always provides liquidity in the form of redemptions for USDC at 1 for 1 with the U.S. Dollar, and EUROC at 1 for 1 with the Euro). Significant disruptions at these marketplaces caused by technical, operational, security or regulatory issues could cause Circle stablecoins holders (who are not Circle customers) to have limited access to markets to buy or sell Circle stablecoins, or could cause temporary market pricing dislocations.

Many blockchains where stablecoins are built, such as USDC in Ethereum, Algorand, Solana, Tron, Stellar, Avalanche, Hedera and Flow, and EUROC in Ethereum, have limited operating histories, have not been validated in production, and are still in the process of developing and making significant decisions that will affect the underlying blockchain, any of which could lead to novel operational risks related to the settlement and validation of transactions, which could adversely affect the stablecoins whose protocols are built on top of such blockchains. Failures in a public blockchain could result in sustained periods where Circle stablecoins holders cannot access or transfer their Circle stablecoins, which could in turn lead to users not regarding Circle stablecoins as a safe or reliable payment technology.
 
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USDC is widely used within smart contracts and within blockchain-based protocols, and EUROC is beginning to gain similar usage. Smart contract protocols may not be adequately tested or audited for security, resulting in Circle stablecoins holders having funds misappropriated through hacks and attacks. There have also been incidents of smart contract developers acting maliciously and misappropriating funds. Widespread hacks, thefts and losses could undermine confidence in Circle stablecoins and could create legal and financial risks for Circle.

The development of new technologies for mining, such as improved application-specific integrated circuits (commonly referred to as ASICs), or changes in industry patterns, such as the consolidation of mining power in a small number of large mining farms, could reduce the security of the blockchain networks where the Circle stablecoins protocols operate.

The use of Circle stablecoins on new blockchains that use proof-of-stake validation and security introduces risks associated with the potential for centralization of validators and the risks of fraudulent attacks on these networks, which could result in Circle stablecoins transactions being lost or reversed.

If rewards and transaction fees for miners or validators on any particular blockchain network where the Circle stablecoins protocols operate are not sufficiently high to attract and retain miners, the blockchain network’s security and speed may be adversely affected, increasing the likelihood of a malicious attack.

The governance of many decentralized blockchain networks is by voluntary consensus and open competition, and many developers are not directly compensated for their contributions. As a result, there may be a lack of consensus or clarity on the governance of any particular crypto network, a lack of incentives for developers to maintain or develop the network, and other unforeseen issues, any of which could result in unexpected or undesirable errors, bugs, or changes, or stymie such network’s utility and ability to respond to challenges and grow.

Significant demand for redemption by USDC holders greatly in excess of normal operating levels (a so called “run”) would lead to increased demand for liquidation of the USDC reserve assets, requiring increased operating activity by Circle and its reserve management partners, which could lead to unexpected errors and require the liquidation of the USDC reserve assets not held in cash for cash to satisfy the redemption demands. An unusual dislocation in the normally liquid capital markets for short-dated U.S. government obligations (in which Circle holds those USDC reserve assets not held in cash) could delay our ability to liquidate such obligations, leading to delays in redemption for USDC holders.

A de-pegging of, or a run on, other major stablecoins could potentially cause significant turmoil in the market for digital assets broadly, including potentially causing unusual patterns in customer demand for Circle stablecoins, including significantly increased volatility of inflows and outflows and/or significantly increased demand for redemption. For example, in May 2022, two stablecoins with large market capitalizations de-pegged, with the price of UST falling from $1.00 to approximately $0.03 (as of August 18, 2022), and the price of USDT falling from $1.00 to $0.945 during intraday trading (on May 12, 2022). During this period of extreme market volatility for stablecoins and other digital assets (May 1, 2022 to August 20, 2022), the highest daily net mint of USDC was approximately $1.1 billion on May 13, 2022, and the highest daily net redemption was approximately $430 million on July 15, 2022, representing approximately 2.1% and 0.8% of the total reserve balances at that time, respectively. During the same period, the highest daily gross mint of USDC was approximately $3.4 billion on June 13, and the highest daily gross redemption was approximately $3.2 billion on June 13, representing approximately 6.3% and 5.9% of the total reserve balances at that time, respectively. Throughout this period, there was no impact on Circle’s ability to accommodate customer redemptions. The cash USDC reserves, which stood at $9.1 billion on May 1, 2022, representing 18% of the total USDC reserves, were sufficient to meet net customer redemption demands, and there was no need to liquidate holdings of Treasury bills outside of the ordinary course to meet such demands. In an even more extreme scenario, it is possible that there could be even greater volatility of inflows and outflows, and significant demand for redemptions greatly in excess of normal levels, with associated risks as discussed in the bullet above.
 
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Market fluctuations could result in a decrease in value of the reserve assets held in short-dated U.S. government obligations, which would lead to a shortfall requiring us to redirect our corporate cash and cash equivalents to make up for the shortfall. Such unanticipated liquidity requirements would require us to redirect our corporate cash or cash equivalents that could have been used for other corporate purposes.

Certain other stablecoin issuers have been the subject of regulatory action in connection with their reserves, including alleged failures to maintain sufficient reserve assets, resulting in regulatory action against the issuer and civil litigation. Circle could suffer from similar regulatory scrutiny or reputational harm if we fail to satisfy our reserve obligations or comply with appropriate reserve management practices.

Circle stablecoins reserves are held with a number of banking and custodial reserve management partners. Significant unforeseen operating or technical issues relating to communication and technical interoperability between Circle and these banks and custodians could lead to potential settlement and redemption delays for Circle stablecoins holders seeking to redeem their USDC or EUROC.

Given the novel technology of public blockchains, which may be susceptible to failures, performance errors, cyber-attacks, exploits and other risks, there is a possibility that Circle stablecoins tokens in circulation become “stranded,” lost, or implicated in potentially illicit activity. In these instances, Circle stablecoins may be frozen or barred from transacting subject to a rightful owner or coin holder making a claim to have an account unfrozen or a block removed.

While unlikely, a digital wallet provider, Virtual Asset Service Provider (VASP), exchange or other market-facing entity or protocol may fail, cease to exist or face potentially serious disruptions, such as Voyager Digital Ltd. and Celsius Network, leading to potential disruption or prevention of use of any Circle stablecoins held in the custody of such provider by a Circle stablecoins holder.

Dramatic growth in the use and adoption of stablecoins such as USDC and EUROC could lead to systemic risks across the U.S. and global financial system. Such risks could lead to significantly heightened regulatory requirements for and supervision of Circle, which could impose significant additional capital requirements, risk management and supervisory requirements that could limit Circle’s growth and profitability.
Many of these risks are fundamentally beyond our control and could materially and adversely affect Circle stablecoins and our business, financial condition and operating results.
Increased government regulation of stablecoins, as well as the potential for government-issued central bank digital currencies (“CBDCs”) could limit the viability of Circle stablecoins.
Within the U.S. government and other major national governments in leading financial market jurisdictions, there is increasing focus on regulating the issuance and usage of stablecoins. New regulations, such as recent bills proposed by different members of the U.S. Congress, could significantly impact the competitiveness of USDC, or even altogether limit its usage and adoption, negatively impacting the financial outlook of the company. Regulatory actions in non-U.S. jurisdictions targeted at Circle stablecoins specifically, or stablecoins more generally, could also limit the reach and usage of Circle stablecoins, or create a competitive environment more favorable to other companies.
Additionally, the U.S. Federal Reserve continues to explore the potential for a government-issued CBDC. The potential future introduction of a government-issued digital currency could eliminate the need for private-sector issued stablecoins, or significantly limit their utility, notwithstanding the fact that CBDCs are largely a domestic payments innovation, whereas stablecoins are meeting global demand. Other national governments around the world could also introduce CBDCs, and impose laws and regulations on the use of privately-issued stablecoins, which could in turn limit the size of the market opportunity for USDC, EUROC and other potential future Circle issued stablecoins, negatively impacting the financial outlook of the company.
While a prudent asset and reserve management model backs all Circle stablecoins in circulation, the possibility of systemic risk, runs or losses of confidence that could result in a large draw down of reserves
 
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exists. However remote, guarding against systemic risks in the emerging blockchain finance and digital assets industry remains an aware with continuously evolving regulatory, prudential and supervisory standards when it comes to asset-liability management, trust, transparency, auditability and public-facing disclosures of reserves backing stablecoin coins and privately-issued digital currencies. As a result and given broader macroprudential risks, correlations and uncertainties, even the best, most highly liquid assets may labor under delays or redemption challenges during periods of stress or high demand for liquidation of Circle stablecoins or tokens in circulation.
Our operating results from our yield service product may fluctuate due to market forces out of our control that impact demand to borrow cryptocurrency or stablecoins.
In 2021, we secured a Class F Digital Asset Business license from the Bermuda Monetary Authority to offer a yield-generating product. Customers with funds in USDC in a Circle Account can invest said USDC from their Circle Account into the yield product, select a term-length, and receive monthly interest payments. Yield is generated through lending USDC out to centralized blockchain based lending markets. Our yield product is collateralized by Bitcoin and the value of that collateral is directly exposed to the high volatility of Bitcoin. We have obligations to safeguard the assets of our customers and any failure to do so could negatively impact our business and result in liabilities, regulatory enforcement and reputational harm.
It is difficult for us to forecast the growth trends of this recent business line accurately, and our business and future prospects are difficult to evaluate, particularly in the short term. Due to the highly volatile nature of the cryptoeconomy and the prices of cryptocurrencies and other blockchain-based assets, our revenues derived from our yield product have, and will continue to, fluctuate significantly from quarter to quarter in accordance with unpredictable market sentiments and movements in the broader cryptoeconomy and lending market. For example, the annual percentage yields we are able to offer customers have fluctuated significantly, ranging from a high of a 7.85% rate offered from November 8, 2021 through November 22, 2021, 0.5% rate offered beginning July 5, 2022, to 0.25% beginning September 19, 2022 and which is the current rate as of October 14, 2022, due to softening demand in the cryptoeconomy lending markets. As a result of the unprecedented turmoil in the digital asset borrowing and lending markets in the second quarter of 2022, and to provide all our customers the opportunity to withdraw their funds despite entering into fixed term contracts, on July 5, 2022 we initiated a tender offer for all outstanding Circle Yield loans, offering to prepay at par up to the entire amount of the outstanding principal of all loans of all Circle Yield customers. The tender offer expired on August 2, 2022. Although we currently do not have plans to pursue additional transactions of this nature, there is no guarantee that we will not pursue such transactions in the future. Circle Bermuda has been required, from time to time in the ordinary course of business, to call from its borrower for the Circle Yield product additional Bitcoin as collateral to maintain the required collateral amounts specified in the loan agreement between Circle Bermuda and the borrower. In connection with the tender offer, USDC receivables from the Borrower related to the repayments, including Bitcoin collateral requirements, were settled in accordance with the loan agreement with the borrower. The loan agreement requires that the borrower post additional Bitcoin as collateral so that the amount of collateral maintained is in excess of the outstanding loan amount. In addition, in the event that annual percentage yields we are able to offer customers are below rates available elsewhere either in the cryptoeconomy or the traditional lending market, customers may choose to invest elsewhere, which could have a material impact on our yield product.
Cyberattacks and security breaches of our systems, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results and financial condition.
Our business involves the collection, storage, processing and transmission of confidential information, customer, employee, service provider and other personal data, as well as information required to access customer assets. We have built our reputation on the premise that our products and services offer customers a secure way to accept and make payments and store value. As a result, any actual or perceived security breach of us or our third-party partners may:

harm our reputation and brand;

result in our systems or services being unavailable and interrupt our operations;
 
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result in improper disclosure of data and violations of applicable privacy and other laws;

result in significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory and financial exposure;

cause us to incur significant remediation costs;

lead to theft or irretrievable loss of our or our customers’ assets;

reduce customer confidence in, or decreased use of, our products and services;

divert the attention of management from the operation of our business;

result in significant compensation or contractual penalties from us to our customers or third parties as a result of losses to them or claims by them; and

adversely affect our business and operating results.
Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or cryptocurrency or blockchain companies, whether or not we are directly impacted, could lead to a general loss of customer confidence in the digital asset economy or in the use of technology to conduct financial transactions, which could negatively impact us including the market perception of the effectiveness of our security measures and technology infrastructure.
An increasing number of organizations, including large businesses, technology companies and financial institutions, as well as government institutions, have disclosed breaches of their information security systems, some of which have involved sophisticated and highly targeted attacks, including on their websites, mobile applications, and infrastructure. Attacks upon systems across a variety of industries, including the cryptocurrency industry, are increasing in their frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. Certain types of cyberattacks could harm us even if our systems are left undisturbed. For example, attacks may be designed to deceive employees and service providers into releasing control of our systems to a hacker, while others may aim to introduce computer viruses or malware into our systems with a view to stealing confidential or proprietary data. Additionally, certain threats are designed to remain dormant or undetectable until launched against a target and we may not be able to implement adequate preventative measures.
Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security breaches, effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security or prevent breaches or attacks. We have experienced from time to time, and may experience in the future, breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities. Unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our customers, partners, and third-party service providers, through various means, including hacking, social engineering, phishing, and attempting to fraudulently induce individuals (including employees, service providers, and our customers) into disclosing usernames, passwords or other sensitive information, which may in turn be attempted to be used to access our information technology systems and customers’ digital assets. For example, in June 2021, we were subject to a phishing incident in which fraudulent actors obtained $2 million in company-owned funds. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. Certain threat actors may be supported by significant financial and technological resources, making them even more sophisticated and difficult to detect. As a result, our costs and the resources we devote to protecting against these advanced threats and their consequences may continue to increase over time.
Although we maintain insurance coverage that we believe is adequate for our business, it may be insufficient to protect us against all losses and costs stemming from security breaches, cyberattacks, and
 
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other types of unlawful activity, or any resulting disruptions from such events. Outages and disruptions of our systems, including any caused by cyberattacks, may harm our reputation and our business, operating results, and financial condition.
We may incur significant liability as a result of several ongoing disputes and investigations. The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.
We are currently in a dispute with a financial advisor (Financial Technology Partners, or “FT Partners”) regarding advisory fees in connection with consummation of the business combination between the Company, Topco, Merger Sub and Concord. FT Partners asserted that it would be entitled to a fee of approximately nine percent of the value issued to our equity holders based on its interpretation of an engagement letter with us. We strenuously dispute FT Partners’ interpretation and instead assert that the parties are obligated under the engagement letter to negotiate appropriate compensation considering, among other things, the custom and practice among investment bankers in similar size and type of transactions. On March 25, 2022, our Board of Directors passed a resolution to terminate the engagement letter between us and FT Partners and notice of such termination was provided to FT Partners on April 8, 2022.
The Company is also in a dispute with FT Partners regarding advisory fees in connection with a recent capital raise. On April 11, 2022, Circle entered into an agreement with multiple investors for a funding round of approximately $401.0 million Series F redeemable convertible preferred stock funding round (“Series F funding”) without FT Partners’ assistance, which closed on May 9, 2022. On April 13, 2022 and August 19, 2022, FT Partners asserted that the termination of the engagement letter with the Company is ineffective and demanded a $28 million fee for the Series F funding. We believe that we have properly and effectively terminated the engagement with FT Partners, and strenuously dispute FT Partners’ demand for any fees in connection with the Series F funding. At this time, no litigation has been filed with respect to this matter. We cannot guarantee the ultimate outcome of this dispute. If this dispute is ultimately resolved by a court of competent jurisdiction in a manner adverse to our position, or if we ultimately settle this dispute by mutual agreement, we may be liable to FT Partners for substantial amounts, which we may pay in cash or equity or a combination thereof. Depending on the resolution of this matter, we may also remain obligated to use FT Partners for future capital raises or company sale transactions, with significant advisory fees due upon the consummation of any such transaction.
As described elsewhere in this proxy statement/prospectus, in February 2018, our indirect wholly-owned subsidiary Poloniex, LLC acquired the Poloniex digital asset trading platform, and as part of the acquisition agreed to assume certain potential regulatory liabilities. Shortly after Poloniex, LLC’s purchase of the Poloniex digital asset trading platform, OFAC served Poloniex, LLC with an administrative subpoena dated April 10, 2018 requesting documents and information regarding accounts opened and/or closed on the Poloniex digital asset trading platform by persons potentially located in Iran. On December 14, 2018, Poloniex, LLC provided a written response to the April 2018 subpoena and also produced documents and information in response to the subpoena. On September 11, 2019, OFAC served a second administrative subpoena on Poloniex, LLC requesting documents and information regarding accounts opened and/or closed on the Poloniex digital asset trading platform by persons potentially located in Cuba, Syria, North Korea, Crimea, and Sudan. In November 2019, Poloniex, LLC sold the Poloniex digital asset trading platform. On October 7, 2020, Poloniex, LLC provided a written response to the September 2019 subpoena and also produced documents and information in response to the subpoena. Poloniex, LLC is currently in discussions with OFAC regarding a potential resolution of OFAC’s investigation. If Poloniex, LLC is found to have violated U.S. export control laws as a result of the pending OFAC investigation, Poloniex, LLC could be subject to civil or criminal penalties and monetary penalties. For financial accounting purposes, we have accrued for the minimum range of $2.4 million as a contingent liability with a charge to loss from operations of discontinued Poloniex business on the condensed consolidated balance sheets and condensed consolidated statements of operations included elsewhere in this proxy statement/prospectus, respectively. Although we believe our estimates are reasonable based on the facts and circumstances of the matter, OFAC has broad authority to impose penalties. Due to OFAC’s statutory methodology for determining penalties on the basis of numbers of violations, the number of violations alleged by OFAC could result in penalties to Poloniex, LLC that are substantially greater than the amounts we have accrued in our financial statements
 
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and which may materially impact the value of our company. Any adverse finding or settlement of the OFAC investigation may have a material impact on our consolidated business and financial condition.
In connection with the FT Partners fee dispute and the OFAC investigation described above, 37.5 million Topco Ordinary Shares that would otherwise be issued directly to our shareholders will instead be placed into a third-party escrow account, 35.5 million of which will apply to the FT Partners protection as described below, and 2.0 million of which will apply to the OFAC protection as described below. In the event that any payments to FT Partners (whether via issuance of shares or cash payments) arising from the business combination with Concord exceed $45 million, either (i) an amount of shares with a value equal to such excess will be cancelled and forfeited to us, which will have an anti-dilutive effect for all shareholders other than those that escrowed such shares, (ii) cash in the escrow (resulting from the sale of escrowed shares) in the amount of such excess will be reimbursed to us, or (iii) a combination of (i) and (ii). A similar mechanism will apply to the extent any cash penalties paid as a result of the OFAC investigation exceed $1.07 million. These mechanisms are designed to provide some protection for shareholders against dilution (whether by equity or by cash) caused by the above-described matters. However, the ultimate payments to FT Partners or penalties assessed by OFAC may exceed the value of the escrowed shares, and you may suffer dilution of your shareholdings as a result. In addition, any cash payments to FT Partners or to OFAC will be paid by Topco or a subsidiary thereof, and therefore may reduce the consolidated cash on Topco’s balance sheet (if no cash or insufficient cash as a result of the sale of escrowed shares remains in escrow). If we do not have sufficient cash to make such payments or sufficient remaining cash after making such payments to continue to run and grow our business, we may need to borrow money or sell equity or debt securities to the public, and the terms of these financings may be adverse to us. Either or both of the matters described above may cause harm to our reputation and may have an adverse effect on our share price, which could cause investors to lose significant portions of their investment in our company.
Between December 2017 and March 2020, in connection with the SEC’s inquiries into digital assets, the SEC served Poloniex, LLC with several subpoenas in connection with its ownership and operation of the Poloniex digital asset trading platform. In February 2018, one of our indirect wholly-owned subsidiaries acquired Poloniex, LLC. Poloniex, LLC produced documents and information to the SEC in response to the subpoenas on a rolling basis from 2018 through most of 2020. In March 2021, Poloniex, LLC made an offer of settlement and on August 9, 2021, the Commission approved the settlement. As part of that settlement, Poloniex, LLC neither admitted nor denied the SEC’s findings and conclusions that the Poloniex Exchange failed to register as a national securities exchange nor operate pursuant to an exemption from registration. Poloniex, LLC agreed to cease and desist from committing or causing any violations of Section 5 of the Exchange Act and paid a civil monetary penalty, disgorgement and prejudgment interest comprising approximately $10.4 million in the aggregate.
We are also subject to various legal proceedings, consumer arbitrations, and regulatory investigation matters as further described in “Business — Legal Proceedings”. If any of these matters are resolved unfavorably to us, our business and results of operations may be adversely affected.
Any significant disruption in our technology could result in a loss of customers or funds and adversely impact our brand and reputation and our business, operating results, and financial condition.
Our reputation and ability to attract and retain customers and grow our business depends on our ability to operate our service at high levels of reliability, scalability, and performance, including the ability to process and monitor, on a daily basis, a large number of transactions that occur at high volume and frequencies across multiple systems. The proper functioning of our products and services, the ability of our customers to make and receive payments, and our ability to operate at a high level, are dependent on our ability to access the blockchain networks underlying Circle stablecoins and other supported crypto assets, for which access is dependent on our systems’ ability to access the internet. Further, the successful and continued operations of such blockchain networks will depend on a network of computers, miners, or validators, and their continued operations, all of which may be impacted by service interruptions.
Our systems, the systems of our third-party service providers and partners, and certain crypto asset and blockchain networks, have experienced from time to time and may experience in the future service interruptions or degradation because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, insider threats, break-ins, sabotage, human error, vandalism, earthquakes,
 
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hurricanes, floods, fires, and other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events. In addition, extraordinary site usage could cause our computer systems to operate at an unacceptably slow speed or even fail. Some of our systems, including systems of companies we have acquired, or the systems of our third-party service providers and partners are not fully redundant, and our or their disaster recovery planning may not be sufficient for all possible outcomes or events.
If any of our systems, or those of our third-party service providers, are disrupted for any reason, our products and services may fail, resulting in unanticipated disruptions, slower response times and delays in our services, including our customers’ payments through their Circle Account, their investments and capital raises through SeedInvest, or their integrated payments and treasury infrastructure through our Circle APIs. This could lead to failed or unauthorized payments, incomplete or inaccurate accounting, loss of customer information, increased demand on limited customer support resources, customer claims, complaints with regulatory organizations, lawsuits, or enforcement actions.
A prolonged interruption in the availability or reduction in the availability, speed, or functionality of our products and services could harm our business. Frequent or persistent interruptions in our services could cause current or potential customers or partners to believe that our systems are unreliable, leading them to switch to our competitors or to avoid or reduce the use of our products and services, and could permanently harm our reputation and brands.
Moreover, to the extent that any system failure or similar event results in damages to our customers or their business partners, these customers or partners could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. Problems with the reliability or security of our systems would harm our reputation, and damage to our reputation and the cost of remedying these problems could negatively affect our business, operating results, and financial condition.
In addition, we are continually improving and upgrading our information systems and technologies. Implementation of new systems and technologies is complex, expensive, time-consuming, and may not be successful. If we fail to timely and successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies, or if such systems and technologies do not operate as intended, it could have an adverse impact on our business, internal controls (including internal controls over financial reporting), operating results, and financial condition.
Because we are a regulated financial institution in certain jurisdictions, frequent or persistent interruptions could also lead to regulatory scrutiny, significant fines and penalties, and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses or banking relationships that we need to operate, or prevent or delay us from obtaining additional licenses that may be required for our business.
We rely on third parties in critical aspects of our business, which creates additional risk. Our ability to offer our services depends on relationships with other financial services institutions and entities, and our inability to maintain existing relationships or to enter into new such relationships could impact our ability to offer services to customers.
In order to offer our payments, payout, and wallet services to enterprise customers, we depend on various third party partners and payment systems. More specifically, our offering of the payments, payout, and wallet services depends on our ability to offer card transaction processing, Automated Clearing House network (“ACH”) transaction processing, and wire transfer processing services to our customers. In order to provide such transaction processing services, we have established relationships with financial institutions whereby such financial institutions sponsor us into the relevant payment networks (e.g., the card networks and the ACH). Our ability to offer our core API services depends on our ability to maintain existing sponsorship relationships and to seek out and obtain new sponsorship relationships.
Also, critical aspects of our technology rely on third party technologies, including blockchains, such as Ethereum and Algorand. Our regulatory status, the status of Circle stablecoins and cryptocurrency more generally, may be an impediment to our ability to receive or obtain services, including sponsorship services,
 
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from financial institutions, including Mastercard and Visa. Should our sponsorship partners cease providing such sponsorship, we would be at risk of being unable to provide the payment processing services that are core to our enterprise customer offering.
Third parties upon which we rely to process transactions may refuse to process transactions adequately, may breach their agreements with us, refuse to renew agreements on commercially reasonable terms, take actions that degrade the functionality of our services, impose additional costs or requirements on us, or give preferential treatment to competitive services or suffer outages in their systems, any of which could disrupt our operations and materially and adversely affect our business, financial condition, results of operations and prospects.
Some third parties that provide services to us may have or gain market power and be able to increase their prices to us without competitive constraint. In addition, there can be no assurance that third parties that provide services directly to us will continue to do so on acceptable terms, or at all, or will not suffer from outages to their systems. If any third parties were to stop providing services to us on acceptable terms, we may be unable to procure alternatives from other third parties in a timely and efficient manner and on acceptable terms, or at all, which may materially and adversely affect our business, financial condition, results of operations and prospects.
Our pursuit of a national bank charter may be delayed, unsuccessful and introduce risks and complexities for shareholders.
We announced plans to become a national bank under the supervision of the Office of the Comptroller of the Currency (the “OCC”). Establishing a national bank would allow us to apply for access to the Federal Reserve System (the “Federal Reserve”) directly, reducing the costs and time for settling transactions and enabling the provision of other financial services to our enterprise customers. If we were to acquire a national bank, the acquisition would be subject to approval from the Board of Governors of the Federal Reserve and the OCC under the Bank Holding Company Act and the National Bank Act, respectively.
If we were to obtain a U.S. national bank charter, we would become subject to regulation, supervision and examination by the Federal Reserve as well as other federal bank regulators, including the Federal Deposit Insurance Corporation (“FDIC”). Our efforts to comply with such additional regulation might require substantial time, monetary and human resource commitments. Additionally, some of our stockholders might need to comply with applicable federal banking statutes and regulations, including the Change in Bank Control Act and the Bank Holding Company Act. Specifically, Topco shareholders holding 10.0% or more of our voting interests might be required to provide certain information and/or commitments on a confidential basis to the Federal Reserve, among other regulators. This requirement may deter certain existing or potential shareholders from purchasing Topco Ordinary Shares, which may suppress demand for the stock and cause the price to decline.
We are in ongoing consultation with the OCC and other relevant regulators about our bank business plan and preparations for an application. Given the unique nature of our core business of issuing and operating Circle stablecoins and related blockchain-based transaction services, we anticipate the bank charter pursuit will require extensive effort and time, and may ultimately be unsuccessful. Additionally, specific statutory requirements for stablecoin issuers are being proposed by the U.S. Department of Treasury and are widely being discussed in potential Congressional legislation. While the Company is actively involved in policy efforts with U.S. Congress and the U.S. Treasury, the details of any new statutes that would impact our bank charter application are uncertain, and could introduce new requirements on the company and further delay or impact our bank charter pursuit.
We are subject to credit risks in respect of counterparties, including financial institutions.
Due to our treasury function and other services, we are and will continue to be subject to the risk of actual or perceived deterioration of the commercial and financial soundness, or perceived soundness, of other financial institutions, in particular in relation to receivables from financial institutions regarding settled payment transactions, and cash and cash-equivalents held at financial institutions. We regularly maintain cash balances at third-party financial institutions in excess of the FDIC insurance limit. Further, Circle stablecoins reserves held in omnibus structures at third-party financial institutions are not covered by FDIC
 
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insurance and are subject to risk of loss. One institution defaulting, failing a stress test or requiring mail-in by its shareholders and/or creditors and/or bail-out by a government could lead to significant liquidity problems and losses or defaults by other institutions. For example, the bankruptcy of Lehman Brothers in 2008 led to this situation, as the commercial and financial soundness of many financial institutions at the time were closely related due to their credit, trading, clearing or other relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty or major financial institution may lead to market-wide liquidity problems and losses or defaults by financial institutions on which we have an exposure. This risk resulting from the interdependence on financial institutions is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as industry payment systems and banks, with whom we interact on a daily basis. Systemic risk, particularly within the United States, could expose us to risk of loss, litigation and potential liability and have a material adverse effect on our ability to raise new funding and on our business, financial condition, results of operations and prospects.
Our sponsorship relationships for transaction processing are concentrated in a small number of partners. Should our relationships with such sponsors deteriorate, we may be limited in our ability to offer the payment processing services that are core to our offerings.
We currently have two relationships for sponsorship in the payment card networks (i.e., Mastercard and Visa). We currently have a single relationship for sponsorship in the ACH. While we are working to diversify these relationships and on-board additional financial institution sponsors, we have not yet finalized any such sponsorship relationships. As such, should our relationships with our existing sponsor financial institutions deteriorate or if such financial institutions make a decision to cease sponsoring entities in the cryptocurrency space, we could lose our ability to process payment card and/or ACH transactions. In such an event, the value of our services to our enterprise customers would be negatively impacted and our enterprise customers could be forced to process much smaller transaction volume with us or to cease transaction processing through us entirely.
As part of our registration with payment card networks (either directly or indirectly through local sponsors), we are subject to operating rules, including mandatory technology requirements, promulgated by the payment card networks that could subject us to a variety of fines and penalties, which we may not be able to pass on to our enterprise customers. If a violation is sufficiently material, there is a risk of damaging the relationship we have with the payment card networks to such an extent that any willingness the payment card networks may have had to expand their business relationships in markets and sectors with us is restricted.
The rules of each payment card network are set by their board of directors, over which the credit card issuing banks have significant influence. This influence may result in decisions being taken by the payment card networks to alter rules or policies in a manner that may benefit others, including the credit card issuing banks, to our detriment. Moreover, as the payment card networks become more dependent on proprietary technology and seek to provide value added services, there is heightened risk that rules and standards may be governed by the self-interest of the payment card networks, or of those with influence over the payment card networks.
Furthermore, failure to comply with the payment card network rules, or the deterioration in our relationships with the payment card networks for any other reason, could also result in the restriction, suspension or termination of our licenses to acquire payment transactions in various jurisdictions, or to act with sponsoring banks to use their acquiring licenses. The suspension or termination of our member registrations or certifications, or any changes to the association and network rules, that we do not successfully address, or any other action by the payment card networks to restrict our ability to process transactions over such networks, could limit our ability to provide payment services to customers and result in a reduction of revenue or increased costs of operation, which, in either case, could have a material adverse effect on our business and results of operations. Our removal from networks’ lists of security standard compliant service providers, for example Mastercard’s Member Alert to Control High-Risk Merchants (“MATCH”) or Visa Merchant Alert System (“VMAS”), could mean that existing customers, partners or other third parties may cease using or referring our services. Also, prospective customers, partners or other third parties may choose not to consider us for their payments needs. In addition, the payment card networks could refuse to allow us to process through their networks. Any of the foregoing could materially adversely impact our business, financial condition or results of operations.
 
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We are exposed to transaction losses due to chargebacks as a result of fraud or uncollectibility that may adversely impact our business, operating results, and financial condition.
Our products and services may be paid for by various methods, including ACH, wire transfers, or by credit and debit cards through payment processors, which exposes us to risks associated with chargebacks and refunds. These claims could arise from fraud, misuse, unintentional use, settlement delay, or other activities. Also, criminals are using increasingly sophisticated methods to engage in illegal activities, such as counterfeiting and fraud. If we are unable to collect such amounts from the customer, or if the customer refuses or is unable, due to bankruptcy or other reasons, to reimburse us, we bear the loss for the amount of the chargeback or refund.
While we have policies to manage and mitigate chargeback and fraud risks, there is no assurance that such policies will be effective. Our failure to limit chargebacks and fraudulent transactions could increase the number of refunds and chargebacks that we have to process. In addition, if the number of refunds and chargebacks increase, our payment processors could require us to increase reserves, impose penalties on us, charge additional fees, or terminate their relationships with us. Failure to effectively manage risk and prevent fraud could increase our chargeback and refund losses or cause us to incur other liabilities. Increases in chargebacks, refunds or other liabilities could have an adverse effect on our operating results, financial condition, and cash flows.
Certain large customers provide a significant share of our revenue and the termination of such agreements or reduction in business with such customers could harm our business. If we lose or are unable to renew these and other marketplace and enterprise client contracts at favorable terms, or if an exchange, digital asset platform or Circle stablecoins compatible platform provider were to terminate affiliation with us or Circle stablecoins, our results of operations and financial condition may be adversely affected.
Some of our largest customers provide significant contributions to our revenue. In particular, for the three months ended June 30, 2022, our top 10 customers represent 5.2% of revenue and our top 3 customers represent 4.4% of revenue. Failure to retain these and other customers could negatively impact our business and could lead to significant fluctuations in its performance. Although our contracts with our customers, including our largest customers, are generally for one year, customers may seek price reductions when renewing, expanding or changing their services with us and/or when their need for payment, asset storage, investing or capital raise services experiences significant volume changes.
We may experience customer attrition as a result of several factors, including business closures, downward trends in the cryptocurrency markets, transfers of customer accounts to our competitors and account closures that we initiate. We cannot predict the level of attrition in the future and our revenues could decline as a result of higher than expected attrition, which could have a material adverse effect on our business, financial condition and results of operations. In addition, our growth to date has been partially driven by the growth of our customers’ businesses. Should the rate of growth of our customers’ business slow or decline, this could have an adverse effect on transactions processed and therefore an adverse effect on our results of operations. Should we not be successful in selling additional solutions, we may fail to achieve our desired rate of growth.
Further, certain customers may seek to lower prices previously agreed due to pricing competition or other economic needs or pressures being experienced by the customer. Customers may also seek more integrated or “bundled” offerings with a simplified pricing structure. In addition, as our large customers typically have arrangements with multiple payment service, asset storage, investing and capital raise providers (primarily in order to mitigate against risks such as downtime, delayed response time, or default), these customers could shift business away at any given time without necessarily terminating the contract. If our contracts are terminated by our large customers or if our large customers shift business away, or if we are unsuccessful in retaining contract terms that are favorable to us, our business, financial condition, results of operations and prospects may be materially and adversely affected.
 
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Our products and services may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams. If any of our customers use our products or services to further such illegal activities, we could be subject to liability and our business could be adversely affected. Our efforts to detect and monitor such transactions for compliance with law may require significant costs, and our failure to effectively deal with bad, fraudulent or fictitious transactions and material internal or external fraud could negatively impact our business.
We have been, and may in the future be, subject to liability for illegal transactions conducted by third parties. Although our service agreements with customers shift liabilities to customers in connection with fraudulent activities, examples of third-party transactions for which we could incur liability include fraudulent payments initiated by our customers, money laundering, gambling, tax evasion, and scams. Examples of fraud include when a party knowingly uses a stolen digital wallet or otherwise illicitly acquires access information to a digital wallet. Further, payment processors, such as Visa and Mastercard, have and in the future, could, require us to terminate services to customers involved in such illegal activities. These payment processors could also charge us a fine in connection with a customer’s entry into their fraud monitoring programs. During the six months ended June 30, 2022, liabilities incurred for illegal transactions conducted by third parties were immaterial. In addition, we are subject to the risk that our employees, counterparties or third-party service providers commit fraudulent activity against us or our customers. Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting, account takeover and fraud. It is possible that incidents of fraud could increase in the future. The use of our products or services for illegal or improper purposes could subject us to claims, individual and class action lawsuits, and government and regulatory investigations, prosecutions, enforcement actions, inquiries, or requests that could result in liability and reputational harm for us. In addition, our efforts to detect and monitor such transactions for compliance with law may require significant costs.
Moreover, certain activity that may be legal in one jurisdiction may be illegal in another jurisdiction, and certain activities that are at one time legal may in the future be deemed illegal in the same jurisdiction. As a result, there is significant uncertainty and cost associated with detecting and monitoring transactions for compliance with local laws. In the event that a customer is found responsible for intentionally or inadvertently violating the laws in any jurisdiction, we may be subject to governmental inquiries, enforcement actions, prosecuted, or otherwise held secondarily liable for aiding or facilitating such activities. Changes in law have also increased the penalties for money transmitters, e-money issuers, broker-dealers and alternative trading systems for certain illegal activities, and government authorities may consider increased or additional penalties from time to time. Owners of intellectual property rights or government authorities may seek to bring legal action against us for involvement in the sale of infringing or allegedly infringing items. Any threatened or resulting claims could result in reputational harm, and any resulting liabilities, loss of transaction volume, or increased costs could harm our business.
Moreover, while fiat currencies can be used to facilitate illegal activities, crypto assets are relatively new and, in many jurisdictions, may be lightly regulated or largely unregulated. Many types of crypto assets have characteristics such as the speed with which digital asset transactions can be conducted, the ability to conduct transactions without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, the irreversible nature of certain crypto asset transactions, and encryption technology that anonymizes these transactions, which may make crypto assets susceptible to use in illegal activity.
U.S. federal and state and foreign regulatory authorities and law enforcement agencies, such as the Department of Justice, the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission, the IRS and various state securities and financial regulators investigate, issue subpoenas and civil investigative demands, and take legal action against persons and entities alleged to be engaged in fraudulent schemes or other illicit activity involving crypto assets. A recent example of these legal actions are the indictments by the SEC and the Department of Justice of three individuals in an insider trading scheme involving the listing of certain crypto assets on Coinbase’s trading platform.
While we believe that our risk management and compliance framework is designed to detect significant illicit activities conducted by our potential or existing customers, we cannot ensure that we will be able to detect all illegal activity on our systems. If any of our customers use our products and services to further such illegal activities, our business could be adversely affected.
 
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Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results, and financial condition. We rely on third parties for some of our KYC and other compliance obligations.
Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the establishment and maintenance of our compliance, audit, and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. While we have devoted significant resources to develop policies and procedures to identify, monitor, and manage our risks, and expect to continue to do so in the future, we cannot assure that our policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments or against all types of risks, including unidentified or unanticipated risks. Our risk management policies and procedures rely on a combination of technical and human controls and supervision that are subject to error and failure.
Some of our methods for managing risk are discretionary by nature and are based on internally developed controls, observed historical market behavior, and standard industry practices. These methods may not adequately prevent losses, particularly as they relate to extreme market movements which may be significantly greater than historical fluctuations in the market. Our risk management policies and procedures also may not adequately prevent losses due to technical errors if our testing and quality control practices are not effective in preventing failures. In addition, we may elect to adjust our risk management policies and procedures to allow for an increased risk tolerance, which could expose us to the risk of greater losses.
Regulators periodically review our compliance with our own policies and procedures and with a variety of laws and regulations. These regulators include, but are not limited to, the U.S. state banking regulators (such as the New York Department of Financial Services and the California Department of Financial Protection and Innovation), U.S. federal regulators (including the Financial Crimes Enforcement Network and Internal Revenue Service), The U.K. Financial Conduct Authority, and the Bermuda Monetary Authority. We have received in the past, and may from time to time receive additional, examination reports citing violations of rules and regulations and inadequacies in existing compliance programs, and requiring us to enhance certain practices with respect to our compliance program, including due diligence, training, monitoring, reporting, and recordkeeping. We have, and will continue to, enhance our compliance programs to address such findings, including enhancing our due diligence, monitoring, reporting, and recordkeeping processes and controls. While our money transmission licenses and money services business registration status subjects us to regulations that govern material aspects our business, such as how we commercialize Circle stablecoins and onboard customers and maintain adequate reserves underlying Circle stablecoins, among other things, such regulation is not equivalent to the type of regulation that governs regulated banks, such as under Federal Deposit Insurance Act and the Federal Reserve Act of 1913, which include prudential supervision by regulators, minimum capital requirements, and specified prohibited activities. To the extent we become subject to such regulation as result of chartering or acquiring a bank, we will need to adjust our operations to the new bank regulatory environment, which may cause us to adjust our business practices and increase materially our ongoing cost of regulatory compliance.
If we fail to comply with these, or do not adequately remediate certain findings, regulators could take a variety of actions that could impair our ability to conduct our business, including delaying, denying, withdrawing, or conditioning approval of our licenses, or certain products and services. In addition, regulators have broad enforcement powers to censure, fine, issue cease-and-desist orders or prohibit us from engaging in some of our business activities. In the case of non-compliance or alleged non-compliance, we could be subject to investigations and proceedings that may result in substantial penalties or civil lawsuits, including by customers, for damages which can be significant. Any of these outcomes would adversely affect our reputation and brand and our business, operating results, and financial condition. Some of these outcomes could adversely affect our ability to conduct our business.
Furthermore, we rely on third parties for some of our KYC and other compliance obligations. If these third parties fail to effectively provide these services, we may be subject to adverse consequences as described above.
 
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We are in the planning phases for establishing connectivity with decentralized finance protocols as part of the suite of offerings we provide to our customers. Such relationships create certain liability risk for Circle should our customers experience losses as a result of accessing such decentralized finance protocols.
Once established and operationalized, our connectivity with numerous decentralized finance protocols will enable our customers to access the decentralized protocols in order to derive the benefit that particular decentralized protocol may provide them. We will not be offering or credentialing the decentralized protocols. We intend to simply provide the technology to allow our customers to effectively connect a Circle wallet to certain decentralized finance protocols. Nonetheless, providing such connectivity presents a risk that we may, under derivative theories of liability, be held responsible for the bad acts, failures or violations of law of the decentralized finance protocols. Decentralized protocols implicate consumer protection risks and may implicate a variety of anti-money laundering laws and regulations, including but not limited to the federal Bank Secrecy Act. If the protocols are deemed by the relevant authorities to be operating out of compliance with registration and other requirements under the Bank Secrecy Act or regulations thereunder, there is a risk that Circle could be held secondarily liable for aiding or facilitating such activities by virtue of the connectivity provided to customers.
Accordingly, if Circle was found to knowingly provide assistance to such criminal activities with the intent of facilitating that crime it would be subject to criminal liability. A criminal prosecution could cause us to cease our DeFi-related services and may expose us to criminal fines, penalties or restraints on operations. In addition, our officers and directors may be personally implicated in such prosecutions and thus we may become responsible for significant indemnification expenses, which may have a material adverse effect on our results of operations and financial condition.
If we fail to develop, maintain, and enhance our brand and reputation, our business, operating results, and financial condition may be adversely affected. Moreover, unfavorable media coverage could negatively affect our business.
Our brand and reputation are key assets and a competitive advantage. Maintaining, protecting, and enhancing our brand depends largely on the success of our marketing efforts, ability to provide consistent, high-quality, and secure products, services, features, and support, and our ability to successfully secure, maintain, and defend our rights to use the “Circle,” “USDC,” “EUROC” and “SeedInvest” marks and other trademarks important to our brand. We believe that the importance of our brand will increase as competition further intensifies. Our brand and reputation could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity, unexpected events, negative perception of our management practices or actions by third parties.
We receive a high degree of media coverage in the cryptoeconomy and around the world. Unfavorable publicity regarding, for example, our product changes, product quality, litigation or regulatory activity, privacy practices, terms of service, employment matters, the use of our products, services, or supported cryptocurrencies for illicit or objectionable ends, the actions of our customers, management practices or the actions of other companies that provide similar services to ours, has in the past, and could in the future, adversely affect our reputation.
In addition, because we are a founder-led company, actions by, or unfavorable publicity about, Jeremy Allaire, our co-founder, Chairman and Chief Executive Officer, may adversely impact our brand and reputation. Such negative publicity also could have an adverse effect on the size and engagement of our customers and could result in decreased revenue, which could have an adverse effect on our business, operating results, and financial condition. Further, we have in the past, and may in the future, be the target of social media campaigns criticizing actual or perceived actions or inactions that are disfavored by our customers, employees, or society at-large, which campaigns could materially impact our customers’ decisions to use our products and services. Any such negative publicity could have an adverse effect on the size, activity, and loyalty of our customers and result in a decrease in net revenue, which could adversely affect our business, operating results, and financial condition. For more information, see the risk factor entitled “— Due to unfamiliarity and some negative publicity associated with cryptocurrency and blockchain technology, our customer base may lose confidence in products and services that utilize cryptocurrency or blockchain technology.
 
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Our future growth depends significantly on our marketing efforts, and if our marketing efforts are not successful, our business and results of operations will be harmed.
We have dedicated significant resources to marketing efforts. Our ability to attract and retain customers depends in large part on the success of these marketing efforts and the success of the marketing channels we use to promote our products. Our marketing channels include, but are not limited to, social media, traditional media such as the press, online affiliations, search engine optimization, search engine marketing, and offline partnerships.
While our goal remains to increase the strength, recognition and trust in our brand by increasing our customer base and expanding our products and services, if any of our current marketing channels becomes less effective, if we are unable to continue to use any of these channels, if the cost of using these channels was to significantly increase or if we are not successful in generating new channels, we may not be able to attract new customers in a cost-effective manner or increase the use of our products and services. If we are unable to recover our marketing costs through increases in the size, value or other product selection and utilization, it could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.
Concerns about the environmental impacts of blockchain technology could adversely impact usage and perceptions of Circle stablecoins and Circle.
The energy usage and environmental impact of blockchain technology, particularly in relation to proof of work mining, has attracted considerable attention. Government scrutiny related to restrictions on cryptocurrency mining facilities and their energy consumption may increase, resulting in additional regulation that could adversely impact usage of Circle stablecoins and harm our business. The considerable consumption of electricity by mining operators may also have a negative environmental impact, including contribution to climate change, which could create a negative consumer sentiment and perception of cryptocurrencies generally and adversely affect our business, prospects, financial condition, and operating results.
Additionally, concerns regarding the environmental impact of blockchain technology could impact investor interest and demand for Topco Ordinary Shares, as an increasing number of major investors, ETFs and mutual funds have strict policies around ESG criteria, and such concerns could lead these investors to avoid purchasing or holding the Topco Ordinary Shares. A more limited investor pool for the Topco Ordinary Shares could lead to underperformance and more limited trading and liquidity.
The COVID-19 pandemic could have unpredictable, including adverse, effects on our business, operating results, and financial condition.
The global spread and unprecedented impact of the COVID-19 pandemic continues to create significant volatility, uncertainty and economic disruption. Our operations and financial results have not been materially negatively impacted by COVID-19 in 2021 or to date in 2022. The future effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), impact of the new COVID-19 variants and the rollout of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The continued impact of COVID-19 and the imposition of related public health measures have resulted in, and is expected to continue to result in, increased volatility and uncertainty in the cryptoeconomy. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business, results of operations, financial condition or liquidity.
As a remote-first company, we are subject to heightened operational and cybersecurity risks.
We are a remote-first company, meaning that for all existing roles our employees work from their homes or other non-company dwellings. However, we are offering our employees opportunities to work from shared office spaces hosted by third parties, like WeWork. This subjects us to heightened operational risks. For example, technologies in our employees’ and service providers’ homes and shared office spaces may not be as robust and could cause the networks, information systems, applications, and other tools available
 
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to employees and service providers to be more limited or less reliable. Further, the security systems in place at our employees’ and service providers’ homes and shared office spaces may be less secure than those used in corporate offices, and while we have implemented technical and administrative safeguards to help protect our systems as our employees and service providers work from home, we may be subject to increased cybersecurity risk which could expose us to risks of data or financial loss, and could disrupt our business operations. There is no guarantee that the data security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees and service providers accessing company data and systems remotely. We also face challenges due to the need to operate with a remote workforce and are addressing so to minimize the impact on our ability to operate.
Our and our third-party service providers’ failure to safeguard and manage our customers’ funds and digital assets could adversely impact our business, operating results, and financial condition.
As of June 30, 2022, assets related to safeguarding obligations recognized on our balance sheet were approximately $958.8 million. Assets related to safeguarding obligations are not insured or guaranteed by any government or government agency. We have also entered into service arrangements with third parties where we or third-party service providers receive and hold funds for the benefit of customers. Some of the digital assets held in connection with our discontinued legacy products are maintained in accounts on third-parties’ exchanges. For further information about our discontinued legacy products, please see the section entitled “Circle Management’s Discussion & Analysis of Financial Conditions and Results of Operations — Significant Events and Transactions”. Our and our third-party service providers’ abilities to manage and accurately safeguard these funds and digital assets requires a high level of internal controls. As our business continues to grow and we expand our product and service offerings, we must continue to strengthen our associated internal controls and ensure that our third-party service providers do the same. Our success and the success of our product offerings requires significant public confidence in our and our third-party service providers’ ability to properly manage digital asset balances and handle large and growing transaction volumes and amounts of customer funds. In addition, we are dependent on our third-party service providers’ operations, liquidity, and financial condition for the proper maintenance, use, and safekeeping of these customer assets. Any failure by us or our third-party service providers to maintain the necessary controls or to manage customer digital assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our and our third-party service providers’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition.
We deposit, transfer, and hold in custody customer funds and digital assets in multiple jurisdictions. In each instance, we are required to safeguard customers’ assets using security controls that meet our regulatory obligations and also address the specific risks applicable to our hot and cold wallet storage systems, as well as our financial management systems related to such custodial functions. Our security technology is designed to prevent, detect, and mitigate inappropriate access to our systems, by internal or external threats. We believe we have developed and maintained administrative, technical, and physical safeguards designed to comply with applicable legal requirements and industry standards. However, it is nevertheless possible that hackers, employees or service providers acting contrary to our policies, or others could circumvent these safeguards to improperly access our systems or documents, or the systems or documents of our third-party service providers or agents, and improperly access, obtain, misuse customer crypto assets and funds. The methods used to obtain unauthorized access, disable, or degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time. Our fidelity insurance coverage for such impropriety is limited and may not cover the extent of loss nor the nature of such loss, in which case we may be liable for the full amount of losses suffered, which could be greater than all of our assets. Our ability to maintain fidelity insurance is also subject to the insurance carriers’ ongoing underwriting criteria. Any loss of customer funds or crypto assets could result in a subsequent lapse in insurance coverage, which could cause a substantial business disruption, adverse reputational impact, inability to compete with our competitors, and regulatory investigations, inquiries, or actions. Additionally, transactions undertaken through our websites or other electronic channels may create risks of fraud, hacking, unauthorized access or acquisition, and other deceptive practices. Any security incident resulting in a compromise of customer assets could result in substantial costs to us and require us to notify impacted customers, and in some cases regulators, of a possible or actual incident, expose us to
 
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regulatory enforcement actions, including substantial fines, limit our ability to provide services, subject us to litigation, significant financial losses, damage our reputation, and adversely affect our business, operating results, financial condition, and cash flows. For more information, see the risk factor entitled “— Cyberattacks and security breaches of our systems, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results and financial condition.
Risks Related to Our Financial Condition
We have a history of losses, and there is no assurance that we will maintain profitability or that our revenue and business models will be successful.
We have incurred net losses in our past and there is no assurance that we will not incur net losses in the future. We incurred net losses from continuing operations of $508.7 million and $17.3 million for the years ended December 31, 2021 and 2020, respectively. We also incurred net losses from continuing operations of $852.4 million and $174.5 million for the six months ended June 30, 2022 and 2021, respectively. Our ability to achieve and maintain profitability is based on numerous factors, many of which are beyond our control. We may not be able to generate sufficient revenue to maintain profitability in the short or long-term. Our revenue growth may slow, or our revenue may decline for a number of other reasons, including reduced demand for our offerings, increased competition, a decrease in the growth or size of the stablecoin, cryptocurrency and digital asset economy, or any failure to capitalize on growth opportunities.
We are continually refining our revenue and business model and have recently shifted our focus to the development and commercialization of Circle stablecoins. There is no assurance that these efforts will be successful or that we will generate revenues commensurate with our efforts and expectations or become or stay profitable. We may be forced to make significant changes to our revenue and business model to compete with our competitors’ offerings, and even if such changes are undertaken, there is no guarantee that they will be successful or profitable. Additionally, we will need to hire, train, and integrate qualified personnel to meet and further such changes to our business objectives at potentially significant additional expense. Failure to successfully implement revenue and business models or manage related expenses could cause us to be unprofitable and have an adverse effect on our business, operating results and financial condition.
We may experience fluctuations in our quarterly operating results.
We could experience significant fluctuations in our quarterly operating results due to a number of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may cause fluctuations in our quarterly operating results include, but are not limited to, the following:

a change in the transaction volume and market cap of Circle stablecoins (such as the decrease of USDC in circulation from $55.6 billion at June 30, 2022 to $47.3 billion at September 30, 2022);

the level of our expenses;

the degree to which we encounter competition in our markets;

general economic conditions;

the amount of capital available for investing in the market;

legal or regulatory developments;

legislative or policy changes;

changes in the prospects of the economy generally, which could alter current or perspective customers’ priorities, or could increase the time it takes us to launch new offerings; and

and the ongoing impact of the COVID-19 pandemic.
Our operating results may fall below the expectations of market analysts and investors in some future periods, which could cause the market price of our common stock to decline substantially.
 
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Fluctuations in interest rates could impact our business and financial results.
Our results of operations are directly impacted by changes in interest rates, among other macroeconomic conditions. Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. For the year ended December 31, 2021, our interest income earned from the management of the U.S. dollar denominated reserves was $28.5 million, which represented 33.5% of our total revenue and reserve interest income from continuing operations. For the three months and six months ended June 30, 2022, our interest income earned from the management of the U.S. dollar denominated reserves was $81.3 million and $100.4 million, which represented 86.4% and 79.3% of our total revenue and reserve interest income from continuing operations, respectively. Because interest income earned from Circle stablecoins, including interest income earned from USDC, is such a significant portion of our revenues currently, an increase or decrease in interest rates may significantly increase or decrease, as the case may be, the Circle stablecoins interest income we earn. For example, a hypothetical 100 basis point increase or decrease in interest rates would have resulted in a $240.9 million increase or decrease in total interest income for the year ended December 31, 2021. Decreases in interest rates could have a material adverse effect on our cash flow and results of operations.
On the other hand, rising interest rates can also adversely impact our business and financial results through shifts in market dynamics. For example, during 2022 rising interest rates have caused flows out of stablecoins such as USDC into U.S. Treasuries, Money Market funds and other traditional investment products. Continued increases in interest rates or continued elevated interest rates as compared to recent historical rates, or other market dynamics that shift investor interest away from stablecoins and towards more traditional investment products, could adversely impact our business and financial results.
We do not expect that the financial forecasts we presented to Concord’s board of directors in February 2022, and which are included in this proxy statement/prospectus, will prove accurate.
In connection with the Proposed Transactions, Concord’s management presented certain updated forecasted financial information for Circle to its board of directors, which information was internally prepared and provided by us. The forecasts were based on numerous variables and assumptions known to us at the time of preparation. Such variables and assumptions are inherently uncertain and many are beyond our control or the control of Concord. Important factors that may affect actual results and cause the forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to our business, industry performance, the competitive environment, changes in technology, and general business and economic conditions. The forecasted financial information reflects assumptions as to certain business decisions that have already changed, and are subject to further change. While we believe that the assumptions underlying the forecasted financial information were reasonable when prepared, subsequent developments, including the following, have caused certain of the assumptions to no longer be accurate: (1) the significant drop in value of major cryptocurrencies during 2022, (2) the collapse of large cryptocurrency companies such as FTX, Voyager Digital and Celsius, (3) rising interest rates which has caused flows out of stablecoins into US Treasuries, Money Market funds and other traditional investment products and (4) the conversion by Binance of several billions of USDC into BUSD held in Binance wallets as further described in the section entitled “Circle Management’s Discussion and Analysis — Key Operating and Financial Indicators — USDC in Circulation.” As a result, the inclusion of such forecasts in this proxy statement/prospectus should not be relied on as “guidance” or otherwise predictive of actual future events, and actual results are expected to differ from, and be materially lower than, those in such forecasts.
Changes in U.S. and foreign tax laws, as well as the application of such laws, could adversely impact our financial position and operating results.
We are subject to complex income and non-income tax laws and regulations in the United States and a variety of foreign jurisdictions. Both the United States and foreign jurisdictions may revise corporate income tax and other non-income tax laws which could impact the amount of tax due in such jurisdiction.
Our determination of our corporate income tax liability is subject to review and may be challenged by applicable U.S. and foreign tax authorities. Any adverse outcome of such challenge could harm our operating results and financial condition. The determination of our worldwide provision for income taxes and other
 
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tax liabilities requires significant judgment and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is complex and uncertain. Moreover, as a multinational business, we have subsidiaries that engage in many intercompany transactions in a variety of tax jurisdictions where the ultimate tax determination is complex and uncertain. Our existing corporate structure and intercompany arrangements have been implemented in a manner we believe is in compliance with current prevailing tax laws. Furthermore, as we operate in multiple taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views with respect to, among other things, the characterization and source of income or other tax items, the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. The taxing authorities of the jurisdictions in which we operate may challenge our tax treatment of certain items or the methodologies we use for valuing developed technology or intercompany arrangements, which could impact our worldwide effective tax rate and harm our financial position and operating results.
We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property, and goods and services taxes in the United States and various foreign jurisdictions. A change in the tax law could impact tax positions which could result in an increased exposure related to such tax liabilities. Such changes could have an adverse effect on our operating results and financial condition.
Our Irish incorporation subjects us to both United States and international tax laws with respect to the structure and operations of our business, which are subject to continued scrutiny and change by governments that could have a material adverse effect on our results of operations and the ability to utilize cash in a tax efficient manner
Although we are incorporated in Ireland, the IRS may assert that we should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal tax purposes pursuant to Section 7874 of the Code. For U.S. federal tax purposes, a corporation generally is considered a tax resident in the jurisdiction of its organization or incorporation. Because we are an Irish incorporated entity, we would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules. Section 7874 of the Code provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal tax purposes.
Under current law, we expect to be treated as a foreign corporation for U.S. federal tax purposes. However, there is limited guidance regarding the section 7874 provisions. An unfavorable determination on our treatment as a foreign corporation under section 7874 of the Code or changes to the inversion rules in section 7874 of the Code, the IRS Treasury regulations promulgated thereunder, or other IRS guidance and legislative proposals aimed at expanding the scope of U.S. corporate tax residence could adversely affect our status as a foreign corporation for U.S. federal tax purposes, which could have a material impact on our financial statements in future periods.
Our ability to use any current or future net operating loss to offset future taxable income may be subject to certain limitations under U.S. or foreign law.
As of December 31, 2021, we had net operating loss carryforwards (“NOLs”) for U.S. federal, state, and foreign purposes of $204.1 million, $8.7 million (tax affected), and $34.1 million, respectively, which may be available to offset taxable income in the future, and portions of which expire in various years beginning in 2034. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire. Under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), as modified by the CARES Act, federal NOLs incurred in tax years beginning after December 31, 2017, can be carried forward indefinitely with no expiration but the utilization of such NOLs is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” ​(as defined under Sections 382 and 383 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs and certain other tax attributes to offset post-change taxable income or taxes.
 
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We may have experienced, or may experience in the future, an ownership change under Section 382 of the Code that could affect our ability to utilize our NOLs to offset our income.
If our estimates or judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve the identification of performance obligations in revenue recognition, evaluation of tax positions, inter-company transactions, and the valuation of stock-based awards and the fiat reserves and digital assets we hold, among others. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of analysts and investors, resulting in a decline in the trading price of Topco Ordinary Shares.
The nature of our business requires the application of complex financial accounting rules, and there is limited guidance from accounting standard setting bodies. If financial accounting standards undergo significant changes, our operating results could be adversely affected.
The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, or the FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. Recent actions and public comments from the FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. Further, there has been limited precedents for the financial accounting of stablecoins, cryptocurrencies and other digital assets and related valuation and revenue recognition considerations.
As such, there remains significant uncertainty on how companies can account for stablecoin, cryptocurrency and other digital asset transactions, value, and related revenue. Uncertainties in or changes to in regulatory or financial accounting standards could result in the need to changing our accounting methods and restate our financial statements and impair our ability to provide timely and accurate financial information, which could adversely affect our financial statements, result in a loss of investor confidence, and more generally impact our business, operating results, and financial condition.
Key business metrics and other estimates are subject to inherent challenges in measurement, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics.
We regularly review key business metrics including Circle stablecoins in Circulation, Total Transaction Volume, Fiat Transaction Volume, Total Circle Accounts, Transacting Circle API Customers, Closed Investment Volume, Adjusted EBIDTA, and other measures to evaluate growth trends, measure our performance, and make strategic decisions. These key metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we currently believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in such measurements. If we fail to maintain an effective analytics platform, our key metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.
Our key business metrics may also be impacted by compliance or fraud-related bans, technical incidents, or false or spam accounts in existence on our platform. We regularly deactivate fraudulent and spam accounts that violate our terms of service and exclude these accounts from the calculation of our key business
 
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metrics; however, we may not succeed in identifying and removing all such accounts from our platform. Additionally, customers are not prohibited from having more than one account and our metrics may overstate the number of unique customers who have registered an account on our platform as one customer may register for, and use, multiple accounts with different email addresses, phone numbers, or usernames. However, we do have controls in place to identify customers that have multiple accounts and we do not allow multiple customers to sign into the same account. If our metrics provide us with incorrect or incomplete information about customers and their behavior, we may make inaccurate conclusions about our business.
We are subject to changes in financial reporting standards or policies, including as a result of choices made by us, which could materially adversely affect our reported results of operations and financial condition and may have a corresponding material adverse impact on capital ratios.
Our consolidated financial statements are prepared in accordance with GAAP, which are periodically revised or expanded. Accordingly, from time to time we are required to adopt new or revised accounting standards issued by recognized bodies. It is possible that future accounting standards and financial reporting standards or policies, including as a result of choices made by us, which we are required to adopt, could change the current accounting treatment that applies to our consolidated financial statements and that such changes could have a material adverse effect on our reported results of operations and financial condition, and may have a corresponding material adverse effect on capital ratios.
During the course of preparing our financial statements as of and for the six and nine months ended June 30, 2021 and September 30, 2021, respectively, we identified a material weakness in our internal controls over financial reporting. Failure to maintain effective internal controls over financial reporting could lead to misstatements in our financial statements and adversely affect our business.
As a privately-held company, we were not required to document and test our internal controls over financial reporting nor were our management required to certify the effectiveness of internal controls and our auditors were not required to opine on the effectiveness of our internal control over financial reporting.
During the course of preparing our financial statements as of and for the six and nine months ended June 30, 2021 and September 30, 2021, respectively, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
A material weakness was identified relating to the precision of management’s review control over the financial statements and that it does not operate at a sufficient level of precision to detect journal entries that have been recorded to incorrect accounts. During the course of preparing our financial statements as of and for the six and nine months ended June 30, 2021, and September 30, 2021 this material weakness resulted in (1) an overstatement of compensation expense due to an incorrect entry in our payroll system; (2) an understatement of other income/loss due to embedded derivatives requiring bifurcation not being identified; and (3) an understatement of the fair value of convertible debt due to the use of an incorrect assumption.
Due to the identification of an embedded derivative requiring bifurcation during the quarterly financial statement close process for the three and nine months ended September 30, 2021, the Company restated and revised its prior period interim financial statements for the three months ended March 31, 2021 and the three and six months ended June 30, 2021. The other components of the material weakness did not require a restatement of prior period financial statements.
In connection with the material weakness, we have implemented remediating controls over compensation expense and a remediation plan that includes specific review procedures designed to identify embedded derivatives as well as to identify appropriate assumptions used to develop the fair value of convertible debt.
The material weakness will not be considered remediated until all remediated controls operate for a sufficient period of time and we have concluded, through testing, that these controls are effective.
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in its internal control
 
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over financial reporting or that they will prevent or avoid any potential future material weakness. In addition, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of its internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified.
As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our stock.
We are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline, and we could be subject to sanctions or investigations by the exchange on which shares of our stock are listed, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
We might require additional capital to support business growth, and this capital might not be available or may require shareholder approval to obtain.
We have funded our operations since inception primarily through equity financings, convertible notes, and revenue generated by our products and services. We intend to continue to make investments in our business to respond to business challenges, including developing new products and services, enhancing our operating infrastructure, expanding our international operations, and acquiring complementary businesses and technologies, all of which may require us to secure additional funds. Recent examples of those investments are the acquisitions of Cybavo Pte. Ltd. and Billeto, Inc..
Additional financing may not be available on terms favorable to us, if at all. If we incur additional debt, the debt holders would have rights senior to holders of Topco’s shares to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on Topco’s shares.
Furthermore, Topco is an Irish incorporated public limited company, and following consummation of the Business Combination, certain capital structure decisions regarding Topco will require the approval of Topco’s shareholders, which may limit our flexibility to manage our capital structure. Under Irish law, the directors of a company may only allot and issue “relevant securities” ​(comprising, subject to certain exceptions, new shares and rights to subscribe for, or convert any security into, new shares) once generally or specifically authorized to do so by its constitution or by a resolution approved by a simple majority of the votes cast at a general meeting of its shareholders at which a quorum is present, referred to under Irish law as an “ordinary resolution”. A general authorization may be granted in respect of up to the entirety of a company’s authorized but unissued share capital and for a maximum period of five years, at which point it must be renewed by another ordinary resolution. The current constitution of Topco, adopted on July 7, 2021, authorizes Topco’s directors to allot and issue new shares and rights to subscribe for, or convert any security into, new shares in the capital of Topco up to the maximum of Topco’s authorized but unissued share capital for a period of five years from July 7, 2021. From Closing, the Topco Constitution will provide a similar authorization to Topco’s directors for a period of five years from its date of adoption. This
 
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authorization will need to be renewed by ordinary resolution upon its expiration and at periodic intervals thereafter. While an allotment authority may be given for up to five years at each renewal, governance considerations may result in renewals for shorter periods or in respect of less than the maximum permitted number of relevant securities being sought or approved. Any increase in Topco authorized share capital also requires to be approved by an ordinary resolution.
Subject to certain exceptions, Irish law also provides shareholders with statutory pre-emption rights when “equity securities” ​(comprising, subject to certain exceptions, new shares and rights to subscribe for, or convert any securities into, new shares) are issued for cash. However, it is possible for such statutory pre-emption rights to be generally or specifically dis-applied in a company’s constitution or by a resolution approved by not less than 75% of the votes cast at a general meeting of its shareholders at which a quorum is present, referred to under Irish law as a “special resolution”. A general dis-application of pre-emption rights may be given in respect of up to the entirety of a company’s authorized but unissued share capital and for a maximum period of five years, at which point it must be renewed by another special resolution. The current constitution of Topco, adopted on July 7, 2021, dis-applies statutory pre-emption rights up to the maximum of the authorized but unissued share capital for a period of five years from July 7, 2021. From Closing, the Topco Constitution will dis-apply statutory pre-emption rights up to the maximum of the authorized but unissued share capital for a period of five years from its date of adoption. This dis-application will need to be renewed by special resolution upon its expiration and at periodic intervals thereafter. While a dis-application of statutory pre-emption rights may be given for up to five years at each renewal, governance considerations may result in renewals for shorter periods or in respect of less than the maximum permitted number of equity securities being sought or approved.
If Topco issues additional shares, holders of Topco Ordinary Shares will experience dilution and the new shares could have rights senior to those of Topco Ordinary Shares. The trading prices for Topco Ordinary Shares may be highly volatile, which may reduce our ability to access capital on favorable terms or at all. In addition, a slowdown or other sustained adverse downturn in the general economic or cryptocurrency and digital asset markets could adversely affect our business and the value of Topco Ordinary Shares. Because our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of shares. As a result, holders of Topco Ordinary Shares bear the risk of future issuances of debt or shares reducing the value of Topco Ordinary Shares and diluting their interests. Our inability to obtain adequate financing or financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue supporting our business growth and responding to business challenges.
The prices of digital assets are extremely volatile, and price fluctuations may adversely impact the value of digital assets that we hold.
Digital assets have historically experienced high levels of volatility far in excess of that experienced in fiat currencies. For example, there has been unprecedented turmoil in the digital asset borrowing and lending markets since the second quarter of 2022. A number of factors contribute to changes in digital asset prices and volatility, including changes in the supply and demand for a particular digital asset, market sentiment, macroeconomic factors, utility of a particular digital asset, and idiosyncratic events such as exchange outages or commentary on social media. We are exposed to price volatility with respect to the corporate digital assets we hold. Though our fundamental business and growth strategy does not include acquiring digital assets for the purpose of value appreciation, we have exposure to digital assets at the corporate level because, for certain services we perform, our customers may pay us in digital assets. To the extent customers compensate us in the form of digital assets, and we continue to hold these digital assets, we may be subject to the high degree of price volatility associated with these digital assets. A decline in price may require us to take an impairment charge on our digital assets, and a decline in the value of the digital assets we hold in higher concentrations may have a larger adverse impact on our operating results in any given period. Volatility in the value of digital assets or other market factors may limit our ability to convert digital assets into fiat currency at attractive prices or at all.
 
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Risks Related to Circle stablecoins and Related Products
Our ecosystem and all API product offerings are centered currently on Circle stablecoins, cryptographic tokens backed by at least an equivalent amount of fiat currency denominated assets held in segregated accounts with U.S. regulated financial institutions in accordance with state money transmitter laws. The regulatory landscape as it relates to stablecoins, including Circle stablecoins, continues to evolve. Such evolution may create additional regulatory burdens and expenses and could materially impact the issuance, use and adoption of Circle stablecoins.
Our API product offering is today built on the ability of our customers to hold and transact in Circle stablecoins. Stablecoins, including Circle stablecoins, are a relatively new development in the payments and financial services industry. As such, the regulatory status of Circle stablecoins and other stablecoins remains somewhat uncertain in the United States and other jurisdictions. As regulatory interpretations develop throughout the world, we may be required to obtain registrations and/or licenses in various jurisdictions that we do not currently hold. We may also be required to take on new and additional compliance obligations in certain jurisdictions, or we could be directed to cease operations involving Circle stablecoins in one or more jurisdictions. Any of these scenarios could have a detrimental impact on our business given that Circle stablecoins are central to our API operations.
There is regulatory uncertainty regarding the classification of Circle stablecoins. Any classification of Circle stablecoins as a security in the United States or in other jurisdictions likely would impose additional regulation and materially impact its adoption, resulting in adverse impacts on our business.
We are of the opinion that payment stablecoins — which we define as a digital currency that is backed by a single fiat currency, and may be redeemed on a 1:1 basis for that underlying fiat currency when a redemption request is made to the issuer — are not securities subject to registration under the Securities Act or the Exchange Act. USDC and EUROC are two stablecoins that meet this definition. As the name suggests, USDC is pegged to the value of the U.S. dollar (USD) — 1 USDC can be bought, redeemed, or exchanged for $1 USD. Similarly, EUROC is pegged to the value of the euro — 1 EUROC can be bought, redeemed or exchanged for €1. USDC’s, and EUROC’s value to their respective holders comes from their price stability and functionality. Each of USDC and EUROC is a digital currency that is not susceptible to the volatility of other cryptocurrencies, such as Bitcoin and Ethereum, or digital assets considered to be securities. Each of USDC and EUROC are internet native, backed by full reserves, always redeemable 1 to 1 for a U.S. dollar or a euro, respectively, and capable of moving quickly and cheaply, across blockchains and in a permissionless manner. USDC holders acquire USDC with the intent of using USDC as a stable store of value and a medium of payment and exchange; similarly, EUROC holders acquire EUROC with the intent of using EUROC as a stable store of value and a medium of payment and exchange.
The regulatory treatment of stablecoins like Circle’s USDC and EUROC stablecoins is highly uncertain and has drawn significant attention from legislative and regulatory bodies around the world, including from a variety of U.S. financial regulators and members of Congress and the European Central Bank. Moreover, there is currently no generally accepted definition of stablecoins; the term “stablecoin” may refer to digital assets that have materially different characteristics, and different types of stablecoins may be subject to different regulations and requirements. In addition, the issuance and resale of stablecoins (in their various forms) may implicate a variety of banking, deposit, money transmission, prepaid access and stored value, anti-money laundering, commodities, securities, sanctions, and other laws and regulations in the United States and in other jurisdictions. Thus, while we are presently of the opinion that neither USDC nor EUROC is a “security” within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act (and registration is therefore not required under the applicable securities laws), the SEC may determine otherwise, or there could be a change in law or regulation that reclassifies assets like USDC and EUROC as a “security.”
Our position is premised on its understanding that neither USDC nor EUROC meets the elements of the Howey test — specifically, that there can be no reasonable expectation of profits based on our management efforts, as each of USDC and EUROC will maintain the same price for purchase and redemption, the value of USDC or EUROC is not determined by our activities or market forces, neither USDC nor EUROC will experience “capital appreciation” given the stable value, and there exists no opportunity to either earn
 
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a return or share in our income or profits by merely holding USDC or EUROC. Notwithstanding these current facts, there exists a risk that the SEC or another regulatory body may disagree with Circle’s assessment and deem that USDC and EUROC offer a reasonable expectation of profit such that USDC and EUROC may be characterized as securities.
Additionally, while we strongly believe that there can be no situation in which USDC or EUROC could be deemed a “note” qualifying as a security because each of USDC and EUROC are bought and sold commercially to provide a method of exchange and a stable store of value, and neither Circle stablecoin (i) obligates us to make any interest or any other type of similar payment to holders or (ii) promises anything to, or creates any other incentive or motivation for, anyone purchasing USDC or EUROC merely for holding it, the SEC may characterize USDC and EUROC as notes bearing resemblance to a security if it concludes that there exists a promise of a return (i.e., an expectation of profit), for example, in the form of interest, or if it concludes that USDC and EUROC are used for trading for speculation or investment. As an example, Circle has previously offered, and may offer in the future, financial products that use USDC as the base currency, such as the Circle Yield program, where participants may receive income from a financial product using USDC. Regardless of the fact that there is no limit on the supply or redemption of either USDC nor EUROC, and that each of USDC and EUROC are readily consumable as mediums of exchange and stable stores of value and not as speculative instruments, the SEC or other regulatory bodies may nevertheless conclude that we as the issuer maintain the ability to artificially manipulate supply and demand — thereby affecting the price of the asset — and therefore determine the asset creates a reasonable expectation of profit based on the efforts of others. The SEC may also take the view that USDC and EUROC give their holders an expectation of profits based on the entrepreneurial or managerial efforts of Circle, even though the value of USDC and EUROC is fixed, and Circle does not retain any portion of funds exchanged for USDC or EUROC as management compensation.
If Circle stablecoins, including both USDC and EUROC, are classified as securities in the United States or in other jurisdictions, we would likely be subject to additional regulation. In the United States, that additional regulation could require us to register the offer and sale of Circle stablecoins under the Securities Act absent an available exemption and would obligate us to register as a broker-dealer with respect to our role in facilitating transactions in Circle stablecoins. We may also be subject to SEC enforcement action with respect to Circle stablecoin-related activities that precede such determination and related registration, which may result in injunctions, cease and desist orders, fines and penalties. In the event Circle stablecoins are classified as securities, under the Securities Act, Circle USDC and EUROC customers that purchased directly from Circle would have the right within the applicable one year statute of limitations to rescind their purchase and receive a full refund of the purchase price with interest thereon to the extent registration was required but not undertaken. In addition, there has been recent litigation initiated by private investors against other stablecoin issuers, and in relation to crypto assets generally, and any enforcement action brought against us by the SEC asserting that USDC, EUROC or any other Circle stablecoin is a security, or any other action against us by any other regulator, could subject us to similar private litigation asserting violations of United States securities laws or other relevant laws. Such developments could impact the adoption of Circle stablecoins and adversely affect our business, prospects and results of operations. See also “Risks Related to Government Regulation.”
Further, our business model relies on our ability to market and sell, through our suite of products and services, the utility of Circle stablecoins to existing and potential enterprise customers. Our core API services involve offering certain payment functionality, payout or disbursement functionality, and wallet services to our customers utilizing Circle stablecoins. The use of such API services by our enterprise customers, as well as the integration of such API services into the product offerings that our enterprise customers make available to their end customers, raises numerous regulatory questions. Financial services regulators in the United States or in other jurisdictions around the world may not agree with our legal positions. In addition, should financial services regulators make changes to or alter interpretations of applicable laws and regulations as they relate to Circle stablecoins, we may be unable to continue offering our payment, payout, and wallet services to enterprise customers in certain jurisdictions or we may have to alter the services in a manner that may be materially detrimental to our financial performance. To the extent that we introduce and commercially support other digital assets, we must assess the status of such products as securities under United States and foreign securities laws. Adherence to our policies and procedures with respect to such assessments, which are risk based, does not guarantee that our conclusions will be proven correct if challenged
 
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by the SEC or any other securities regulatory body. Ultimately, we make risk-based judgments that do not constitute legal standards or determinations binding on the SEC or any securities regulatory body and, if we are wrong in our assessments, we are at risk of the institution of enforcement proceedings against us, and resulting injunctions, cease and desist orders, fines and penalties.
The launch of a central bank digital currency (CBDC) may adversely impact our business.
While the possibility of central bank digital currencies (CBDC) remains an item of ongoing public sector review, including the design choices of whether one would exist at the wholesale (bank-to-bank) or retail (general purpose) levels, the advent of CBDCs could pose certain challenges in the demand for privately-issued digital currencies or stablecoins. These include the risk of substitution of CBDCs for stablecoins in circulation, wider market and consumer adoption, as well as the adoption of these digital currency alternatives among businesses and financial services firms, among others. Notwithstanding these risks, the potential for coexistence or the acknowledgement that CBDCs largely represent domestic payment and monetary innovations, whereas stablecoins are fundamentally global in scope, creates opportunities for coexistence, rather than substitution.
We incur certain risks as a result of our membership in the Centre Consortium, and our inability to continue to participate in the Centre Consortium could be materially detrimental to our ongoing financial performance and continued viability.
Centre Consortium is the standard setting body with respect to the issuance and redemption of USDC. The Centre Consortium’s decisions, reputation and actions are integral to the future development and growth of USDC, and while we are a founding member, we are not able to unilaterally govern the Centre Consortium or the decisions that affect USDC, including the use of its intellectual property. If the Centre Consortium deems certain of our activities or our financial viability to be potentially detrimental to the consortium, the Centre Consortium has certain rights that it can exercise vis-à-vis us that could limit our ability to continue our existing operations, impacting our financial performance and continued viability.
Due to unfamiliarity and some negative publicity associated with cryptocurrency and blockchain technology, our customer base may lose confidence in products and services that utilize cryptocurrency or blockchain technology.
Products and services that are based on cryptocurrency and other digital assets are relatively new. Many of our competitors are unlicensed, unregulated, operate without supervision by any governmental authorities, and do not provide the public with significant information regarding their ownership structure, management team, corporate practices, reserve management, cybersecurity, and regulatory compliance. As a result, customers and the general public may lose confidence in crypto asset and blockchain technology, including regulated products and services like ours.
Since the inception of the cryptoeconomy, numerous cryptocurrency and digital asset businesses and platforms have been sued, investigated, or shut down due to fraud, illegal activities, the sale or issuance of unregistered securities, manipulative practices, business failure, and security breaches. Recent examples are the insolvency proceedings initiated by Voyager Digital Ltd. and Celsius Network LLC. In many of these instances, customers of these platforms, products and services were not compensated or made whole for their losses. Mid-sized companies like us are more appealing targets for hackers and malware and may also be more likely to be targets of regulatory enforcement actions.
In addition, there have been reports that a significant amount of cryptocurrency trading volume is fabricated and false in nature, with a specific focus on unregulated platforms, products and services located outside the United States. Such reports may indicate that the market for products and services utilizing cryptocurrencies and other digital assets is significantly smaller than otherwise understood.
Negative perception, a lack of stability and standardized regulation in the cryptoeconomy, including following the collapse of TerraUSD and LUNA, and more recently, the collapse and subsequent insolvency proceedings of FTX, and the closure or temporary shutdown of platforms utilizing cryptocurrencies due to fraud, business failure, hackers or malware, or government mandated regulation, and associated losses
 
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suffered by customers may reduce confidence in the cryptoeconomy and result in greater volatility of the prices of assets, including significant depreciation in value. Any of these events could have a material and adverse impact on our business.
Issuing and redeeming Circle stablecoins from our platform involves risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business.
To receive USDC a customer must deposit, via credit or debit card, ACH or wire transfer, to a Circle bank account, U.S. dollars corresponding to the amount of desired USDC tokens. Once the credit is made to the Circle bank account, USDC tokens are issued to the customer’s digital wallet (the “Circle Account”), effectively increasing the USDC in circulation. Likewise, customers with USDC in their Circle Account can redeem USDC so that the system cancels the USDC tokens and transfers U.S. dollar funds out of reserve and into a customer’s linked bank account, effectively reducing the USDC in circulation. A similar process is followed for EUROC and Euros, respectively, but limited to the Silvergate Exchange Network (SEN) at this time.
If a customer incorrectly enters bank account credentials or other information when depositing and withdrawing funds, there is a risk that a portion or all of the customer’s assets will be permanently and irretrievably lost with no means of recovery. Alternatively, a customer may transfer Circle stablecoins or other supported assets to an external wallet address that he, she or it does not own, control or hold the private keys to. Such incidents could result in customer disputes, damage to our brand and reputation, legal claims against us, and financial liabilities, any of which could adversely affect our business.
Future developments regarding the treatment of Circle stablecoins and other stablecoins for U.S. federal income, state and foreign tax purposes could adversely impact our business.
Due to the new and evolving nature of stablecoins and other digital assets, there is an absence of law and judicial precedent for such transactions as it relates to U.S. federal and state income tax purposes as well as foreign tax treatment. We do not know with any certainty when or if additional guidance will be provided. Changes to the tax law could lead to adverse tax consequences in the future.
In 2014, the IRS released a notice, or IRS Notice, discussing certain aspects of “convertible virtual currency” ​(that is, a digital asset that has an equivalent value in fiat currency or that acts as a substitute for fiat currency) for U.S. federal income tax purposes and, in particular, stating that such digital asset (i) is “property”, (ii) is not “currency” for purposes of the rules relating to foreign currency gain or loss, and (iii) may be held as a capital asset. In 2019, the IRS released a revenue ruling and a set of “Frequently Asked Questions”, or the Ruling & FAQs, that provide some additional guidance, including guidance to the effect that, under certain circumstances, hard forks of digital assets are taxable events giving rise to ordinary income and guidance with respect to the determination of the tax basis of digital asset. However, the IRS Notice and the Ruling & FAQs do not address other significant aspects of the U.S. federal income tax treatment of stablecoins and states that no inference should be drawn with respect to virtual currencies not described in the Notice.
The types of virtual currencies addressed in the Notice and their features are significantly different from Circle stablecoins and stablecoins in general. Whereas the value of the types of virtual currencies addressed in the Notice reflect a variety of factors, such as perceived utility, they are not subject to a requirement by the issuer to redeem them based on a one to one basis. Although we believe our treatment of digital asset transactions is consistent with existing guidance provided by the IRS, because of the rapidly evolving nature of digital asset innovations and the increasing variety and complexity of digital asset products, it is possible the IRS may disagree with our treatment of certain of our digital asset events for U.S. federal income tax purposes, which could adversely affect our customers and the vitality of our business. Similar uncertainties exist in the foreign markets in which we operate, affecting our non-U.S. customer base, and these uncertainties and potential adverse interpretations of tax law could affect our non-U.S. customers and the vitality of our products and services outside of the United States.
There can be no assurance that the IRS or other foreign tax authority will not alter or clarify its position with respect to digital assets and stablecoins specifically in the future. It is also unclear what additional guidance may be issued in the future on the treatment of existing cryptocurrency and other
 
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digital asset transactions and future innovations for purposes of U.S. federal income tax or other foreign tax regulations. Any such alteration of existing IRS and foreign tax authority positions or additional guidance regarding digital asset products and transactions could result in adverse tax consequences for holders and issuers of digital assets and could have an adverse effect on the value of digital assets and the broader digital assets markets. Future technological and operational developments that may arise with respect to digital assets may increase the uncertainty with respect to the treatment of digital asserts for U.S. federal income and foreign tax purposes. The uncertainty regarding tax treatment of stablecoins, cryptocurrency and other digital asset transactions impacts our customers, and could impact our business, both domestically and abroad.
We believe we are compliant with U.S. federal income tax reporting and withholding requirements with respect to Circle stablecoins and other operational transactions. The exact scope and application of such reporting and withholding requirements, including but not limited to U.S. onboarding requirements through Form W, backup withholding, and Form 1099 reporting obligations, is not specifically addressed for our business transactions. The IRS could introduce new rules related to tax reporting and withholding obligations. Changes to the tax law surrounding this issue may require revisions to our current compliance protocols. The IRS may issue additional regulations related to tax reporting and withholding obligations. We will refine compliance procedures surrounding withholding and reporting for U.S. federal income tax reporting purposes as needed to ensure compliance.
Our yield service product is an innovative product which is complex to analyze vis-à-vis existing financial services laws and regulations around the world. The product involves certain risks, including reliance on third parties, which could limit or restrict our ability to offer the product in certain jurisdictions.
Our ability to offer our yield service product in jurisdictions around the world is unclear from a regulatory perspective, including but not limited to questions about whether certain aspects of the offering constitute securities. We treat our yield service product as a security for U.S. federal and state securities law purposes and offer the product pursuant to an exemption from Securities Act registration that accords us preemption of state registration and qualification statutes. We incur compliance costs and assume liability exposure associated with our treatment of our yield service product as a security. If we redesign our yield service product to expand the universe of investors eligible to invest or available borrowers, we may need to register the offering under the Securities Act, which would result in increased compliance costs. If our yield service product is classified as a security in other jurisdictions, we would likely be subject to additional regulation that could materially impact our ability to market this product, introduce additional compliance costs and liability exposure, which may adversely affect our business, prospects and results of operations. See also “Risks Related to Government Regulation.” Further, in offering the yield service product, we are dependent on certain partners who will provide liquidity and the regulatory requirements with respect to those partners are uncertain. Our dependency on the performance of those partners raises risk that turns upon their performance. Moreover, we use BitGo Trust as the custodian of the collateral, and consequently we and our yield service product customers are exposed to the credit risk of BitGo Trust. If our partners fail to perform, both we and our customers could be subject to losses, and we may be required to cease offering the product.
If Circle stablecoins were classified as securities under United States securities laws, we would need to register as a broker-dealer, which would impose in a significant compliance burden on our Circle stablecoins related activities and lead to a material increase in compliance costs.
The classification of Circle stablecoins as securities under the Exchange Act would result in new regulatory compliance obligations relating to our dealings in Circle stablecoins. Persons that effect transactions in securities in the United States as part of a regular business are subject to registration with the SEC as a “broker” or “dealer.” Thus, if Circle stablecoins were classified as securities, we would need to either expand the operational capacity and permitted scope of operations of SeedInvest, our existing broker-dealer subsidiary, partner with an existing broker-dealer, or organize and capitalize a new subsidiary that would register as a broker-dealer with the SEC and apply for membership with FINRA, and in either case, we would need to resource the broker-dealer with experienced personnel. On October 24, 2022, as a result of Circle’s strategic decision to focus on its core businesses and drive Circle stablecoins adoption, Circle entered into the Purchase Agreement to sell substantially all of the assets and certain specified liabilities
 
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of SeedInvest to a subsidiary of StartEngine. For more information, see Summary of the Proxy Statement/Prospectus — Recent Developments — SeedInvest Divestiture.” The registration and new and continuing membership process is time-consuming, particularly for broker-dealers with digital asset oriented business plans; and it is possible FINRA’s new or continuing membership process may exceed a year given the nascent state of its regulatory policy development with respect to digital assets. Moreover, FINRA’s approvals may be limited to certain activities and expansion into new activities requires additional FINRA approvals. We would not be able to continue our dealing in Circle stablecoins until we have registered and are able to operate a broker-dealer in a compliant manner. Once registered, a new broker-dealer would be subject to, among other things, prescribed regulations governing advertising, know your customer, financial responsibility and customer protection (i.e. custody and safeguarding of customer assets) and it will be subject to periodic examination by the SEC and FINRA to assess its operations and the adequacy of its regulatory compliance. Our existing broker-dealer will remain subject to such regulations, but its compliance functions would need to be adjusted to reflect the Circle stablecoins related activities. The cost of compliance would be significant and much of the compliance costs will be ongoing.
Moreover, SEC and FINRA regulatory policy in the area of custody remains uncertain and is subject to ongoing uncertainty as to how broker-dealers can operate in compliance with Exchange Act Rule 15c3-3, known as the customer protection rule. On December 23, 2020, the SEC issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers in accordance with Rule 15c3-3. The guidance sets forth the SEC’s position that, for a period of five years, a broker-dealer operating under the circumstances set forth in the guidance will not be subject to a SEC enforcement action on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities consistent with the guidance. These circumstances, among other things, include that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities. The SEC is requesting comment to gain additional insight into the evolving standards and best practices with respect to custody of digital asset securities. We might not be successful in identifying a custodial arrangement for the secure holding of Circle stablecoins or any other digital asset security that FINRA or the SEC will accept as meeting the requirements of Rule 15c3-3. If we are not able to identify such an arrangement, or if FINRA delays approval of our subsidiary’s continuing or new member application, as applicable, due to questions concerning the custody of customer assets or other regulatory concerns over our Circle stablecoins related activities, such failure or delay could prevent us from continuing to administer our Circle stablecoins operations as currently operated in furtherance of facilitating the use of Circle stablecoins as stablecoins. Thus, it remains unclear as to whether our broker-dealer could obtain custody of customer’s Circle stablecoins consistent with our current operations and we may be forced to alter our operations in ways that may not otherwise be efficient. Unless Circle stablecoins were registered under the Securities Act, the insurance and other protections afforded to our broker-dealer’s customers under the Securities Investor Protection Act of 1970 (“SIPA”) may not apply with respect to Circle stablecoins.
Insurance protection under the Securities Investor Protection Corporation (“SIPC”) will not be available for USDC or other stablecoins or related products custodied with any affiliated broker-dealer we establish.
Pursuant to the SIPA, SIPC provides limited insurance coverage to investors for cash or securities held in their brokerage accounts in the event of insolvency of a broker-dealer or limited other circumstances. We do not consider USDC to be a security and do not believe SIPC would currently consider USDC to be insured as cash or securities for these purposes. Accordingly, the insurance and other protections afforded to our broker-dealer’s customers under SIPA would not currently apply to Circle stablecoins. Thus, in a liquidation of our broker-dealer, a customer’s unregistered Circle stablecoins held in the custody of the broker-dealer will be treated as a general claim as opposed to a claim that has priority over other creditors in a liquidation, and customers would not be entitled to SIPC insurance for missing assets of our liquidated broker-dealer. Accordingly, the lack of SIPA protections and SIPC insurance coverage could adversely affect our ability to retain and obtain new customers and expand our Circle stablecoins operations.
 
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If Circle stablecoins or other digital assets products we may offer in the future are determined to be securities or “facilitating transactions” in securities, adoption of our product and service offerings could be limited.
There is substantial uncertainty as to the application of securities laws to blockchain, digital assets and transactions in digital assets. The application of existing law or changes to interpretation of existing law or new rules and regulatory presents risks that securities laws may apply to the Circle stablecoins or other digital asset products. The offer and sale of securities in the United States must generally be registered with the SEC absent an available exemption, and persons facilitating transactions in securities may be required to register as a broker dealer or otherwise as a securities exchange, absent available exemptions. Foreign jurisdictions may also regulate digital assets as securities and require market participants to hold licenses in order to deal in digital assets. The classification as securities of Circle stablecoins or other digital products we may offer from time to time in the United States and in other foreign jurisdictions may limit how and to whom these products may be offered, require us to incur costly regulation and compliance obligations if exemptions are not available and we may be exposed to potential liabilities pursuant to investor protection remedies. In addition, crypto asset platforms or other market participants may be reluctant to transact or use Circle stablecoins or other service offerings or digital asset products if they believe that subjects them to regulation or risks under the federal securities laws or would cause them to incur increased transaction costs from regulatory compliance or otherwise. As a result, the application of securities laws to current or future offerings could have a material adverse effect on our ability to offer digital assets products and services and advance their adoption.
Risks Related to SeedInvest
If SeedInvest is not able to expand to add additional assets such as tokenized securities in a regulatory compliant way or to continue to attract high-quality companies for its investment platform, it may be unable to attract or retain customers and its synergy and integration with our business may be limited.
SeedInvest offers a digital platform for companies to raise capital through equity offerings directly on the internet and seeks to capitalize on interest in the digitization of early-stage investing. We believe that continued adoption of digital technologies as part of investment tools will continue to grow, but it is possible that investor interest in these types of offerings will be limited or that we may be unable to comply with existing regulations of broker-dealers or FINRA compliance requirements in a way that is effective to promote additional adoption and utilization of SeedInvest and growth of the SeedInvest business. Further, if we are unsuccessful in attracting exciting and interesting small business to the platform, or if the companies that use SeedInvest services are unsuccessful and customers experience losses, the value of the platform’s accessibility and its pre-vetted opportunities may not be realized and customers may perceive the equity offered on SeedInvest to be bad investments, which could cause us lose customers and to experience significant losses.
If favorable regulations regarding digital assets including digital securities and trading, clearance and settlement rules for digital securities are not adopted or if such regulations create significant compliance burdens for broker-dealers and equity crowdfunding platforms, SeedInvest may be unable to expand its business and we may not be able to realize synergies. SeedInvest intends to develop tokenized securities to continue to democratize capital raising for startup companies while we provide digital payment, marketplace and custody services to enable the future acquisition, sale and storage of the tokens at scale.
SeedInvest is subject to regulatory oversight and may from time to time be involved in regulatory requests, exams, inquiries and actions which if resolved unfavorably could result in fines or penalties, modifications to its business or reputational harm.
SeedInvest is a regulated broker-dealer entity and operates within a regulated environment. As a result, SeedInvest is subject to regulatory oversight and may from time to time be involved in regulatory requests, exams, inquiries and actions which if resolved unfavorably could result in fines or penalties, modifications to its business or reputational harm. See also “Risks Related to Government Regulation.
The SeedInvest divestiture is subject to a number of conditions, and may not close at all.
The Purchase Agreement for the SeedInvest divestiture contains a number of conditions that must be fulfilled to complete the proposed acquisition, including, without limitation, the receipt of the FINRA
 
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approval and the receipt of documents required for the transfer of the assets. The required satisfaction of the foregoing conditions could delay the completion of the proposed acquisition for a significant period of time or prevent it from occurring. Additionally, pursuant to the Purchase Agreement, either party may terminate the Purchase Agreement if the proposed acquisition has not closed on or before March 31, 2023. If all closing conditions have been satisfied other than the FINRA approval due to no delay or nonperformance of any party, such expiration date will be automatically extended by three months. Any delay in completing the proposed acquisition could cause Circle not to realize some or all of the benefits that the it expects to achieve, and a delay beyond March 31, 2023 could result in termination of the Purchase Agreement and abandonment of the proposed acquisition. Further, there can be no assurance that the conditions to closing of the proposed acquisition will be satisfied or waived. We can provide no assurance that the proposed acquisition will be consummated in a timely manner, or at all.
Risks Related to Our Employees and Other Service Providers
In the event of employee or service provider misconduct or error, our business may be adversely impacted.
Employee or service provider misconduct could subject us to legal liability, financial losses, and regulatory sanctions, and could seriously harm our reputation and negatively affect our business. Such misconduct could include engaging in improper or unauthorized transactions or activities, misappropriation of customer funds, and misappropriation of information, failing to supervise other employees or service providers, or improperly using confidential information.
To help us detect employee, including senior officers, and service provider misconduct, we have an overarching enterprise risk management framework that aims to provide reasonable assurance that our employees and vendors support and adhere to a strong risk-based culture. This includes a third party management program that focuses on enterprise-wide risks related to service providers in terms of misconduct, compliance and reputational risks. In addition, our internal audit program provides independent review and control testing specific to our business that work to ensure risk management, oversight, governance and internal controls are operating effectively. These programs enable us to identify risks and test associated controls to prevent and detect employee and service provider misconduct. We employ various manual and automated ways to detect potential employee or third party misconduct. Examples of these programs are a whistleblower policy and security controls that monitor suspicious activity. For our service providers, our risk management framework requires us to perform risk-based due diligence on service providers, such as anti-money laundering (AML) screening, and we also require annual AML and security training for all employees that should help employees identify and detect misconduct proactively.
Employee or service provider errors, including mistakes in executing, recording, or processing transactions for customers, could expose us to the risk of material losses even if the errors are detected. Through our risk management framework described above, we have implemented processes and procedures and provide training to our employees and service providers to reduce the likelihood of misconduct and error, however, these efforts may not be successful. Moreover, the risk of employee or service provider error or misconduct may be even greater for novel products and services, and is compounded by the fact that many of our employees and service providers are accustomed to working at tech companies which generally do not maintain the same compliance customs and rules as financial services firms.
It is not always possible to deter misconduct and the precautions we take to prevent and detect this activity may not be effective in all cases. If we were found to have not met our regulatory oversight and compliance and other obligations, we could be subject to regulatory sanctions, financial penalties, restrictions on our activities for failure to properly identify, monitor and respond to potentially problematic activity, and seriously damage our reputation. Our employees, contractors, and agents could also commit errors that subject us to financial claims for negligence, as well as regulatory actions, or result in financial liability. Further, allegations by regulatory or criminal authorities of improper trading activities could affect our brand and reputation.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could adversely impact our business, operating results, and financial condition.
We operate in a relatively new industry that is not widely understood and requires highly skilled and technical personnel. We believe that our future success is highly dependent on the talents and contributions
 
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of our senior management team, including Jeremy Allaire, our co-founder, Chairman and Chief Executive Officer, members of our executive leadership team, and other key employees across product, engineering, risk management, finance, compliance, legal, talent and marketing.
Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled employees. Due to the nascent nature of the cryptoeconomy, the pool of qualified talent is extremely limited, particularly with respect to executive talent, engineering, risk management, and financial regulatory expertise. We face intense competition for qualified individuals from numerous software and other technology companies. To attract and retain key personnel, we incur significant costs, including salaries and benefits and equity incentives. Even so, these measures may not be enough to attract and retain the personnel we require to operate our business effectively. The loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business, could adversely impact our operating results and impair our ability to grow.
Our culture emphasizes innovation, and if we cannot maintain this culture as we grow, our business and operating results could be adversely impacted.
We believe that our entrepreneurial and innovative corporate culture has been a key contributor to our success. We encourage and empower our employees to develop and launch new and innovative products and services, which we believe is essential to attracting high quality talent, partners, and developers, as well as serving the best, long-term interests of our company. If we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork that has been integral to our business, in which case our products and services may suffer and our business, operating results, and financial condition could be adversely impacted.
Our officers, directors, employees, and large stockholders may encounter potential conflicts of interests with respect to their positions or interests in certain entities, and other initiatives, which could adversely affect our business and reputation.
We frequently engage with a wide variety of crypto and blockchain industry participants, as well as startups and growth companies, and maintain relationships with a significant number of crypto projects, their developers, members of their ecosystem, and investors. These transactions and relationships could create potential conflicts of interests in management decisions that we make. For instance, certain of our officers, directors, and employees are active investors in crypto projects and other growth companies themselves, and may make investment decisions that favor projects that they have personally invested in. Many of our large stockholders also make investments in these crypto projects. For more information, see the section titled “Certain Circle Relationships and Related Party Transactions.” In addition, our co-founder, Chairman and Chief Executive Officer, Jeremy Allaire, is involved in a number of initiatives related to the cryptoeconomy and more broadly, which could divert Mr. Allaire’s time and attention from overseeing our business operations and have a negative impact on our business.
Risks Related to Government Regulation
We are subject to an extensive and highly-evolving regulatory landscape, and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.
Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, securities, broker-dealers, commodities, credit, cross-border and domestic money and crypto asset transmission and custody, commercial lending, privacy, data governance, data protection, cybersecurity, fraud detection, payment services, escheatment, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.
Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, digital assets, and related technologies. As a result, they do not contemplate or address unique issues associated with the cryptoeconomy, are subject to significant uncertainty, and vary widely across
 
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U.S. federal, state, and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules, and regulations thereunder, evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another.
Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptoeconomy, including custody of customers’ digital assets, requires us to exercise our judgement as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
In addition to existing laws and regulations, various governmental and regulatory bodies, including legislative and executive bodies in the United States and in other countries, may adopt new laws and regulations, or new interpretations of existing laws and regulations may be issued by such bodies or the judiciary, may adversely impact the development of the cryptoeconomy as a whole and our legal and regulatory status in particular by changing how we operate our business, how our products and services are regulated, and what products or services we and our competitors can offer, requiring changes to our compliance and risk mitigation measures, imposing new licensing requirements, or imposing a total ban on certain crypto asset transactions, as has occurred in certain jurisdictions in the past.
We may be further subject to administrative sanctions for technical violations or customer attrition if the user experience suffers as a result. As an example, the extension of anti-money laundering requirements to certain crypto-related activities by the E.U. Fifth Money Laundering Directive has increased the regulatory compliance burden for businesses in Europe and, as a result of the fragmented approach to the implementation of its provisions, resulted in distinct and divergent national licensing and registration regimes in different E.U. member states. As a more recent example, if and when the provisional political agreement on the final text of MiCA, addressing consumer protection and prudential oversight of crypto-asset activity within the E.U.’s single market comes into full force and effect, it may impact our operations in the E.U.
Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.
Federal, state and international regulatory agencies frequently adopt changes to their regulations or change the way existing regulations are applied. Regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products and to continue offering our current products, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations to comply and could have a material adverse effect on our business, financial condition and results of operations.
The cryptoeconomy is novel and has little access to policymakers or lobbying organizations, which may harm our ability to effectively react to proposed legislation and regulation of stablecoins as well as related payment products and services adverse to our business.
As stablecoins, cryptocurrencies and other digital assets have grown in both popularity and market size, various U.S. federal, state, and local and foreign governmental organizations and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold crypto assets for users.
Many of these entities have called for heightened regulatory oversight and have issued advisories describing the risks posed by cryptocurrencies to users and investors. The cryptoeconomy is novel and has little access to policymakers and lobbying organizations in many jurisdictions. Competitors from other, more established industries, including traditional financial services, may have greater access to lobbyists or governmental officials, and regulators that are concerned about the potential for stablecoins and cryptocurrencies for illicit usage may affect statutory and regulatory changes with minimal or discounted
 
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inputs from the cryptoeconomy. As a result, new laws and regulations may be proposed and adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that harm the stablecoin, cryptocurrency and digital asset industry, which could adversely impact our business.
The regulatory environment to which we are subject gives rise to various licensing requirements, significant legal and financial compliance costs and management time, and non-compliance could result in monetary and reputational damages, all of which could have a material adverse effect on our business, financial position and results of operations.
In the United States, we have obtained licenses to operate as a money transmitter or its equivalent in the states where such licenses are required, as well as in the District of Columbia and Puerto Rico. In addition, we have obtained a BitLicense from the NYDFS and are registered as a “Money Services Business” with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). These licenses and registrations subject us to, among other things, record-keeping, reporting and bonding requirements, limitations on the investment of customer funds, and examination by state and federal regulatory agencies.
In addition, we currently hold an Electronic Money Issuer authorization with the U.K. Financial Conduct Authority, and a Class F Digital Asset Business license with the Bermuda Monetary Authority. SeedInvest is a FINRA registered broker dealer (CRD# 170937) and a member of the Securities Investor Protection Corporation. We are currently seeking the required financial services licenses in Singapore and Ireland. On October 24, 2022, as a result of Circle’s strategic decision to focus on its core businesses and drive Circle stablecoins adoption, Circle entered into the Purchase Agreement to sell substantially all of the assets and certain specified liabilities of SeedInvest to a subsidiary of StartEngine. For more information, see Summary of the Proxy Statement/Prospectus — Recent Developments — SeedInvest Divestiture.”
There can be no assurance that we will be able to maintain our existing, or obtain additional, required regulatory licenses, certifications and regulatory approvals in the countries where we provide services or want to expand to. Furthermore, where we have obtained such regulatory licenses, certifications and regulatory approvals, there are substantial costs and potential product changes involved in maintaining such regulatory licenses, certifications, and approvals, and we could be subject to fines or other enforcement action if we are found to violate disclosure, reporting, anti-money laundering, capitalization, corporate governance or other requirements of such licenses. These factors could impose substantial additional costs and involve considerable delay to the development or provision of our products or services, or could require significant and costly operational changes or prevent us from providing any products or services in a given market.
These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity or unclear application to the business of non-traditional financial services. As a result, their application in practice may evolve over time as new guidance is provided by supervisory authorities and the interpretation of requirements by supervisory authorities and courts may be further clarified over time. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory bodies or supervisory authorities due to ambiguities related to their interpretation, application and practice, supervisory authorities may initiate legal and regulatory proceedings against us and our business, reputation, financial condition, results of operations and cash flow could be materially and adversely affected.
In certain countries, it may not be clear whether we are required to be licensed as a money transmitter, payment services provider, bank, financial institution, custodian, broker-dealer, exchange, or otherwise. Local regulators may use their power to slow or halt transactions or otherwise prohibit us from doing business in a country. We and our local businesses do not only need to comply with the local laws and regulations, but also with certain laws and regulations with worldwide application. Further, because our services are accessible worldwide and we facilitate Circle stablecoins transfers worldwide, one or more jurisdictions may claim that we or our customers or partners are required to comply with their laws. Laws regulating the internet, mobile and related technologies outside of U.S. may impose different, more specific, or even conflicting obligations on us, as well as broader liability.
If we are unable to commit sufficient resources for regulatory compliance, this could lead to delays and errors and may force it to choose between prioritizing compliance matters over administrative support for business activities, or may ultimately force us to cease the offering of certain products or services globally or
 
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in certain jurisdictions. Any delays or errors in implementing regulatory compliance could lead to substantial monetary damages and fines, public reprimands, a material adverse effect on our reputation, regulatory measures in the form of cease and desists orders, increased regulatory compliance requirements or other potential regulatory restrictions on our business, enforced suspension of operations and in extreme cases, withdrawal of regulatory licenses or authorizations to operate particular businesses, or criminal prosecution in certain circumstances.
In addition to non-compliance by us ourselves, we may in the future suffer negative consequences of non-compliance by third parties that use our APIs. We may also suffer negative consequences of customers operating businesses or schemes in violation of applicable rules and regulations whose activities we could be held responsible to monitor and, where applicable, to denounce or to interrupt its extension of services to such customers and, if necessary, terminate the relationship with such party. We may be required to make greater expenditures and devote additional resources and management time to addressing these liabilities and requirements, which could have an adverse effect on our business, financial position and results of operations.
The financial services industry is subject to intensive regulation. Major changes in laws and regulations, as well as enforcement actions, could adversely affect our business, financial position, results of operations and prospects.
In pursuit of a broad reform and restructuring of financial services regulation, national and supra-national legislatures and supervisory authorities, predominantly in the United States and Europe but also elsewhere, continue to introduce and implement a wide range of proposals that could result in major changes to the way our global operations are regulated and could have adverse consequences for our business, business model, financial position, results of operations, reputation and prospects. These changes could materially impact the profitability of our businesses or the value of its assets, require changes to business practices or force us to discontinue businesses and expose us to additional costs, taxes, liabilities, enforcement actions and reputational risk and are likely to have a material impact on us.
The timing and full impact of new laws and regulations cannot be determined yet and are beyond our control. The introduction of these and other new rules and requirements could significantly impact the manner in which we operate, particularly in situations where regulatory legislation can interfere with or even set aside national private law. New requirements may adversely affect our business, capital and risk management strategies and may result in us deciding to modify our legal entity structure, capital and funding structures and business mix or exit certain business activities altogether, or determine not to expand in certain business areas despite their otherwise attractive potential.
The large number of legislative initiatives, in particular with respect to the financial services industry, requires constant attention from our senior management and consumes significant levels of resources to identify and analyze the implications of these initiatives. We may have to adapt our strategy, operations and businesses, including policies, procedures and documentation, to comply with these new legal requirements. Based on the volume of existing initiatives, it cannot be excluded that certain new requirements will not be implemented in a timely fashion or implemented without errors, or in a manner satisfactory to the applicable supervisory authority, resulting in non-compliance and possible associated negative consequences such as administrative fine or public reprimands. Additionally, we may be forced to cease to serve certain types of customers or cease to offer certain services or products as a result of new requirements. Any of the other above factors, events or developments may materially adversely affect our businesses, financial position and results of operations and prospects.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as currently contemplated and could have a material adverse effect on our business, financial position, results of operations and cash flows.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in
 
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securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company” as such term is defined in either of those sections of the 1940 Act.
With respect to Section 3(a)(1)(A), we hold ourselves out and operate as a company engaged in the business of operating the market infrastructure for Circle stablecoins and providing a suite of internet-native transaction and treasury products and services, that enable its customers to conduct financial transactions, including receiving payments, making payouts, borrowing, lending, and custody digital currency-related transactions. We do not believe that we hold ourselves out as being, engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the 1940 Act. Our assessment of our business is not binding on the SEC or any federal court that would consider our status as an investment company in the future.
With respect to Section 3(a)(1)(C), as of June 30, 2021, however, investment securities exceeded 40% of the value of our total assets as calculated under the 1940 Act. During the three months ending September 30, 2021, we disposed of certain debt securities to limit USDC reserves to cash and short-dated U.S. government obligations. As of and for all periods since September 30, 2021, our investment securities have remained below 40% of the Company’s total assets for purposes of Section 3(a)(1)(C) of the 1940 Act (including September 30, 2022), and we intend to conduct our operations such that we will not be deemed an investment company. In addition, stablecoins, cryptocurrencies and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the 1940 Act.
There is a risk that assets or arrangements which we do not consider to be securities could be deemed to be securities by the SEC or other authority, which would increase the percentage of securities held by us for 1940 Act purposes. The SEC has requested information from a number of participants in the cryptoeconomy, including the company, regarding the potential application of the 1940 Act to cryptoeconomy businesses. For example, in an action unrelated to Circle or any of its subsidiaries, in February 2022, the SEC issued a cease and desist order under the 1940 Act to BlockFi Lending LLC, in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of crypto assets made by BlockFi to institutional borrowers.
If we were deemed to be an inadvertent investment company, Rule 3a-2 under the 1940 Act provides a one year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one year period), in a business other than that of investing, reinvesting, owning, holding or trading in securities and that such intent be evidenced by the company’s business activities, and an appropriate resolution of the board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Reliance on Rule 3a-2 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations.
If we were to be deemed an investment company in the future and Rule 3a-2 or another exclusion was not available, restrictions imposed by the 1940 Act, including limitations on our ability to issue different classes of stock and equity compensation to directors, officers and employees and restrictions on management, operations and transactions with affiliated persons, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial position, results of operations and cash flows. As a result, any future guidance or action from the SEC or its staff, including changes that the SEC may propose and adopt to stablecoins and/or cryptocurrency generally, could inhibit our ability, or the ability of our subsidiaries, to pursue our current or future operating strategies, which could have a material adverse effect on us. Classification as an investment company under the 1940 Act would subject us to specialized accounting methods under the 1940 Act. Among other things, the 1940 Act prescribes the methods to be used when making determinations of value. Securities for which market quotations are available are valued at their market value as of the end of the last quarter. Securities for
 
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which market quotations are not readily available and all other assets owned at the end of the last quarter are valued at fair value at the end of such quarter, as determined in good faith by the board of directors. Assets acquired after the end of the last quarter are valued at cost. Furthermore, a company subject to regulation under the 1940 Act is also required to present its financial statements as prescribed under applicable 1940 Act rules and regulations. If we were deemed to be an investment company, and were unable to qualify for an exemption under the 1940 Act, our accounting of assets and presentation of our financial statements would change, and the financial statement presentation would not in our view reflect the services orientation of our operations and may make it difficult to compare our results of operations with the results of our competitors in the digital assets services sector.
We are subject to laws, regulations, and executive orders regarding economic and trade sanctions, anti-bribery, anti-money laundering, and counter-terror financing that could impair our ability to compete in international markets or subject us to criminal or civil liability if we violate them. This includes sanctions imposed on Russia as a result of the invasion of Ukraine. As we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to investigations and enforcement actions by U.S. and non-U.S. regulators and governmental authorities.
As we expand and localize our international activities, we have and will become increasingly obligated to comply with the laws, rules, regulations, policies, and legal interpretations both of the jurisdictions in which we operate and those into which we offer services on a cross-border basis. Laws regulating financial services, the internet, mobile technologies, cryptocurrencies, and related technologies outside of the United States often impose different, more specific, or even conflicting obligations on us, as well as broader liability.
We are required to comply with U.S. economic and trade sanctions administered by OFAC, and we have processes in place to comply with OFAC regulations and requirements as well as similar requirements in other jurisdictions. The OFAC regulations and requirements generally restrict dealings by persons subject to U.S. jurisdiction with certain countries, or sub-national territories that are the target of comprehensive sanctions, which currently are Cuba, Iran, North Korea, and Syria, as well as the Crimea, the so-called Donetsk People’s Republic, and the Luhansk People’s Republic regions of Ukraine. In addition, OFAC restricts dealings by persons subject to U.S. jurisdiction with specific individuals and entities subject to targeted sanctions and identified on relevant prohibited lists. We are also subject to various anti-money laundering and counter-terrorist financing laws and regulations around the world that prohibit, among other things, our involvement in transferring the proceeds of criminal activities. In the United States, most of our services are subject to anti-money laundering laws and regulations, including the Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001, and its implementing regulations (collectively, the “BSA”) and other similar laws and regulations.
The BSA, among other things, requires money transmitters to develop and implement risk-based anti-money laundering programs, to report large cash transactions and suspicious activity, and, in some cases, to collect and maintain information about customers who use their services and maintain other transaction records. Regulators in the United States and globally continue to increase their scrutiny of compliance with these obligations, which may require us to further revise or expand our compliance program including the procedures we use to verify the identity of our customers and to monitor transactions on our system, including payments to persons outside of the United States. Regulators regularly re-examine the transaction volume thresholds at which we must obtain and keep applicable records or verify identities of customers, and any change in such thresholds could result in greater costs for compliance. We could be subject to potentially significant fines, penalties, inquiries, audits, investigations, enforcement actions, and criminal and civil liability if regulators or third-party auditors identify gaps in our anti-money laundering program and such gaps are not sufficiently remediated, or if our anti-money laundering program is found to violate the BSA by a regulator.
Despite our efforts to comply with the applicable laws, rules, and regulations, there can be no guarantee that these measures will be viewed as compliant. If we were to be found to have violated sanctions, or become involved in government investigations, that could result in negative consequences for us, including costs related to government investigations, financial penalties, and harm to our reputation. The impact on us related
 
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to these matters could be substantial. Although we have implemented controls and screening tools designed to prevent similar activity, there is no guarantee that we will not inadvertently provide our products and services to individuals, entities, or governments prohibited by U.S. sanctions.
Regulators worldwide frequently study each other’s approaches to the regulation of the cryptoeconomy. Consequently, developments in any jurisdiction may influence other jurisdictions. New developments in one jurisdiction may be extended to additional services and other jurisdictions. The European Commission, for example, has proposed revisions to the Anti-Money Laundering Directives, which could make compliance more costly and operationally difficult to manage. As a result, the risks created by any new law or regulation in one jurisdiction are magnified by the potential that they may be replicated, affecting our business in another place or involving another service. Conversely, if regulations diverge worldwide, we may face difficulty adjusting our products, services, and other aspects of our business with the same effect. These risks are heightened as we face increased competitive pressure from other similarly situated businesses that engage in regulatory arbitrage to avoid the compliance costs associated with regulatory changes.
We may operate our business in foreign countries where companies often engage in business practices that are prohibited by United States and other regulations applicable to us. We are subject to anti-corruption laws and regulations, including the FCPA, Irish Criminal Justice (Corruption Offenses) Act 2018, and other laws that prohibit the making or offering of improper payments to foreign government officials and political figures, including anti-bribery provisions enforced by the Department of Justice. These laws prohibit improper payments or offers of payments to foreign governments and their officials and political parties by the United States and other business entities for the purpose of obtaining or retaining business. We have implemented policies, procedures, systems, and controls designed to identify and address potentially impermissible transactions under such laws and regulations; however, there can be no assurance that all of our employees, consultants and agents, including those that may be based in or from countries where practices that violate U.S. or other laws may be customary, will not take actions in violation of our policies, for which we may be ultimately responsible.
The complexity of U.S. federal and state and international regulatory and enforcement regimes, coupled with the global scope of our operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions. Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brands and business, and adversely affect our operating results and financial condition. Due to the uncertain application of existing laws and regulations, it may be that, despite our regulatory and legal analysis concluding that certain products and services are currently unregulated, such products or services may indeed be subject to financial regulation, licensing, or authorization obligations that we have not obtained or with which we have not complied. As a result, we are at a heightened risk of enforcement action, litigation, regulatory, and legal scrutiny which could lead to sanctions, cease, and desist orders, or other penalties and censures which could significantly and adversely affect our continued operations and financial condition.
Our consolidated balance sheets may not contain sufficient amounts or types of regulatory capital to meet the changing requirements of our various regulators worldwide, which could adversely affect our business, operating results, and financial condition.
Effective management of our capital and liquidity is critical to our ability to operate our businesses, to grow organically and to pursue our strategy. As a regulated and licensed entity in various jurisdictions, we are required to possess sufficient financial soundness and strength to adequately support our regulated affiliate entities. The maintenance of adequate capital and liquidity is also necessary for our financial flexibility in the face of turbulence and uncertainty in the global economy. We may from time to time incur indebtedness and other obligations which could make it more difficult to meet these capitalization requirements or any additional regulatory requirements.
In addition, although we are not a bank holding company for purposes of United States law or the law of any other jurisdiction, as a global provider of financial services and in light of the changing regulatory environment in various jurisdictions, we could become subject to new capital requirements introduced or imposed by U.S. federal, state or international regulators. The changes to applicable current or future capital and liquidity requirements may require us to raise additional regulatory capital or hold additional liquidity
 
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buffers, for example because of different interpretations of or methods for calculating risk exposure amounts or liquidity outflows or inflows, or because we do not comply with ratios and levels, or instruments and collateral requirements that currently qualify as capital or capital risk mitigating techniques no longer do so in the future because of changes to the requirements or interpretations thereof. Any change or increase in these regulatory requirements could have an adverse effect on our business, operating results, and financial condition.
If we are unable to raise the requisite regulatory capital, we may be required to reduce the amount of our risk exposure amount or business levels, restrict certain activities or engage in the disposition of core and other non-core businesses, which may not occur on a timely basis or at prices which would otherwise be attractive to us, and such inability to raise sufficient regulatory capital could have an adverse effect on the market’s trust in respect of the long-term viability of our products and services, which could, for example, result in customers transferring to use our competitors’ platforms for the provision of stablecoins, payment infrastructure, and/or crowdfunding and investment opportunities. As a result of stricter liquidity requirements or higher liquidity buffers, we may be required to optimize our funding composition which may result in higher funding costs for us, and in having to maintain buffers of liquid assets which may result in lower returns than less liquid assets. Furthermore, if we are unable to adequately manage our liquidity position, this may prevent us from meeting our short-term financial obligations.
We maintain complex treasury operations to manage and move customer asset across our platform and to comply with regulatory requirements. However, it is possible we may experience errors in fiat currency and digital asset handling, accounting, and regulatory reporting that leads us to be out of compliance with these requirements.
In addition, regulators may increase the amount of fiat currency reserves that we are required to maintain for our operations, as has happened in the past. For instance, in 2017, the Hawaii Division of Financial Institutions imposed a new policy whereby digital asset businesses are required to maintain cash reserves in an amount equal to the aggregate face value of digital asset funds held on behalf of customers. Any similar events can complicate our operations and increase our expenses. Any noncompliance may lead to sanctions, penalties, changes to our business operations, or the revocation of licenses.
The above changes and any other changes that limit our ability to manage effectively our balance sheet, liquidity position and capital resources going forward, or to access funding sources, could have a material adverse impact on our financial position, regulatory capital position and liquidity provision.
We obtain and process a large amount of customer data, including sensitive customer data. Any real or perceived improper use of, disclosure of, or access to such data could harm our reputation, as well as have an adverse effect on our business.
Our operations involve the storage and/or transmission of customer data, including highly sensitive data of our customers such as identity data, financial data, transaction data, marketing and communication data and location data, amongst other types of information. Consequently, we are subject to complex and evolving U.S., U.K., European, and other jurisdictions’ laws, rules, regulations, orders and directives (referred to as “privacy laws”) relating to the collection, use, retention, security, transfer and other processing of personal information (referred to as “personal data”) in the countries where we operate, and much of the personal data that we process, especially financial information, is regulated by multiple privacy laws and, in some cases, the privacy laws of multiple jurisdictions (such as GDPR and UK GDPR). In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us and our subsidiaries.
Any failure, or perceived failure, by us to comply with our privacy policies or with any applicable privacy laws in one or more jurisdictions could result in proceedings or actions against us by governmental entities or others, including class action privacy litigation in certain jurisdictions, significant fines, penalties, judgments and reputational damages to us, requiring us to change our business practices, increasing the costs and complexity of compliance, any of which could materially and adversely affect its business, financial condition, results of operations and prospects.
Data protection, privacy and information security have become the subject of increasing public, media and legislative concern. If our customers were to reduce their use of our products and services as a result of
 
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these concerns, our business could be materially harmed. Any failure of us or our partners or others who use our services to adequately protect sensitive data could have a material and adverse effect on its reputation, business, financial condition, results of operations and prospects.
We are subject to complex and evolving laws, regulations, and industry requirements related to data privacy, data protection and information security across different markets where we conduct our business, including in the United States, U.K. and the European Economic Area, and such laws, regulations, and industry requirements are constantly evolving and changing. Our or our third party’s actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies/notices could harm our business by impairing customer trust and could subject us to fines and reputational harm.
Various local, state, federal, and international laws, directives, and regulations apply to our collection, use, retention, protection, disclosure, transfer, and any other processing of personal data. There is uncertainty and inconsistency in how these data protection and privacy laws and regulations are interpreted and applied, and they continue to evolve in ways that could adversely impact our business. These laws have a substantial impact on our operations both outside and in the United States, directly as a data controller/business and as a data processor/service provider and handler for various offshore entities.
In the United States, state and federal lawmakers and regulatory authorities have increased their attention on the collection and use of consumer data. While our current product offerings do not target retail consumers, some of our prior products have been offered to retail consumers. In the United States, non-sensitive consumer data generally may be used under current rules and regulations, subject to certain restrictions, so long as the consumer does not affirmatively “opt-out” of the collection or use of such data. If an “opt-in” model or additional required “opt-outs,” were to be adopted in the United States, less data could be available, and the cost of data would be higher.
Laws, regulations and standards covering marketing, advertising, and other activities conducted by telephone, email, mobile devices, and the internet may be or become applicable to our business, such as the Federal Communications Act, the Federal Wiretap Act, the Electronic Communications Privacy Act, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), and similar state consumer protection and communication privacy laws, such as California’s Invasion of Privacy Act.
We may make telephone call and send short message service, or SMS, text messages to customers. The actual or perceived improper calling of customer phones or sending of text messages may subject us to potential risks. Federal or state regulatory authorities, regulatory authorities in international jurisdictions or private litigants may claim that the notices and disclosures we provide, form of consents we obtain or our calling or SMS texting practices are not adequate or violate applicable law. This may in the future result in civil claims against us. We also send marketing messages via email and are subject to the CAN-SPAM Act. The CAN-SPAM Act imposes certain obligations regarding the content of emails and providing opt-outs (with the corresponding requirement to honor such opt-outs promptly). While we strive to ensure that all of our marketing communications comply with the requirements set forth in the CAN-SPAM Act, any violations could result in the FTC seeking civil penalties against us.
In addition, the scope and interpretation of the laws that are or may be applicable to the delivery of text messages or email marketing are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct liability, could be required to change some portions of our marketing strategy, or could face negative publicity, and our business, financial condition and results of operations could be adversely affected. Even an unsuccessful challenge of our calling or SMS texting practices by our customers, regulatory authorities or other third parties could result in negative publicity and could require a costly response from and defense by us.
California has enacted the California Consumer Privacy Act, or the CCPA, along with related regulations, in 2020 and the California Privacy Rights Act, or the CPRA, which has been passed and will become effective on January 1, 2023. The CCPA gives California residents new rights to access and request deletion of their personal data, opt out of the sale of personal data, and receive detailed information about how their personal data is processed. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches involving the loss of personal data. This private right of action may increase the
 
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likelihood of, and risks associated with, data breach litigation. The CPRA significantly modifies the CCPA, including by expanding consumers’ rights with respect to certain personal data and creating a new state agency to oversee implementation and enforcement efforts. While the CCPA currently has exemptions for business-to-business and human resources data, these exemptions are set to expire on January 1, 2023. It is unclear if they will be extended. The CCPA and CPRA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal data, our financial condition, and our operating results.
Additionally, the CCPA has prompted a number of proposals for new federal and state-level privacy legislation, on March 2, 2021, Virginia, Connecticut and Utah, enacted the Consumer Data Protection Act, or CDPA and the CDPA will become effective on January 1, 2023. The CDPA will regulate how businesses, which the CDPA refers to as “controllers,” collect and share personal information. The law applies to companies that conduct business in Virginia or have products or services that are targeted to residents of Virginia and either: (1) annually control or process personal data of at least 100,000 Virginia residents; or (2) control or process the personal data of at least 25,000 Virginia residents and derive over 50% of gross revenue from the sale of personal data. While the CDPA incorporates many similar concepts of the CCPA and CPRA, there are also several key differences in the scope, application, and enforcement of the law that will change the operational practices of controllers. The new law will impact how controllers collect and process personal sensitive data, conduct data protection assessments, transfer personal data to affiliates, and respond to consumer rights requests. In addition, on July 8, 2021, Colorado’s governor signed the Colorado Privacy Act (CPA) into law. The CPA is rather similar to the Virginia’s CPDA but also contains additional requirements. The new measure applies to companies conducting business in Colorado or who produce or deliver commercial products or services intentionally targeted to its residents of the state and that either: (1) control or process the personal data of at least 100,000 Colorado residents during a calendar year; or (2) derive revenue or receive a discount on the price of goods or services from the sale of personal data and process or control the personal data of at least 25,000 Colorado residents.
Moreover, on March 24, 2022, Utah’s governor signed the Utah Consumer Privacy Act (UCPA) into law. The UCPA will take effect on December 31, 2023. Also, in May 2022, Connecticut Governor Lamont signed the Connecticut Data Privacy Act (CTDPA) into laws. The UCPA and CTDPA draw heavily upon their predecessors in Virginia and Colorado. With the CTDPA, Connecticut became the fifth state to enact a comprehensive privacy law New privacy and data security laws have been proposed in more than half of the states in the U.S. and in the U.S. Congress. With bills proposed in many other jurisdictions, it remains quite possible that other states will follow suit. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. The existence of comprehensive privacy laws in different states in the country will make our compliance obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or otherwise incur liability for noncompliance.
As each new state law is passed, it could add increasing complexity to and significantly expand the scope of our compliance efforts, impact our business strategies, increase our potential liability, increase our compliance costs, and adversely affect our business.
As a result of our presence in Europe and some of our customers being located in the European Union, or the E.U., and the U.K.,” we are subject to the European General Data Protection Regulation, or the GDPR, which imposes stringent E.U. data protection requirements, and could increase the risk of non-compliance and the costs of providing our products and services in a compliant manner. These regimes grant rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability) and enhances current rights (e.g., data subject access requests). A breach of the GDPR or U.K. GDPR could result in regulatory investigations, reputational damage, fines and sanctions, orders to cease or change our processing of our data, enforcement notices, or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.
 
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On June 28, 2021, the European Commission issued the U.K. with an “adequacy decision” to facilitate the continued free flow of personal data from E.U. member states to the U.K. However, this adequacy decision has a limited duration until 2023 in case there is a future divergence between E.U. and U.K. data protection laws or unless the European Commission reassesses and renews/extends the decision. In September 2021, the U.K. government launched a consultation on its proposals for wide-ranging reform of U.K. data protection laws following Brexit. There is a risk that any material changes which are made to the U.K. data privacy regime could result in the Commission reviewing the U.K. adequacy decision, and the U.K. losing its adequacy decision if the Commission deems the U.K. to no longer provide adequate protection for personal data. In the event that the adequacy decision is not renewed, the adjustments required to facilitate data transfers from E.U. member states to the U.K. will lead to additional costs as we try to ensure compliance with new privacy legislation and will increase our overall risk exposure.
In addition, the GDPR imposes strict rules on the transfer of personal data out of the E.U. to a “third country” including the United States. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. On July 16, 2020, the Court of Justice of the European Union, or CJEU, invalidated the European Union United States, or E.U.-U.S., “Privacy Shield” ​(under which personal data could be transferred from the E.U. to U.S. entities that had self-certified under the Privacy Shield scheme) on the grounds that the Privacy Shield failed to offer adequate protections to E.U. personal data transferred to the United States. In addition, while the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.
Use of the standard contractual clauses must now be assessed on a case by case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals. The CJEU indicated that if a competent supervisory authority believes that the standard contractual clauses cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer. The use of standard contractual clauses for the transfer of personal data specifically to the United States remains under review by a number of European data protection supervisory authorities, along with those of some other E.U. member states. Additional measures or contractual provisions may need to be put in place; however, the nature of these additional measures is currently uncertain. German and Irish supervisory authorities have indicated, and enforced in recent rulings, that the standard contractual clauses alone provide inadequate protection for E.U.-U.S. data transfers. On August 10, 2020, the U.S. Department of Commerce and the European Commission announced new discussions to evaluate the potential for an enhanced E.U.-U.S. Privacy Shield framework to comply with the July 16, 2020 judgment of the CJEU.
In June 2021, the European Commission issued new SCCs that account for the CJEU’s decision and other developments, which need to be put in place for new contracts involving the transfer of personal data from the European Economic Area to a third country since September 27, 2021, and incorporated into existing contracts by December 27, 2022. The New SCCs do not apply to the UK, but the UK Information Commissioner’s Office has published its own transfer mechanism, the International Data Transfer Agreement (UK IDTA), which entered into force on March 21, 2022, and enables data transfers originating from the UK. It requires a similar assessment of the data protection provided in the importer’s country. The UK IDTA needs to be concluded in new contracts involving the transfer of personal data from the UK as of September 22, 2022. Organizations have until March 21, 2024 to update existing agreements. Complying with these obligations and applicable guidance regarding cross-border data transfers could be expensive and time consuming, and may require us to modify our data handling policies and procedures and may ultimately prevent or restrict us from transferring personal data outside the European Economic Area of the UK which could cause significant business disruption.
While we have taken steps to mitigate the impact on us with respect to transfers of data, such as implementing the SCCs in new contracts with our service providers, customers, subsidiaries, and are updating existing contracts with the new SCCs in anticipation of the December 2022 deadline, the validity of these transfer mechanisms remains uncertain. Complying with this guidance as it exists today and evolves
 
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will be expensive and time consuming and may ultimately prevent us from transferring personal data outside the European Union, which would cause significant business disruption for ourselves and our customers and potentially require the changes in the way our products are configured, hosted and supported.
While we maintain a Privacy Shield certification, we rely on the SCC for intercompany data transfers from the E.U. to the United States and have reviewed and amended any existing vendor agreements that rely only on Privacy Shield as the data transfer mechanism. As supervisory authorities continue to issue further guidance on personal data, we could suffer additional costs, complaints, or regulatory investigations or fines, and if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
We are also subject to evolving E.U. privacy laws on cookies and e-marketing. In the E.U., regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and a E.U. regulation known as the ePrivacy Regulation will significantly increase fines for non-compliance once in effect. In the E.U., informed consent, including a prohibition on pre-checked consents and a requirement to ensure separate consents for each cookie, is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing (and under the UK GDPR and the GDPR), valid consent is tightly defined, including, a prohibition on pre-checked consents for each type of cookie or similar technology. As regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, negatively impact our efforts to understand customers, adversely affect our margins, increase costs, and subject us to additional liabilities.
As these and other laws and regulations may continue to evolve and be enacted, or new interpretations of existing laws and regulations apply, it may require us to modify our data processing practices, agreements and policies and to incur substantial costs in order to comply with this ever evolving regulatory landscape. Restrictions on the collection, use, sharing or disclosure of personal information or additional requirements and liability for security and data integrity could require us to modify our solutions and features, possibly in a material manner, could limit our ability to develop new services and features, and could subject us to increased compliance obligations and regulatory scrutiny. We use a variety of technical and organizational security measures and other measures to protect the data we process, in particular personal data pertaining to our customers, employees and business partners. Despite measures we put in place, we may be unable to anticipate or prevent unauthorized access to such personal data.
Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection, and information security, it is possible that our practices or technology could fail, or be alleged to fail to meet applicable requirements. For instance, the overall regulatory framework governing the application of privacy laws to blockchain technology is still highly undeveloped and likely to evolve. Despite our efforts to choose vendors that meet applicable laws, regulations and other obligations relating to privacy, data protection, and information security and maintain robust security controls, it is possible that a vendor could fail to comply or experience a data breach impacting our data and our business. Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the foregoing types of failure has occurred, could damage our reputation or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, and financial condition.
We are and may continue to be subject to litigation, including individual and class action lawsuits, as well as regulatory audits, disputes, inquiries, investigations and enforcement actions by regulators and governmental authorities.
We have been and may from time to time become subject to material claims, arbitrations, individual and class action lawsuits, government and regulatory investigations, inquiries, actions or requests and other proceedings alleging violations of laws, rules, and regulations, both foreign and domestic, involving the provision of regulated financial services, intellectual property, privacy, data protection, information security, anti-money laundering, counter terrorist financing, sanctions, anti-corruption, securities, tax, labor and
 
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employment, payment network rules, commercial disputes, services, and other matters. The number and significance of our actual disputes and inquiries have increased as we have grown larger, our business has expanded in scope and geographic reach, and our products and services have increased in complexity.
In addition, our prior business lines may continue to expose us to claims, arbitrations and lawsuits by former or existing clients. For example, we are and, from time to time, we may become, subject to various legal proceedings, consumer arbitrations, and regulatory investigation matters that arise from our previous ownership of the Poloniex digital asset trading platform. For example, see the risk factor titled “We may incur significant liability as a result of several ongoing disputes and investigations. The ultimate resolution of these matters may require substantial cash payments, materially and adversely affect our business, financial condition and results of operation, and may cause dilution to our shareholders.”
Moreover, the laws, rules and regulations affecting our business, including those pertaining to stablecoins, cryptocurrencies, digital assets, internet and mobile services, as well as payment, crowdfunding and other financial services, are subject to ongoing interpretation by the courts and governmental and supervisory authorities, and the resulting uncertainty in the scope and application of these laws, rules and regulations increases the risk that we will be subject to private claims, governmental and regulatory actions alleging violations of those laws, rules, and regulations.
The scope, determination, and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are subject cannot be predicted with certainty, and may result in:

substantial payments to satisfy judgments, fines, or penalties;

substantial outside counsel legal fees and costs;

additional compliance and licensure requirements;

loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business;

loss of productivity and high demands on employee time;

civil or criminal sanctions or consent decrees;

termination of certain employees, including members of our executive team;

barring of certain employees from participating in our business in whole or in part;

orders that restrict our business or prevent us from offering certain products or services;

changes to our business model and practices;

delays to planned transactions, product launches or improvements; and

damage to our brand and reputation.
Because of our large customer base, actions against us may claim large monetary damages, even if the alleged per-customer harm is small or non-existent. Regardless of the outcome, any such matters can have an adverse impact, which may be material, on our business, operating results, or financial condition because of legal costs, diversion of management resources, reputational damage, and other factors.
Treatment of Circle as a foreign corporation for U.S. federal income tax purposes.
Circle expects to be treated as a foreign corporation for U.S. federal tax purposes. However, there is limited guidance regarding the provisions under Section 7874 of the Code. For general information regarding the inversion rules of Section 7874 of the Code, see the discussion below under “— Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Topco — Tax Residence of Topco for U.S. Federal Income Tax Purposes.
 
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Risks Related to Intellectual Property
Our intellectual property rights are valuable, and any inability to protect them could adversely impact our business, operating results, and financial condition.
Our business depends in large part on our proprietary technology and our brand. We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, and trade secret and laws, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights. As of October 14, 2022, we held eight registered trademarks in the United States, including Circle and the Circle logo, and also held 62 registered trademarks in foreign jurisdictions. We also had 16 pending trademark applications in the United States, as well as 45 pending trademark applications in foreign jurisdictions. We intend to file additional trademark applications with respect to our brands. We have filed four patent applications in the United States with respect to our technology.
Our efforts to protect our intellectual property rights may not be sufficient or effective. Our proprietary technology and trade secrets could be lost through misappropriation or breach of our confidentiality and license agreements, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar to ours and that compete with our business.
As we have grown, we have sought to obtain and protect our intellectual property rights in an increasing number of countries, a process that can be expensive and may not always be successful. For example, the U.S. Patent and Trademark Office and various foreign governmental intellectual property agencies require compliance with a number of procedural requirements to complete the trademark application process and to maintain issued trademarks, and noncompliance or non-payment could result in abandonment or lapse of a trademark or trademark application, resulting in partial or complete loss of trademark rights in a relevant jurisdiction. Further, intellectual property protection may not be available to us in every country in which our products and services are available. We may also agree to license our intellectual property to third parties as part of various agreements. Those licenses may diminish our ability, though, to counter-assert our intellectual property rights against certain parties that may bring claims against us.
In the future we may be sued by third parties for alleged infringement of their proprietary rights.
In recent years, there has been considerable patent, copyright, trademark, domain name, trade secret and other intellectual property development activity in the cryptoeconomy, as well as litigation, based on allegations of infringement or other violations of intellectual property, including by large financial institutions. Furthermore, individuals and groups can purchase patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. Our use of third-party intellectual property rights also may be subject to claims of infringement or misappropriation.
We cannot guarantee that our internally developed or acquired technologies and content do not or will not infringe the intellectual property rights of others. From time to time, our competitors or other third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.
We expect that the occurrence of infringement claims is likely to grow as the digital asset market grows and matures. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Further, during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of Topco Ordinary Shares may decline. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert
 
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the resources of our management and require significant expenditures. Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, operating results, and financial condition.
Our and our ecosystem partners’ products and services, including the blockchains where the Circle stablecoins protocols are built on, contain third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could harm our business.
Our products and services contains software modules licensed to us by third-party authors under “open source” licenses. Also, the blockchains on which the Circle stablecoins protocols are built and our other ecosystem partners materially rely on open source licenses to operate. We also make certain of our own software available to customers for free under various open source licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code. In addition, the public availability of such software may make it easier for others to compromise our products and services.
Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use, or grant other licenses to our intellectual property. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software.
Although we monitor our use of open source software to avoid subjecting our products and services to conditions we do not intend, we have not recently conducted an extensive audit of our use of open source software and, as a result, we cannot assure you that our processes for controlling our use of open source software in our products and services are, or will be, effective. If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, we could face litigation, infringement or other liability, or be required to seek costly licenses from third parties to continue providing our offerings on terms that are not economically feasible, to re-engineer our products or services, to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating results, and financial condition.
Moreover, the terms of many open source licenses have not been interpreted by U.S. or foreign courts. As a result, there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products and services. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software.
Risks Relating to Operating as a Public Company
The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, make us incur increased costs, and affect our ability to attract and retain executive management and qualified board members.
As a public company we will incur significant operational, legal, accounting, and other expenses that we did not incur as a private company. We will be subject to reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules subsequently implemented by the SEC, the rules and regulations of the listing standards of the NYSE, the Irish Companies Act and other applicable securities rules and regulations. Stockholder activism, the current political and social environment, and the current high level of government intervention and regulatory reform, may lead to substantial new regulations and disclosure obligations, which will likely result in additional compliance costs and could impact the manner in which we operate our business in ways we cannot currently anticipate.
 
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Our management team has limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Should our management team not successfully or efficiently manage our transition to being a public company, it may subject us to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, operating results, and financial condition. Although we have already hired additional employees to assist us in complying with these requirements, our finance team is small and we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.
Compliance with these rules and regulations may strain our financial and management systems, internal controls, and employees. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control, over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures, and internal control over, financial reporting to meet this standard, significant resources and management oversight may be required. If we encounter material weaknesses or deficiencies in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. Effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud.
As a public company listed in the United States, we will incur significant additional operational, legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and the NYSE, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to continue investing resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We expect our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal controls over financial reporting commencing with our second annual report on Form 10-K. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, subject to our current qualification as an “emerging growth company”. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal controls over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. As a result, the market price of Topco Ordinary Shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we also expect that being a public company and complying with applicable rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain and maintain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
 
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The trading price of Topco Ordinary Shares may be volatile, and purchasers of Topco Ordinary Shares could incur substantial losses.
Our stock price may be volatile. The stock market in general and the market for technology companies and cryptocurrency technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their Topco Ordinary Shares at or above the price paid for the shares. The market price for Topco Ordinary Shares may be influenced by many factors, including:

actual or anticipated variations in our operating results;

changes in financial estimates by us or by any securities analysts who might cover our stock;

conditions or trends in our industry;

changes as a result of the COVID-19 pandemic, or similar macroeconomic events;

stock market price and volume fluctuations of comparable companies, and in particular those that operate in the cryptocurrency and digital asset industry;

announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships, or divestitures;

announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

capital commitments;

investors’ general perception of our company and our business;

recruitment or departure of key personnel; and

sales of Topco Ordinary Shares, including sales by our directors and officers or specific stockholders.
In addition, in the past, stockholders have initiated class action lawsuits against technology companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from our business.
The price of Topco Ordinary Shares could decline if securities analysts do not publish research or if securities analysts or other third parties publish inaccurate or unfavorable research about us.
The trading market for Topco Ordinary Shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for Topco Ordinary Shares could be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our results of operations fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Future sales of Topco Ordinary Shares, or the perception that such sales may occur, could depress our stock price.
Following completion of this transaction, there will be approximately [•] Topco Ordinary Shares outstanding. Sales by us or our shareholders, particularly our executives, of a substantial number of Topco Ordinary Shares in the public market, or the perception that these sales might occur, could cause the market price of Topco Ordinary Shares to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities. Following the lock-up restriction implemented pursuant to the terms of the Topco Constitution, as described in the section entitled “Description of Topco’s Securities — Lock-Up,” all of the Topco Ordinary Shares issued in connection with this transaction will be
 
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freely transferable, except for any shares held by our “affiliates,” without restriction or further registration under the Securities Act.
We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, Topco Ordinary Shares may be less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company,” we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; we will be exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and we will not be required to hold non-binding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We may be an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of Concord’s initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1 billion in annual revenue in any fiscal year, (ii) the market value of Topco Ordinary Shares that is held by non-affiliates exceeds $700 million as of any June 30, or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.
The exact implications of the JOBS Act are subject to interpretation and guidance by the SEC and other regulatory agencies, and we cannot assure that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find Topco Ordinary Shares less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act. If some investors find Topco Ordinary Shares less attractive as a result, there may be a less active trading market for Topco Ordinary Shares and our stock price may decline or become more volatile.
Topco is incorporated in Ireland; Irish law differs from the laws in effect in the United States and may afford less protection to our shareholders.
Topco is an Irish incorporated public limited company. There is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liability provisions of the U.S. federal or state securities laws, or hear actions against us or those persons based on those laws. The U.S. and Ireland do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters, and, accordingly, common law rules apply in determining whether a judgment obtained in a U.S. court is enforceable in Ireland. Although there are processes under Irish law for enforcing a judgment of a U.S. court, including by seeking summary judgment in a new action in Ireland, those processes are subject to certain established principles and conditions, and there can be no assurance that an Irish court would enforce a judgment of a U.S. court in this way and thereby impose civil liability on us or our directors or officers.
As an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the
 
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duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the U.S.
We summarize your rights as a Topco Ordinary Shareholder in the section “Description of Topco’s Securities” and provide a summary comparing your rights as a Public Stockholder and a Topco Ordinary Shareholder in the section “Comparison of Corporate Governance and Shareholders Rights.”
Irish law requires Topco to have available “distributable profits” to pay dividends to shareholders and generally to make share repurchases and redemptions.
Under Irish law, Topco may only pay dividends and make other distributions (and, generally, make share repurchases and redemptions) only out of “distributable profits” shown on its unconsolidated financial statements prepared in accordance with the Irish Companies Act and filed with the Irish Companies Registration Office. Distributable profits are the accumulated realized profits of Topco that have not previously been utilized in a distribution or capitalization less accumulated realized losses that have not previously been written off in a reduction or reorganization of capital, and include reserves created by way of a reduction of capital. In addition, no dividend may be paid or other distribution, share repurchase or redemption can be made by Topco unless the net assets of Topco are equal to, or exceed, the aggregate of Topco’s called up share capital plus its un-distributable reserves and the dividend or other distribution, share repurchase or redemption does not reduce Topco’s net assets below such aggregate. Un-distributable reserves include the un-denominated capital, the capital redemption reserve fund, and the amount by which Topco accumulated unrealized profits that have not previously been utilized by any capitalization exceed Topco’s accumulated unrealized losses that have not previously been written off in a reduction or reorganization of capital.
Following consummation of the Business Combination, Topco, as a new parent company with no operational history, will have no distributable profits of its own. Accordingly, in order to pay dividends or make other distributions, share repurchases or redemptions, Topco will need to generate distributable profits from its business activities or otherwise create distributable profits by alternative means, including a reduction of capital.
Topco anticipates that it will be able to create a pool of distributable reserves by capitalizing certain merger reserves arising on the consummation of the Business Combination and subsequently reducing the capital created. Such reduction of capital will require the approval of Topco shareholders by special resolution passed at a general meeting of shareholders, together with the sanction of the High Court of Ireland. Although the creation of distributable profits in this manner is an established mechanism, the sanction of the High Court of Ireland is discretionary and there is no guarantee it will be granted.
In the event that distributable profits of Topco are not, for whatever reason, generated from its business activities or created by alternative means, no dividends may be paid or other distributions, share repurchases or redemptions made by Topco.
Following consummation of the Business Combination, attempted takeovers of Topco will be subject to the Irish Takeover Rules and will be under the supervisory jurisdiction of the Irish Takeover Panel.
Following consummation of the Business Combination, Topco will be subject to the Irish Takeover Rules, which regulate the conduct of takeovers of, and certain other relevant transactions affecting, Irish incorporated public limited companies listed on certain stock exchanges, including the NYSE. The Irish Takeover Rules are administered by the Irish Takeover Panel, which has supervisory jurisdiction over such transactions. Among other matters, the Irish Takeover Rules operate to ensure that no offer is frustrated or unfairly prejudiced and, in situations involving multiple bidders, that there is a level playing field. For example, pursuant to the Irish Takeover Rules, the Topco board will not be permitted, without shareholder approval, to take certain actions which might frustrate an offer for Topco shares once the Topco board has received an approach that might lead to an offer or has reason to believe that an offer is, or may be,
 
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imminent. Please see the section “Description of Topco’s Securities” under the heading “Irish Takeover Rules and the Substantial Acquisition Rules” for a more detailed description of those rules.
Following consummation of the Business Combination, under the Irish Takeover Rules, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of Topco may be required to make a mandatory cash offer for the remaining shares of Topco.
Under the Irish Takeover Rules, in certain circumstances, a person, or persons acting in concert, who acquire(s), or consolidate(s), control of Topco may be required to make a mandatory cash offer for the remaining shares of Topco at a price not less than the highest price paid for the shares by that person or its concert parties during the previous 12 months. Save with the consent of the Irish Takeover Panel, this mandatory offer requirement is triggered: (i) if an acquisition of shares would result in a person or persons acting in concert holding shares representing 30% or more of the voting rights of Topco, and (ii) where a person, or persons acting in concert, already hold(s) shares representing 30% or more of the voting rights of Topco, if an acquisition of shares would result in the percentage of the voting rights of Topco held by such person, or persons acting in concert, increasing by more than 0.05% within a 12-month period. In the case of an issuance of new shares, the Irish Takeover Panel will typically waive the mandatory offer requirement in circumstances where the issuance has been approved in advance by simple majority vote given at a general meeting of independent Topco shareholders convened in accordance with the requirements (including as to disclosure) of the Irish Takeover Rules. The mandatory offer requirements do not apply to a single holder, holding shares representing more than 50% of the voting rights of Topco.
Anti-takeover provisions in the Topco constitution could make an acquisition of Topco Ordinary Shares more difficult.
The Topco constitution contains provisions that may delay or prevent a change of control, discourage bids at a premium over the market price of Topco Ordinary Shares, adversely affect the market price of Topco Ordinary Shares, and adversely affect the voting and other rights of holders of Topco Ordinary Shares. These provisions include: (i) permitting the Topco Board to issue preference shares without the approval of holders of Topco Ordinary Shares, with such rights, preferences and privileges as they may designate, and (ii) allowing the Topco board to adopt a shareholder rights’ plan upon such terms and conditions as it deems expedient in the interests of Topco.
If the Topco Ordinary Shares and Topco Warrants are not eligible for deposit and clearing within the facilities of DTC, then transactions in those shares and warrants may be disrupted.
The facilities of DTC are a widely-used mechanism that allow for rapid electronic transfers of securities between the participants in the DTC system, which include many large banks and brokerage firms.
Upon the consummation of the Business Combination, the Topco Ordinary Shares and Topco Warrants will be eligible for deposit and clearing within the DTC system. We expect to enter into arrangements with DTC whereby we will agree to indemnify DTC for any Irish stamp duty that may be assessed upon it as a result of its service as a depository and clearing agency for Topco Ordinary Shares and Topco Warrants. We expect these actions, among others, will result in DTC agreeing to accept the Topco Ordinary Shares and Topco Warrants for deposit and clearing within its facilities upon consummation of the Business Combination.
DTC is not obligated to accept the Topco Ordinary Shares and Topco Warrants for deposit and clearing within its facilities at the closing and, even if DTC does initially accept the shares, it will generally have discretion to cease to act as a depository and clearing agency for the shares. If DTC determined prior to consummation of the Business Combination that the Topco Ordinary Shares and Topco Warrants are not eligible for clearance within the DTC system, then we would not expect to complete the transactions contemplated by this proxy statement/prospectus in their current form. However, if DTC determined at any time after the consummation of the Business Combination that the Topco Ordinary Shares and Topco Warrants were not eligible for continued deposit and clearance within its facilities, then we believe the Topco Ordinary Shares and Topco Warrants would not be eligible for continued listing on a national U.S. securities exchange and trading in Topco Ordinary Shares and Topco Warrants would be disrupted. While we
 
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would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could have a material adverse effect on the trading price of the Topco Ordinary Shares and Topco Warrants.
Shareholders or warrant holders who are resident or ordinarily resident for tax purposes in Ireland may be subject to Irish capital gains tax or corporation tax on taxable gains (as applicable) (“Irish CGT”) on the disposal of their shares or warrants.
Topco shareholders or warrant holders that are resident or ordinarily resident for tax purposes in Ireland, or Topco shareholders or warrant holders that use, hold or acquire their Topco Ordinary Shares or Topco Warrants for the purposes of a trade carried on by that person in Ireland through a branch or agency, or otherwise for the purposes of a branch or agency in Ireland will, subject to the availability of any exemptions and reliefs, generally be subject to Irish CGT on a gain arising on the disposal of those shares or warrants.
The disposal of Circle Shares in exchange for the receipt of Topco Ordinary Shares by Circle Holders should be treated as a reorganization for Irish CGT purposes, which is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is the avoidance of liability to tax, and which satisfies certain other conditions so that the provisions of section 586 of the Taxes Consolidation Act 1997 of Ireland (as amended) apply. Accordingly, such shareholders in Circle should not be treated as having made a disposal of their Circle Shares for the purposes of Irish CGT to the extent that they receive Topco Ordinary Shares in exchange for those shares.
For additional discussion of certain Irish tax consequences of the Scheme, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
It is expected that the Merger will be treated as part of a ‘scheme of reconstruction or amalgamation’ for Irish CGT purposes, being a scheme for the amalgamation of any two or more companies, which is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is the avoidance of liability to tax, and which satisfies certain other conditions so that the provisions of section 587 of the Taxes Consolidation Act 1997 of Ireland (as amended) apply. As a result, the following treatment should apply:

The receipt by a Concord stockholder of Topco Ordinary Shares on the Merger should not be treated as a disposal of his or her shares of Concord common stock for Irish CGT purposes.

The Topco Ordinary Shares received on the Merger should be treated as the same asset as the Concord common stock and as acquired at the same time and for the same consideration as those Concord common stock which were disposed of in the context of the Merger, with the same historic base cost for Irish CGT purposes.
For additional discussion of certain Irish tax consequences of the Merger, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
Irish stamp duty in the context of the Business Combination.
The Scheme should be treated as part of a scheme for the ‘reconstruction of any company or the amalgamation of any companies’ for Irish stamp duty purposes and, subject to certain conditions being met, relief from Irish stamp duty is expected to be available in respect of the Scheme pursuant to section 80 of the Stamp Duties Consolidation Act 1999 of Ireland (as amended).
No Irish stamp duty should be payable in respect of the Merger.
For additional discussion of certain Irish tax consequences of the Business Combination, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
Transfers of Topco Ordinary Shares or Topco Warrants, other than by means of the transfer of book-entry interests through DTC, may be subject to Irish stamp duty.
It is expected that certain confirmations related to Irish stamp duty will be sought from the Irish Revenue Commissioners in advance of the Business Combination. These confirmations should provide that
 
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transfers of Topco Ordinary Shares and Topco Warrants effected by means of the transfer of book-entry interests through DTC should not be subject to Irish stamp duty.
However, if you hold your Topco Ordinary Shares and/or Topco Warrants directly rather than beneficially through DTC, any transfer of your Topco Ordinary Shares and/or Topco Warrants could be subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paid or the market value of the shares acquired).
A Topco shareholder or warrant holder who directly holds Topco Ordinary Shares or Topco Warrants may, subject to confirmation by the Irish Revenue Commissioners in advance of the Business Combination, transfer such Topco Ordinary Shares or Topco Warrants into his or her own broker account to be held through DTC (or vice versa) without giving rise to Irish stamp duty, provided that there is no change in the ultimate beneficial ownership of the Topco Ordinary Shares or Topco Warrants as a result of the transfer, and the transfer is not in contemplation of a sale of Topco Ordinary Shares or Topco Warrants by a beneficial owner to a third party.
Payment of Irish stamp duty is generally a legal obligation of the transferee. The potential for stamp duty could adversely affect the price of your Topco Ordinary Shares or Topco Warrants.
For additional discussion of certain Irish tax consequences of the Business Combination, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
In certain limited circumstances, dividends paid by Topco may be subject to Irish dividend withholding tax.
In certain limited circumstances, Irish dividend withholding tax (“DWT”) may arise in respect of dividends, if any, paid on Topco Ordinary Shares. The current rate of DWT is 25%. A number of exemptions from DWT exist, including exemptions pursuant to which shareholders resident in the U.S., U.K. and in the countries listed in Annex D attached to this proxy statement/prospectus, which are collectively referred to as Relevant Territories and individually as a Relevant Territory, may be entitled to exemptions from DWT. It should be noted that the comments below regarding Topco Ordinary Shares held through DTC are subject to confirmation by the Irish Revenue Commissioners.
See the section entitled “Material Irish Tax Considerations” beginning on page 168 for further information on the operation of DWT generally and the relevant exemptions — in particular, please note the requirement to complete certain relevant Irish Revenue Commissioners DWT forms, which are referred to as DWT Forms, in order to qualify for many of the exemptions.
Subject to confirmation by the Irish Revenue Commissioners in advance of the Business Combination, dividends paid in respect of Topco Ordinary Shares that are owned by a U.S. resident and held through DTC should not be subject to DWT provided that the address of the beneficial owner of such Topco Ordinary Shares in the records of the broker holding such Topco Ordinary Shares is recorded as being in the United States (and such broker has further transmitted the relevant information to a qualifying intermediary appointed by Topco).
Dividends paid in respect of Topco Ordinary Shares that are held outside of DTC by a person who is a resident of the U.S. should not be subject to DWT if such shareholder in Topco has provided a completed IRS Form 6166 (in the case of an individual) and a valid DWT Form to Topco’s transfer agent to confirm its U.S. residence and claim an exemption.
Shareholders of Topco resident in other Relevant Territories may also be eligible for exemption from DWT on dividends paid in respect of their Topco Ordinary Shares provided that they satisfy the conditions of one of the exemptions including the requirement to furnish valid DWT Forms to their brokers (in respect of shares held through DTC) (and such broker has further transmitted the relevant information to a qualifying intermediary appointed by Topco) or to Topco’s transfer agent (in respect of shares held outside of DTC).
However, other shareholders of Topco may be subject to DWT, which if you are such a shareholder of Topco could adversely affect the price of your Topco Ordinary Shares. For additional discussion of certain
 
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Irish tax consequences of the Business Combination, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
Dividends received from Topco by Irish resident and certain other shareholders of Topco may be subject to Irish income tax.
Shareholders of Topco that are entitled to an exemption from DWT on dividends received from Topco should not be subject to Irish income tax in respect of those dividends unless they have some connection with Ireland other than their shareholding in Topco (for example, they are resident in Ireland or they hold their Topco Ordinary Shares in connection with a branch or agency they operate in Ireland). Topco Ordinary Shareholders who are not resident nor ordinarily resident in Ireland, and do not hold their Topco Ordinary Shares in connection with a branch or agency they operate in Ireland, who receive dividends subject to Irish DWT will generally have no further liability to Irish income tax on those dividends.
For additional discussion of certain Irish tax consequences of the Business Combination, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
Topco Ordinary Shares or Topco Warrants received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.
Irish capital acquisitions tax (“CAT”) (currently levied at a rate of 33%) could apply to a gift or inheritance of Topco Ordinary Shares or Topco Warrants irrespective of the place of residence, ordinary residence or domicile of the parties. This is because Topco Ordinary Shares and Topco Warrants will be regarded as property situated in Ireland. Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold which Irish Revenue typically updates annually in respect of taxable gifts or inheritances received from their parents (currently at €335,000). The person who receives the gift or inheritance has primary liability for CAT.
For additional discussion of certain Irish tax consequences of the Business Combination, see the section entitled “Material Irish Tax Considerations” beginning on page 168.
It is recommended that each shareholder and warrant holder consults his or her own tax advisor as to the tax consequences of acquiring, holding, and disposing of Topco Ordinary Shares and Topco Warrants in, and receiving distributions from, Topco.
General Risk Factors
Adverse economic conditions and geopolitical events may adversely affect our business.
Our performance is subject to general economic conditions and their impact on the cryptocurrency, digital assets, payments and capital raise markets, as well as our customers. The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity declined resulting in lower consumption rates, restricted credit, reduced profitability, weaknesses in financial markets, bankruptcies, and overall uncertainty with respect to the economy. The impact of general economic conditions on the cryptoeconomy is highly uncertain and dependent on a variety of factors, including market adoption of stablecoins, cryptocurrencies and other digital assets, global trends in the crypto and blockchain economy, central bank monetary policies, and other events beyond our control. Geopolitical developments, such as the current conflict between Russia and Ukraine and related economic and other retaliatory measures taken by the United States, European Union and others, trade wars and foreign exchange limitations, can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and crypto asset markets. Our business, financial conditions and results of operations may be materially and adversely affected by any negative impact on the global economy and digital assets market resulting from the conflict in Ukraine or any other geopolitical tension or general adverse economic condition.
We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as terrorism, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or other catastrophic events may also cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating
 
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results, and financial condition. Our business operations are subject to interruption by natural disasters, fire, power shortages, and other events beyond our control.
In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer. For example, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we have adopted have resulted, and could continue to result, in difficulties or changes to our customer support, or create operational or other challenges, any of which could adversely impact our business and operating results.
Further, acts of terrorism, labor activism or unrest, and other geo-political unrest could cause disruptions in our business or the businesses of our partners or the economy as a whole. In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our products and services, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.
We do not maintain insurance sufficient to compensate us for the potentially significant losses that could result from disruptions to our services. Additionally, all the aforementioned risks may be further increased if we do not implement a disaster recovery plan or our business partners’ disaster recovery plans prove to be inadequate. To the extent natural disasters or other catastrophic events concurrently impact data centers we rely on in connection with private key restoration, customers will experience significant delays in withdrawing funds, or in the extreme we may suffer loss of customer funds.
Our acquisition of CYBAVO Pte. Ltd. (CYBAVO) and Billeto, Inc. (Elements), and/or potential future acquisitions, joint ventures or other strategic transactions create certain risks and may adversely affect our business, financial condition or results of operations.
Acquisitions, partnerships and joint ventures are part of our growth strategy. For example, in July of 2022 we acquired CYBAVO and Elements. We expect to continue to evaluate potential strategic acquisitions of, and partnerships or joint ventures with, complementary businesses, services or technologies. We may not be successful in identifying acquisition, partnership and joint venture targets. In addition, we may not be able to successfully finance or integrate any businesses, services or technologies that we acquire (including CYBAVO and Elements) or with which we form a partnership or joint venture.
We may not be able to identify suitable acquisition candidates or complete acquisitions in the future, which could adversely affect our future growth; or businesses that we acquire (including CYBAVO and Elements) may not perform as well as expected or may be more difficult or expensive to integrate and manage than expected, which could adversely affect our business and results of operations. In addition, the process of integrating these acquisitions may disrupt our business and divert our resources.
In addition, acquisitions outside of the United States (including the CYBAVO acquisition) often involve additional or increased risks including, for example:

managing geographically separated organizations, systems and facilities;

integrating personnel with diverse business backgrounds and organizational cultures;

complying with foreign regulatory requirements;

fluctuations in fiat and cryptocurrency exchange rates;

enforcement and protection of intellectual property in some foreign countries;

difficulty entering new foreign markets due to, among other things, customer acceptance and business knowledge of these new markets; and

general economic and political conditions.
These risks may arise for a number of reasons: we may not be able to find suitable businesses to acquire at affordable valuations or on other acceptable terms; we may face competition for acquisitions from other potential acquirers; we may need to borrow money or sell equity or debt securities to the public
 
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to finance acquisitions and the terms of these financings may be adverse to us; changes in accounting, tax, securities or other regulations could increase the difficulty or cost for us to complete acquisitions; we may incur unforeseen obligations or liabilities in connection with acquisitions; we may need to devote unanticipated financial and management resources to an acquired business; we may not realize expected operating efficiencies or product integration benefits from an acquisition; we could enter markets where we have minimal prior experience; and we may experience decreases in earnings as a result of non-cash impairment charges.
We cannot ensure that any acquisition, partnership or joint venture we make will not have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Concord
Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Concord.
Risks Related to Concord’s Business and the Business Combination
There can be no assurance that the combined company’s securities will be approved for listing on the NYSE or that the combined company will be able to comply with the continued listing standards of the NYSE.
In connection with the closing of the Business Combination, we intend to list the Topco Ordinary Shares and Topco Warrants on the NYSE under the symbols “CRCL” and “CRCL WS”, respectively. The combined company’s continued eligibility for listing may depend on the number of our shares that are redeemed. If, after the Business Combination, NYSE delists the combined company’s shares from trading on its exchange for failure to meet the listing standards, the combined company and its stockholders could face significant material adverse consequences including:

a limited availability of market quotations for the combined company’s securities;

reduced liquidity for the combined company’s securities;

a determination that Topco Ordinary Shares is a “penny stock” which will require brokers trading in the Topco Ordinary Shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the combined company’s securities;

a limited amount of news and analyst coverage; and

a decreased ability to issue additional securities or obtain additional financing in the future.
Subsequent to the consummation of the Business Combination, the combined company may be required to take write-downs or write-offs, or the combined company may be subject to restructuring and impairment or other charges that could have a significant negative effect on the combined company’s financial condition, results of operations and the price of Topco Ordinary Shares, which could cause you to lose some or all of your investment.
Although Concord has conducted due diligence on Circle, this diligence may not surface all material issues that may be present with Circle’s business. Factors outside of Circle’s and outside of Concord’s control may, at any time, arise. As a result of these factors, the combined company may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in the combined company reporting losses. Even if Concord’s due diligence successfully identified certain risks, unexpected risks may arise, and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on the combined company’s liquidity, the fact that the combined company reports charges of this nature could contribute to negative market perceptions about the combined company or its securities. In addition, charges of this nature may cause the combined company to violate net worth or other covenants to which the combined company may be subject as a result of assuming pre-existing debt held by Circle or by virtue of the combined company obtaining post-combination debt financing. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following the Business Combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders
 
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are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or proxy statement/prospectus relating to the Business Combination contained an actionable material misstatement or material omission.
If the Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of Concord’s securities or, following the Closing, the combined company’s securities, may decline.
If the perceived benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of Concord’s securities prior to the Closing may decline. The market values of the combined company’s securities at the time of the Business Combination may vary significantly from their prices on the date the Transaction Agreement was executed, the date of this proxy statement/prospectus, or the date on which Concord’s stockholders vote on the Business Combination.
In addition, following the Business Combination, fluctuations in the price of the combined company’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for Circle’s capital stock. Accordingly, the valuation ascribed to Circle may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for the combined company’s securities develops and continues, the trading price of the combined company’s securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the combined company’s control. Any of the factors listed below could have a material adverse effect on your investment in the combined company’s securities and the combined company’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the combined company’s securities may not recover and may experience a further decline.
Factors affecting the trading price of the combined company’s securities may include:

actual or anticipated fluctuations in the combined company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to it;

changes in the market’s expectations about the combined company’s operating results;

success of competitors;

the combined company’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

changes in financial estimates and recommendations by securities analysts concerning the combined company or the fintech industry in general;

operating and share price performance of other companies that investors deem comparable to the combined company;

the combined company’s ability to market new and enhanced products and technologies on a timely basis;