User and Fund Protection

1. Fund Ratings and Risk Assessment

OpenFund automatically evaluates and ranks all funds based on a variety of key performance metrics, allowing investors to make informed decisions about where to allocate their capital. This rating system ensures fund managers are held accountable and provides clear indicators of risk and reward.

Fund Rating Criteria:

• Quality of Investments: Funds are assessed based on:

  • Largest percentage return on a single trade.

  • Highest fund growth over different time periods.

  • Volatility metrics, including variance across trading periods.

  • Liquidity-to-market-cap ratio, ensuring adequate fund liquidity.

• Consistency of Performance:

  • Frequency of positive daily returns.

  • Infrequency of drawdowns and losses.

  • Low deviation during downtrends, highlighting resilience in negative market conditions.

Fund ratings directly impact visibility on OpenFund’s marketplace, ensuring high-performing, low-risk funds receive more exposure, making it easier for investors to discover trustworthy and profitable fund managers.

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2. Preventing Malicious Fund Manager Behaviour

While OpenFund enables decentralized fund creation, it implements robust safeguards against potential fund manager misconduct. One major risk in decentralized fund structures is the possibility of fund managers engaging in self-benefiting practices that hurt investors.

Potential Risks from Malicious Fund Managers:

• Creating and trading their own tokens to artificially inflate valuations.

• Bundling supply of tokens and using fund deposits as “exit liquidity.”

• Engaging in unauthorized or highly speculative asset allocations.

Mitigation Measures:

To prevent these risks, OpenFund enforces the following security protocols:

• Fund Caps for Non-KYC/AML Funds:

  • Funds that are not KYC/AML-compliant are capped at $1,000,000 USD to limit exposure.

  • Non-KYC funds have additional restrictions, such as limited access to certain tokenized assets.

• Mandatory Social Identity Verification:

  • All fund managers, even those without KYC verification, must link their X (Twitter) and Telegram identities to the platform.

  • This prevents anonymous bad actors from creating multiple fraudulent funds without accountability.

• Supply and Token Lock Mechanisms:

  • Bundled tokens cannot be immediately sold after being purchased.

  • A predefined lock-up period prevents fund managers from using deposits as immediate exit liquidity.

  • This measure prevents pump-and-dump schemes within fund structures.

These measures ensure that all funds operating on OpenFund adhere to transparency, accountability, and investor-first principles while maintaining the decentralized flexibility that makes the platform attractive.

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3. Protection Against Withdrawal Exploits

To prevent fund managers from manipulating liquidity conditions or engaging in bank-run-style withdrawal exploits, OpenFund has implemented the following safeguards:

• Deposit Withdrawal Timer:

  • Investors cannot withdraw immediately after depositing, reducing sudden liquidity fluctuations.

  • This ensures that fund managers have a stable capital base before executing trades.

• Withdrawal Request Timer:

  • Managers must set a structured withdrawal period (ranging from 24 hours to one week).

  • This prevents sudden withdrawals from forcing unplanned liquidations.

• Forced Liquidations with Asset Hierarchy:

  • If a fund manager fails to execute withdrawal requests in time, OpenFund automatically liquidates positions based on best execution strategies.

  • Managers can predefine an asset liquidation hierarchy, ensuring the most optimal assets are sold first.

These structured withdrawal mechanisms prevent liquidity manipulation, protect against forced sales, and ensure investor stability.

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4. Decentralized, Reputation-Based Accountability

Unlike traditional hedge funds, OpenFund leverages decentralized reputation-building mechanisms to ensure that fund managers act in the best interests of their investors.

• Social Reputation Holds More Weight:

  • Many investors in crypto rely on the credibility of fund managers who have built their digital reputation over years.

  • Since all fund managers are required to link public identities (X, Telegram), it discourages reckless behaviour that could destroy their credibility.

• Transparent On-Chain Fund Management:

  • All fund activity is fully visible and auditable on-chain.

  • Investors can track fund performance, trades, and liquidity status in real-time.

By combining on-chain transparency, withdrawal safeguards, and reputation-based accountability, OpenFund ensures that both fund managers and investors operate in a fair and secure environment.