The contracts have not been audited.
No third party has reviewed this code. No audit is pending and none has been commissioned. The source is verified on the explorer, so what you read is what runs, but nobody qualified has checked it for defects. Combined with the fact that there is no pause and no upgrade path, a defect would be permanent.
Security states this in full and does not soften it.
A Trader can lose their entire $5,000.
There is no partial protection and no floor under a Trader's own contribution. It is spent first and spent entirely before anyone else is touched, and that is the design rather than a bad outcome within it.
A Backer's maximum loss is $10,000.
That is the outer limit, not the expectation. Nothing is held outside the traded wallet, so there is no reserve anywhere that tops it back up.
The 6% is contingent, not guaranteed.
It is paid if the wallet covers the Backer's capital at settlement. It is not interest, not a yield and not a promise by anybody.
A Backer cannot exit once matched.
For any reason, until settlement. A Trader may settle early, which pays the Backer sooner but is never something the Backer can ask for.
The fee is not refunded, ever.
Not on early settlement, not on a trading halt, not pro rata for unused days. It buys the term, not the time.
Nobody can intervene.
A formed Arlo has no owner, no pause, no upgrade path and no administrative key. The venue allowlist is the governed exception (one immutable owner, a 72-hour timelock). Arlo cannot reverse a transaction, recover a mistake or make an exception, and neither can anyone else.
Settlement can wait on a wallet with no ETH.
GMX charges its execution fee in ETH, and an Arlo wallet holds none — its funding is USDC by design. If a wallet reaches settlement or a trading halt with an open GMX position and no ETH, the close order cannot be paid for, settlement defers indefinitely, and neither the Trader nor the Backer sees a payout move. Nothing is lost while it waits: the money is where it should be, the position is still open, and deferral is the protocol refusing to compute a payout on a reading that is not final. But it is a wait, and both parties sit in it.
The wait ends permissionlessly, which is the point. The Guard blocks outflows only, so anyone can send ETH to the wallet — the Trader, the Backer, or the keeper, which funds wallets it finds short before triggering closes, up to a per-wallet limit. Past that limit the keeper refuses, alerts, and leaves the wallet where it is — which is exactly the moment for the Trader or Backer to move first, because no one else is coming. No key, no owner, no support ticket: the unstick is a plain transfer to an address anyone can read.