Berachain, a prominent new blockchain in the cryptocurrency space, is currently under renewed examination following a report that detailed an unusually favorable clause granted to one of its significant Series B investors, Brevan Howard Digital’s Nova Digital fund. This clause reportedly allows the fund to reclaim its $25 million investment following the project's token launch.
According to documents accessed by a media outlet, this arrangement empowers Nova to request a refund for its investment up to one year after Berachain's token generation event (TGE), which is scheduled for February 6, 2025.
Such post-TGE refund rights are exceptionally uncommon within the realm of cryptocurrency venture capital. Four legal experts specializing in crypto informed the outlet that these types of refund provisions are exceedingly rare and, when they do appear, are typically contingent on a project failing to launch a token altogether.
In Berachain's specific situation, the refund option becomes available even after the token has commenced trading. This effectively provides Nova with the ability to recover its initial capital if the price of Berachain's token, BERA, experiences a decline. Notably, BERA has already seen a price drop of approximately 66% from Nova's initial purchase price of $3, making a refund a financially appealing prospect.
Should Nova choose to exercise its refund right before February 6, 2026, Berachain could be obligated to return $25 million in cash. Such a repayment could potentially create financial strain for the startup. While other investors typically face a one-year vesting cliff on their token allocations, Nova's refund clause, as detailed in a side letter dated March 5, 2024, grants the fund the discretion to reclaim "some or all" of its invested capital.
This revelation has ignited considerable discussion, particularly because Brevan Howard's participation played a role in validating Berachain during its rapid growth phase.
The project, which originated in 2021 as a meme-driven NFT project featuring bears and cannabis culture, swiftly transformed into a highly anticipated blockchain. It has successfully raised at least $142 million, achieving a valuation of $1.5 billion from investors including Framework Ventures, Polychain, Hack VC, Arrington Capital, and Tribe Capital.
Berachain's pseudonymous founder, known as Smokey the Bera, has contested the report, characterizing it as "inaccurate and incomplete." He asserted that all Series B investors were subjected to identical investment terms.
Smokey the Bera further elaborated that Brevan Howard's Nova vehicle operated as a "liquid-only" fund and co-led the funding round through Brevan's Abu Dhabi office.
Notwithstanding the denial, persistent questions linger regarding whether this specific refund right was disclosed to other investors and whether the arrangement adheres to relevant securities regulations and investor protection mandates.