Berachain Under Scrutiny Over Nova Digital’s $25M Refund Clause

TLDR

• Berachain’s co-founder, Smokey the Bera, disputes claims about Nova Digital’s $25M refund clause in the Series B funding.
• The refund clause allows Nova Digital to reclaim its entire $25M investment until February 6, 2026.
• Legal experts call the refund clause unusual, as such mechanisms typically only trigger if a project fails to launch tokens.
• Some investors in Berachain’s Series B were unaware of the special terms granted to Nova Digital.
• Framework Ventures holds significant losses on its Berachain investment, reflecting the project’s ongoing struggles.

Berachain, a layer-1 blockchain project, has drawn attention over a refund clause secured by lead investor Brevan Howard’s Nova Digital fund. The clause grants Nova a unique $25 million refund option on its Series B investment. Berachain’s anonymous co-founder, Smokey the Bera, dismissed claims that the arrangement was unusual, calling them inaccurate and incomplete.

Refund Clause Sparks Debate Over Funding Practices

The refund clause in question allows Nova Digital to reclaim its $25 million investment until February 6, 2026. This is one year after Berachain’s token generation event, which took place on February 6, 2025. According to documents obtained by Unchained, the clause was activated when Nova deposited $5 million into a Berachain wallet within 30 days of the token launch.

Legal experts in the crypto space have said that such refund mechanisms are highly unusual in token fundraises. “Refund rights typically only trigger if projects fail to launch tokens at all,” said Gabriel Shapiro, co-founder of MetaLeX Labs. He further explained that this clause differs from typical venture investments, where capital remains at risk regardless of performance.

Smokey the Bera defended the deal in a statement, arguing that Nova’s compliance team required provisions to cover specific scenarios. He claimed that Nova participated in the Series B fundraise using the same paperwork as all other investors. He also confirmed that Nova remains one of Berachain’s largest tokenholders despite the controversy surrounding the refund clause.

Investor Confusion and Potential MFN Violation

Two investors in Berachain’s Series B round told Unchained they were unaware of the refund clause granted to Nova Digital. They raised concerns that this deal might violate Most Favored Nation (MFN) provisions, which could guarantee early investors access to better terms. Aaron Brogan, founder of Brogan Law, indicated that the refund mechanism likely triggered MFN rights for other investors.

Despite the backlash, Smokey the Bera emphasized that no other Series B investors received MFN clauses. He dismissed the claims in the Unchained report, attributing them to disgruntled former employees. However, sources familiar with the matter suggested that Brevan Howard’s special terms could set a precedent for future token fundraising deals.

Framework Ventures, another investor in Berachain’s Series B, acquired 21,145,476 BERA tokens by the end of Q2 2025. These tokens were purchased at a cost of approximately $72.4 million. At the current price of $1.02 per token, Framework’s holdings reflect a paper loss of over $50.8 million.

Berachain Faces Operational Challenges

In 2025, Berachain experienced around $367 million in net outflows to competing blockchains, according to Artemis data. Despite these financial setbacks, the network has continued to operate, with recent issues arising from a Balancer protocol vulnerability. On November 3, 2025, validators paused the chain temporarily after the vulnerability put $12.8 million in funds at risk. The network was back online within 24 hours, and a white-hat hacker recovered assets.

In October 2025, Berachain announced a potential turnaround strategy with Greenlane Holdings. The smoking accessories company revealed a $110 million private placement to acquire BERA for its digital asset treasury. This move attracted backing from several notable firms, including Polychain, Blockchain.com, and Kraken.

Nova Digital is now being spun out from Brevan Howard due to differences in risk tolerance and strategy. Once the separation is complete, Brevan will have no further involvement with Berachain. This move marks a new chapter for both Berachain and Nova Digital, as they navigate the complexities of the blockchain space and investor relationships.

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