Blockchain Project's Secret Refund Clause Sparks Legal and Fairness Debates

Blockchain project Berachain and hedge fund Brevan Howard are entangled in a dispute over a $25 million refund clause tied to the crypto firm's February 2025 token launch. Leaked documents reveal that Brevan Howard's Nova Digital unit secured the right to reclaim its investment within 12 months of the token generation event (TGE), provided it deposits $5 million into a Berachain wallet-a condition neither party has confirmed was met. The clause, which allows Nova to request a refund until February 6, 2026, has drawn scrutiny for its unusual terms and lack of transparency to other investors.

The Series B funding round, which valued Berachain at $1.5 billion, saw Nova co-lead the investment alongside Framework Ventures. Nova's $25 million stake represented one-quarter of the $100 million round. Section 7 of the agreement grants Nova the right to request a refund, while Section 6 mandates a $5 million deposit by March 8, 2025, to activate the clause. Unchained, which obtained the documents, could not verify whether the deposit occurred. If unfulfilled, the refund right would expire.

Berachain's anonymous co-founder, Smokey the Bera, dismissed the reporting as "inaccurate and incomplete," emphasizing that Brevan Howard's terms were identical to those of other investors. The founder attributed the side letter -signed by Berachain's general counsel and Nova's director- to Nova's compliance team seeking additional safeguards against TGE failure risks. However, two Series B investors told Unchained they were unaware of the clause at the time of investment.

Legal experts describe the arrangement as highly unconventional. Gabriel Shapiro of MetaLeX Labs, who has negotiated over 50 token deals, called post-TGE refund rights "unprecedented," noting such clauses typically apply only if projects fail to launch tokens entirely. The structure eliminates downside risk for Brevan Howard while preserving upside potential-a stark contrast to traditional venture capital models.

The BERA token, which trades at approximately $1.01, has plummeted 66% from Nova's $3 entry price. If Nova exercises its refund right, Berachain may need to raise $25 million in cash to repay the investment, potentially straining its liquidity. The firm's total value locked hit $3.5 billion in early March, but per The Block its fully diluted valuation now stands at $536.7 million.

The controversy has sparked questions about fairness. Four crypto lawyers consulted by Unchained highlighted that the clause could violate "Most Favored Nation" provisions, which typically ensure early investors access to terms offered to later backers. Brevan Howard Digital and Nova co-founder Ashwin Ramachandran declined to comment, while Berachain stated it remains committed to "complex commercial agreements" that justify the differential terms.

With Nova's refund window closing in early 2026, the dispute underscores growing tensions in crypto fundraising practices. As institutional investors seek risk-mitigation strategies, the case may set a precedent for how projects balance innovation with investor transparency.