Berachain's Refund Clause Pits Investor Protections Against Project Sustainability

Berachain's co-founder has dismissed reporting on a $25 million refund clause tied to its Series B investment as "inaccurate and incomplete," amid growing scrutiny of the layer-1 blockchain's funding structure. The controversy centers on a clause granting Brevan Howard's Nova Digital fund the right to reclaim its entire investment until February 6, 2026, a year after Berachain's token generation event (TGE). Documents obtained by Unchained reveal the unusual terms, which require Nova to deposit $5 million into a Berachain wallet within 30 days of the TGE to activate the refund option.

The clause has drawn sharp criticism from legal experts, who describe such post-TGE refund rights as "highly unusual" in token fundraising. Gabriel Shapiro of MetaLeX Labs, with experience on over 50 token deals, stated he had never encountered a similar provision. Traditional venture investments typically involve capital at risk, whereas this arrangement eliminated downside exposure for Nova while preserving upside potential. BERA, Berachain's token, currently trades at $1.02, down 66% from Nova's $3 entry price.

The terms also raise potential legal conflicts. Two Series B investors told Unchained they were unaware of the refund clause at the time of investment. MetaLeX's Shapiro and other attorneys noted that the clause could trigger Most Favored Nation (MFN) provisions, which guarantee early investors access to favorable terms offered to later backers. Sources familiar with the matter suggested the arrangement might violate MFN rights held by other Berachain investors.

Despite the backlash, Berachain's anonymous co-founder, Smokey the Bera, defended the agreement in a statement on X, calling the reporting incomplete and emphasizing that Brevan Howard remains a major tokenholder. The foundation cited "complex commercial agreements" to justify the terms but provided no further details. Unchained could not verify whether Nova completed the required $5 million deposit by March 8, 2025, a prerequisite to maintaining the refund right.

The Series B round, co-led by Framework Ventures and Nova Digital, valued Berachain at $1.5 billion and raised $100 million. The deal's structure has intensified debates over transparency in blockchain fundraising, particularly as the BERA token's performance has lagged. Nova's potential exercise of the refund right-valid until February 2026- could force Berachain to raise $25 million in cash or forfeit token allocations due to a one-year lock-up on investor holdings.

Brevan Howard Digital and Nova co-founder Ashwin Ramachandran declined to comment on the terms. Meanwhile, Berachain's defense of the clause underscores the broader tensions between investor protections and project sustainability in the crypto sector.