"Berachain's Special Refund Terms Spark MFN Concerns in Crypto Deal"

Berachain's co-founder Smokey the Bera has dismissed recent reporting on a $25 million refund right granted to Brevan Howard's Nova Digital fund as "inaccurate and incomplete," defending the terms of the agreement as part of "complex commercial agreements" tied to compliance requirements. The clause, revealed in leaked documents by Unchained and reported by multiple outlets, allows Nova to reclaim its investment until February 6, 2026-exactly one year after Berachain's token generation event (TGE) on February 6, 2025. The arrangement requires Nova to deposit $5 million into a Berachain wallet within 30 days of the TGE to activate the refund option, a step that has not been confirmed as completed.

The refund mechanism has sparked industry debate, with four crypto attorneys consulted by Unchained calling it "highly unusual" in token fundraising. Traditional refund rights typically apply only if a project fails to launch tokens entirely, not for underperformance. Gabriel Shapiro of MetaLeX Labs, who has worked on over 50 token deals, stated he had never encountered a post-TGE refund clause. Two anonymous Series B investors in Berachain also told Unchained they were unaware of Nova's special terms, raising concerns about potential violations of "Most Favored Nation" (MFN) clauses, which require equal treatment of investors.

Smokey argued that the agreement was necessary to address compliance concerns for Brevan Howard's Abu Dhabi-based "liquid-only vehicle," emphasizing that Nova's participation included additional commitments, such as providing liquidity post-launch. The co-founder also highlighted Nova's continued holdings in BERA, including both Series B tokens and open-market purchases, to underscore its "supportive" role . However, Framework Ventures, another Series B co-lead, faces over $50 million in paper losses as BERA trades at $1.02, far below Nova's $3 entry price .

The refund clause's structure has exposed broader tensions in crypto fundraising. Nova's asymmetric risk profile-preserving upside while capping downside-contrasts sharply with standard venture investments, where capital remains at risk. Legal experts noted that such terms could trigger MFN obligations, potentially obliging Berachain to offer similar protections to other investors. Smokey rejected these claims, stating no other Series B participants received MFN clauses and attributing criticism to "disgruntled former employees" .

Berachain's operational challenges further complicate the situation. The network has experienced $367 million in net outflows in 2025 and faced a temporary halt on November 3 after a Balancer protocol vulnerability. Meanwhile, Nova's pending separation from Brevan Howard adds uncertainty, with the hedge fund set to withdraw from the project entirely .

As the February 2026 deadline approaches, the refund clause's activation remains contingent on Nova's unconfirmed $5 million deposit. If exercised, the payout would mark a rare precedent in crypto fundraising, testing industry norms around investor rights and transparency. For now, the controversy underscores the opaque nature of side-letter agreements in token deals-a practice increasingly scrutinized by regulators and investors alike.