Crypto's New Risk Hedge: Brevan Howard's Berachain Refund Clause Sparks Debate

A $25 million venture capital investment by Brevan Howard in blockchain project Berachain has ignited controversy after revelations emerged that the hedge fund secured a one-year refund right on its stake, effectively insulating its fund from principal risk. The clause, outlined in a side letter obtained by Unchained, allows Nova Digital-a Brevan Howard subsidiary-to reclaim its investment if Berachain's native token, BERA, underperforms. The firm has until February 6, 2026, to exercise this right, a year after Berachain's token generation event in February 2025.

BERA, which trades at approximately $1.01, has plummeted 66% from its $3 investment price, leaving the token with a fully diluted valuation of $536.7 million. The refund mechanism, tied to a $5 million deposit requirement that Nova must fulfill within 30 days of the TGE, has raised eyebrows among crypto legal experts. Gabriel Shapiro of MetaLeX Labs, who has reviewed over 50 token deals, called the provision "highly unusual," noting it deviates from standard venture capital practices.

Berachain co-founder Smokey the Bera disputed claims of preferential treatment, asserting that all Series B investors received identical terms. The firm emphasized the side letter was a mutual agreement addressing Nova's liquidity needs, not a special concession. However, two anonymous investors in the same funding round told Unchained they were unaware of the refund clause when they committed capital.

The Series B round, co-led by Brevan Howard's Nova Digital and Framework Ventures, valued Berachain at $1.5 billion. Framework, which invested $72.4 million, now faces over $50.8 million in unrealized losses as BERA's price languishes. Meanwhile, Berachain's total value locked hit $3.5 billion in early March, underscoring the project's on-chain growth despite token price volatility.

The debate highlights broader tensions in crypto investing. Traditional venture capital models rely on high-risk, high-reward dynamics, but refund clauses like Berachain's could reshape expectations for institutional participation. One legal analyst said, "This sets a precedent for how funds manage downside risk in speculative assets." Brevan Howard, which acquired Nova Digital from Dragonfly Capital in 2023, has remained silent on the matter.

As the crypto market grapples with regulatory scrutiny and declining valuations, the Berachain case underscores the need for transparency in investment terms. With Nova's refund window closing in early 2026, the outcome could influence how future blockchain projects structure fundraising rounds.