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"Berachain's Unique Refund Conditions Raise MFN Issues in Cryptocurrency Agreement"

"Berachain's Unique Refund Conditions Raise MFN Issues in Cryptocurrency Agreement"

Bitget-RWA2025/11/26 07:00
By:Bitget-RWA

- Berachain co-founder Smokey dismissed a $25M refund clause for Nova Digital as "inaccurate," citing compliance needs for Brevan Howard's Abu Dhabi fund. - The clause allows Nova to reclaim its investment until Feb 2026 if $5M is deposited post-TGE, but activation remains unconfirmed. - Four crypto attorneys called the refund mechanism "highly unusual," raising concerns about potential violations of "Most Favored Nation" investor clauses. - Smokey denied MFN breaches, noting no other Series B investors re

Smokey the Bera, co-founder of Berachain, has refuted recent media coverage regarding a $25 million refund provision given to Brevan Howard's Nova Digital fund, labeling the reports as "misleading and lacking context." He defended the arrangement as part of "intricate business agreements" designed to meet compliance standards. The clause, which surfaced in leaked records published by Unchained and covered by several news outlets, permits Nova to retrieve its investment up until February 6, 2026—precisely one year after Berachain's token generation event (TGE) scheduled for February 6, 2025. To activate this refund right, Nova must transfer $5 million into a

wallet within 30 days following the TGE, .

This refund feature has ignited debate within the industry, as four crypto lawyers interviewed by Unchained described it as "extremely rare" in token fundraising. Typically, refund rights are only available if a project fails to launch its tokens, not due to poor performance. Gabriel Shapiro of MetaLeX Labs,

, mentioned he had never seen a refund clause that applies after a TGE. Two unnamed Series B investors in Berachain also informed Unchained they were not made aware of Nova's preferential terms, of "Most Favored Nation" (MFN) agreements, which are meant to ensure all investors receive equal treatment.

Smokey maintained that the deal was essential to satisfy compliance needs for Brevan Howard's Abu Dhabi-based "liquid-only vehicle," stressing that Nova's involvement came with extra responsibilities, such as supplying liquidity after launch. He also pointed out that Nova still holds BERA tokens, both from the Series B round and from purchases on the open market, to demonstrate its "ongoing support." In contrast, Framework Ventures, another Series B co-lead, is currently facing over $50 million in unrealized losses, as BERA is trading at $1.02, significantly below Nova's $3 entry price.

The unique structure of the refund clause has highlighted deeper issues in crypto fundraising. Nova's arrangement, which limits downside risk while preserving potential gains, stands in stark contrast to typical venture capital deals where investors' funds are fully at risk. Legal professionals have pointed out that such terms might trigger MFN clauses, potentially requiring Berachain to extend similar protections to other backers. Smokey, however, denied these allegations, asserting that no other Series B investors were granted MFN rights and attributing the backlash to "disgruntled ex-employees."

Berachain's operational hurdles add further complexity. The network saw $367 million in net withdrawals in 2025 and experienced a temporary suspension on November 3 due to a vulnerability in the Balancer protocol. Additionally, Nova's upcoming split from Brevan Howard introduces more uncertainty, as the hedge fund prepares to exit the project entirely.

With the February 2026 deadline drawing near, the activation of the refund right still depends on Nova's unverified $5 million deposit. Should the clause be exercised, it would set an unusual precedent in crypto fundraising, challenging established norms regarding investor protections and openness.

the lack of transparency in side-letter arrangements within token investments—a practice increasingly under the microscope from both regulators and investors.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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