Berachain's provision of a $25 million special refund right to a fund may violate SEC anti-fraud requirements.

Documents obtained by Unchained show that Berachain has granted Nova Digital, a cryptocurrency-focused fund under Brevan Howard, one of the lead investors in its Series B funding round, a refund right on its $25 million investment. This right is valid for one year following the Berachain token generation event (TGE, which occurs on February 6, 2025). This refund clause means that Nova Digital's fund bears no risk to its principal: if the BERA token performs well, the fund will receive a return; if the token performs poorly, the fund can request a refund of its investment. Four lawyers specializing in the crypto space stated that granting investors a refund right after a TGE is "highly unusual." The documents show that Nova Digital invested $25 million, acquiring BERA tokens at $3 each, as part of its Series B funding round. Other investors included Polychain, Hack VC, Arrington Capital, and Tribe Capital. The refund agreement was stipulated in a side letter signed on March 5, 2024. The BERA token is currently trading at approximately $1.02, down about 66% from Nova Digital's investment price ($3). If Nova Digital exercises its refund right (with a deadline of February 6, 2026), Berachain may need to pay $25 million in cash to repay the investment, potentially causing liquidity issues. Project documents show that the tokens purchased by investors have a one-year lock-up period, so Nova exercising its refund right may mean forfeiting its BERA allocation. Two lawyers familiar with capital markets regulations stated that it is uncertain whether Berachain has a legal obligation to disclose the refund terms to other investors in the Series B round. Two anonymous investors stated that Berachain did not inform them that other investors had refund terms. Smokey the Bera, an anonymous co-founder of Berachain, stated in an email statement: "Unchained's report on this matter is neither accurate nor complete. Brevan Howard remains one of Berachain's largest investors. Their investment involves multiple complex business agreements, but they participated in the Series B funding round using the same documents as all other investors."