Berachain-BERA founder calls $25 million recovery report ‘inaccurate and incomplete’

The anonymous founder of Berachain, known as Smokey the Bera, disputed investigative reports revealing that Brevan Howard’s Nova Digital fund received a refund of its $25 million Series B investment, calling the coverage “inaccurate and incomplete.”

This disclosure has led to increased scrutiny of the funding practices and transparency standards of this layer-one blockchain, particularly with Berachain trading at $1.02, roughly two-thirds below Nova Digital’s entry price of $3.

Additionally, documents obtained by Unchained show that Brevan Howard’s Nova Fund received an unusual post-launch buyout clause that allows it to recoup its entire $25 million investment until February 6, 2026, a year after Berachain’s TGE.

Furthermore, 4 lawyers specializing in Unchained digital currencies asserted that such arrangements are extremely rare in fundraising operations through the sale of currencies, with recovery rights generally only applying in the event of failure of currency launch projects.

Unusual elements raise questions about transparency

The buyback mechanism required Nova Digital to deposit $5 million into the Berachain wallet within 30 days of the coin’s launch on February 6, 2025 to activate the buyback option, thereby eliminating the fund’s downside risk while maintaining upside potential, which is very different from traditional venture capital investments, where capital remains exposed to risk regardless of performance.

Gabriel Shapiro, co-founder of MetaLeX Labs who has worked on more than 50 cryptocurrency fundraising deals, said he has never encountered a redemption right after a token generation event (TGE) during a funding round.

Two investors participating in Unchained’s Series B round also confirmed that they were not informed that another participant had benefited from special redemption terms.

Aaron Brogan, founder of Brogan Law, noted that such a clause could trigger most favored nation (MFN) clauses, which guarantee early investors access to any preferential terms afforded to later investors.

According to informed sources, this arrangement actually constitutes a violation of the MFN rights enjoyed by at least one of the other investors in the Perachin project.

The Foundation defends trade agreements

Smokey the Bera defended the deal in a lengthy statement posted to Platform X, emphasizing that Brevan Howard remains one of the largest holders of Berachain.

Explaining that Nova’s compliance team required the inclusion of special provisions to address scenarios where BERA coins reserved and purchased during a funding round may not be classified as an eligible investment under the fund’s liquidity strategy, Smokey wrote: “ Their investments involve complex commercial agreements, but they participated in the Series B funding round with the same documents used by all investors.”, adding that Nova is committed to providing liquidity on the network post-launch.

Smokey called Unchained’s report incomplete, noted that some disgruntled former employees helped shape the story, and the organization confirms that no other Series B buyers are on MFN terms, despite the allegations in the article.

When asked, Smokey revealed that he was suffering millions of dollars in losses on liquid purchases of Berachain, in a bid to refute speculation that insider selling was behind the price pressure.

Market Challenges and Recovery Efforts

Berachain price crashed more than 90% from its all-time high of $11 to levels near $1.02, causing huge losses to large investors.

Framework Ventures, which co-led the Series B round with Brevan Howard’s Nova Fund, held a total of 21,145,476 Berachain tokens at the end of Q2 FY2025 worth approximately $72.4 million, representing theoretical losses of over $50.8 million at current prices.

Over the course of 2025, the Parachain network saw approximately $367 million in investments towards competing blockchain networks, according to data from the Artemis platform.

On November 3, auditors temporarily shut down the network after discovering a vulnerability in the Balancer protocol that threatened assets worth $12.8 million. Operations resumed in less than 24 hours and the assets were fully recovered via a security specialist (white-hat hacker).

Later, the Berachain Project announced a potential transformational initiative in October, when smoking accessories company Greenlane Holdings unveiled a $110 million private placement to purchase Berachain and add it to its treasury of digital assets.

The digital asset treasury is backed by Polychain, Blockchain.com, Kraken, North Rock Digital, CitizenX and dao5, with Papa Bear acting as an advisor to the company according to an application filed with the United States Securities and Exchange Commission (SEC).

Now the Nova Digital fund is separated from Brevan Howard due to differences in risk tolerance and strategy; The fund will operate independently, as Brevan will no longer be involved in the Berachain project once the split is complete.

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