Next-generation blockchain project VeraChain (BERA) has granted an unusual “right of redemption” to its $25 million Series B investment in Brevan Howard Digital’s Nova Digital Fund, the company announced.
This right allows the Fund to recoup its investment within one year of VeraChain’s Token Generation Event (TGE).
The situation created legal problems due to allegations that other venture capital investors were not informed of the terms of the agreement.
Verachain, which emerged in 2021 as a bear-themed NFT project, became one of the most talked about projects in the crypto world by 2024. The company has raised at least $142 million in venture capital to date, with the latest funding round bringing the token’s valuation to $1.5 billion. The round was co-led by Framework Ventures and Brevan Howard’s Nova Digital fund.
The involvement of traditional financial giants like Brevan Howard has given Verachain great credibility. An anonymous former employee quoted Papa Bear, one of Verachain’s anonymous founders, as saying that the fund’s brand would “legitimize” the project.
According to the documents, the repayment clause allows Nova Digital to recoup the $25 million it invested in one year from TGE on February 6, 2025. This provision eliminates risk to the Fund’s principal.
The BERA token price is currently approximately 66% below the investment price of $3. Therefore, it makes economic sense to exercise the right of redemption. However, the token allocation comes with a one-year lock-up period, meaning Nova will have to relinquish its rights to the tokens if there is demand.
Four lawyers specializing in cryptocurrencies noted that this requirement is highly unusual in the industry. The two noted that redemption rights are typically granted only if a project fails to launch the token. The most important debate is whether redemption rights will be disclosed to other investors. If so, there could be issues with securities laws and investors’ capital.
*This is not investment advice.
