C (3:29)

Yeah, well, again, we're all sorry to hear about what happened with the editorial team at Blockworks, but I guess at least in this one very unique case, their loss was Ardane. And we're happy to publish it. We're going to get into all the details. I know that this story garnered a lot of attention online in particular. But first, let's take a brief break to hear from some of the sponsors who make the show possible.

A (3:50)

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C (4:10)

All right, so let's just kind of level set here. I mean, why don't you just briefly tell us about the story, Jack? Like, what are like the two or three key takeaways that people who read it should come away with?

B (4:21)

Yeah, so I obtained documents from Barachain, which is a layer one blockchain. It's themed around bears. Earlier this year raised 142 million in funding, I believe. And one of their lead backers was Brevin Howard Digital, a large, very famous hedge fund. And what these documents showed was that the sort of term sheet that Brevin Howard, a fund within Brevan Howard, actually signed, offered the firm a refund. Right. Where for up to a year after TGE or when the Bara token came out In February of 2025, that fund could ask for a refund, no strings attached at any time. Now, this is a really remarkable kind of right. It's very unusual, according to lawyers that we spoke with. And, you know, I'm not a lawyer and can't make a strong claim here, but the legality of it is also questionable. If they didn't tell other investors that this fund within Brevin Howard received this refund. Right. I guess, you know, what would be relevant for people listening to this show is that we can't exactly say if the Nova Digital, which is this fund within Brevin Howard, has actually exercised its refund. Right yet. A lot of that stuff probably would happen between exchange accounts or however it is. But basically what we can say is that they have the right at any point between now and February of 2026 to basically demand that Barachain send them $25 million in cash, which is a tough break for any project.

C (6:04)

Yeah, I mean, this story was. It was really kind of interesting to look at because, I mean, we've both looked at these types of deals for years. And I think for some people that aren't in the know on this particular industry, it's hard to underestimate or hard to overestimate the value of having a fund like Brevin Howard on your cap table really brings. I mean, it's the same legitimacy that comes with like A Millennium or an Apollo or Hamilton Lane or any of these other funds that are just known worldwide. Like, these aren't crypto hedge funds. These are like big hedge funds. Revit Howard, I think, manages 34, $35 billion and. And their name means something. So, I mean, to the extent I know you said you got the documents from Verchain, I think you didn't actually get them from Verchain. I know you can't tell us precisely where you got them from, but they were documents, I guess, issued by signing. Yeah. Signed by Baruchain. What more can you tell us about just the mechanics of this series B and how it fits into, like, Bear Chain's trajectory? I know in the story you kind of go through some of the origins of Bear Chain as this, like, fun sort of bear theme blockchain that was very buzzy. But recently it's been on hard times. And I think that part of the story is really important to understand all of the impacts, all the relevant, I guess, takeaways that come from Bearachain having this. I'm sorry, Brevin Howard having this refund. Right. That is going to come due in the next couple of months. So maybe the table on bearing to begin with.

B (7:39)

Totally, Steve. And I think it's important to emphasize, like to take a very left curve look in very simple terms at this deal. It is a great deal for Nova Digital, right. The fund within Brevin Howard. If I could take that deal, I would. I have to give you money. And, you know, if the token performs well, I get to keep the token, but if it performs badly, I get my money back. Like, that is a fantastic term. Um, but it's a really bad deal for Barachain, right? Because, you know, on. On Barachain side of things, one of their lead backers who's supposed to be taking this venture bet on. On their tokens succeeding, can ask for their money back, you know, up to a year after tge. So that's kind of one of the things that immediately struck me when I first came across these documents is like, why would Barachain agree to this term? I still don't know if I have a great answer that I can give you. I think you could speculate that it's based on Brevin Howard's brand or something like this that they were willing to accept really bad terms. But the way it kind of fits into the larger story of Barit Chain is that if you want to look at this really charitably from Barit Chain's perspective, it's kind of like calling your own shot. It's like we are so confident that we are going to have the Barrett token trading in a year above the. The $3 sale price that we gave to the Series B investors that will give you this call option, but you're never going to exercise it, right? So nova Digital spent $3 per bara token. You know, if Bara was trading at $10 in February of 2026, Nova Digital probably doesn't ask for its money back because it's more worth it to them to keep the tokens they. They 3x their investment. Right? But so far, that's not been the case. Barachain launched back in February. It's had some difficulty, I think, achieving like, meaningful usage. A lot of the metrics are down across the board from where they were in February and March. There's not a lot of usage on the chain currently. Some of the apps have launched on Hyper Liquid, or maybe they've just shut down altogether and things like that. And so you add all these pieces together plus just a challenging crypto market for any token. Right now. Bar Chain is far below the $3 per token that that Nova Digital invested 25 million in. It's currently trading around $1. It's at a third of the price that, you know, the Series B investors got. And this causes a real problem Right. For bar chain. Assuming again that that Nova Digital has not yet exercised the refund rate. Right. They haven't asked for their $25 million back. If that price doesn't go above $3 by February, it's in Nova Digital's interest to ask for the 25 million back. Now maybe they can work out some kind of backroom agreement or something. But based on the terms of the contracts that they all signed, Barachain is a chain that has struggled to really achieve meaningful usage over the past several months, and now it's staring down a potential, you know, $25 million hole in the balance sheet. Right.

C (10:51)

Okay, so let's unpack this, this refund clause a little bit more because, I mean, that is obviously being part of the story. I know in the piece you walk through, the idea of having a refund clause is not new to crypto. And this isn't the first example of any type of refund clause. Although, again, based on lawyers, lawyers that you spoke to, it's the very first time that this was done, really, for just one investor. And we'll get into potential bear train, potentially hiding this from some other investors that had a right to know. But how have refund clauses typically worked in crypto, I mean, going back over the last few years?

B (11:27)

Yeah, that's a good question, Steve. And you know, this is a complicated story in some ways, and so it's really good to kind of explain the context. Yeah, refund writes, you know, as we dug into this, these documents a little more, it turns out that refund rights aren't completely unheard of. It's not like Nova Digital invented this new clause when it signed this side letter with Barachain, they do occasionally happen. But what's really unusual about this specific case is that typically refund rights are a kind of insurance against the project, not launching a token. So if I'm some big venture fund and I'm going to invest very early in a, a crypto startup, I may say, hey, you know, in the case that you kind of fold early, you ever launch a token, I never actually realized the gains on this investment. I want you to offer me a refund of my investment in that case. That's a pretty great term for a venture investor to get anyways. But what's really crazy is to say, you know, or really unusual, I should say, is for you to say, hey, even if you launch a token, I want basically, you know, a no, no questions asked call option that I can exercise at any point for up to a year after the tge, that was something that people really haven't heard of because, you know, there's. Yes, this hedges against bar chain not launching a token. It also hedges against the bar token not performing well. And yeah, as you mentioned, Steve, this does happen before. One prominent recent example was this defi project called Flying Tulip, which actually did something very similar. They said, hey, anyone who invested, you get this perpetual. I guess it's more of a put option.

C (13:15)

Yeah, I think, I think you're. When you were saying call option to 42 for brevin, you meant put option as well. But yeah, it's been a little bit.

B (13:24)

Since I was in school.

C (13:26)

You're only like half my age. It hasn't been that long.

B (13:30)

That's fair.

C (13:30)

Sweet.

B (13:31)

You get this put option, you know, at any time you can ask for your money back in Flying Tulip. Obviously the difference there is that Flying Tulip publicly advertised this and they made it available to every investor. But if I was another investor in Barachain Series B and I wasn't told that Nova Digital was given a refund, right, I'd feel a little bit left out to dry, right? Like, they get this unlimited downside risk, but I have to actually risk my capital. And, you know, if I was a Series B investor and I spent $3 per token, I could be down quite a bit at this point in time. And so that's, that's really what's unique here is the fact that, you know, based on our reporting, other investors weren't know. Weren't in the know about this refund, Right? And certainly the public wasn't told, right? Retail investors that bought Bara didn't know that Nova Digital was allowed this refund, right. For up to a year after the tge.

C (14:22)

Yeah. And I think one interesting way to think about the refund, right, especially during the ICO days, is almost like a Kickstarter campaign. Like a lot of these tokens were sold under like SAPs, like a standardized contract. I think it stands for like standard. Standard agreement for future Token sales or something like that. And yeah, the idea just with a Kickstarter, you put the money in, but if they don't launch, they don't make or they don't have, or they don't reach their quota, I guess, to build the product or whatever, you get your money back. So maybe not a perfect analogy, but that's kind of the mental model that people like me, I guess, try to use.

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C (15:54)

I want to get into most Favored nation clauses and some other stuff there, but I think at this point it makes sense to talk about what Barochian's response has been. I know that you tried reaching out to Smokey and the team several times, even back when you were working on this at Blockworks, and then when we decided to publish it here, they gave one sort of terse statement that appeared in the original version of the article, but Smokey then issued a longer, I guess statement on X last night. What did what was sort of the interaction with with the the Barrow team? What did they say about the story and what questions do you still have?

B (16:42)

Yeah, that's probably good to bring up. So, so maybe to kind of just tell the the longer story about this piece in general. I did most of the reporting on this piece while I was still employed at Blockworks. The piece was fully written, it was fact checked, it got like multiple okays internally, but basically there were a couple ducks that we had to get in a row before publication and that obviously didn't happen before the layoffs kind of eliminated our whole news team as they go in a more data first direction. And so I had kind of already been in touch with all the relevant actors, done all of my journalistic due diligence while I was still at Blockworks. And that's why, you know, I think that's important context, right, that Barachain was not caught by surprise by this. More than a month ago I sent over a detailed list of questions that outlined everything that we were planning to report on and none of that changed over the past month. In response to that list of questions, Barachain's PR emailed me and refused to actually answer directly any of the questions that I had. But they said, here's a statement from Smokey Dibara. They also offered a call as time went by. I said, hey, would love to schedule that call that I followed up twice there that was never responded to. Then shortly before we publish an Unchained, I let them know that, you know, hey, no longer at Blockworks, but still working on this piece. It's going to go out in Unchained. And, you know, the first time I actually got any substance from the Bear Chain team was with this Smokey the Bear up statement. I replied to his tweet. So I'm not going to go into it too much, but I think the big takeaway from how I look at it is that I don't think he actually challenges the facts in the article very much. I felt like there was nothing that really, you know, if you read the. The substance of the article, the things that he responds to are either, you know, not really pertinent to the matter at hand, or they just don't really refute the reporting that we put out there.

C (18:59)

Yeah, I'm sorry, I was just going to say, I mean, a couple things you mentioned I think are really important there. I mean, something like best practices for any journalist is there should not be surprises when something comes out, good or bad, especially. Especially if it's potentially a negative story. So, I mean, I know you're a conscientious reporter and we made it. We had a very detailed plan to make sure that we gave them every opportunity to comment on the story and to let them know precisely what was going to be in it. Because the idea is always to be truthful and objective. We're not doing some sort of dramatic TV show where we need to have a big reveal at the end. That's not what this business is. So I know you were very diligent about doing that. And his sort of like, refutation, for lack of a better term. I mean, I think it was funny. One thing that he mentioned is that he said, unlike in the article where we currently claim some Series B investors had this Most Favored Nation, right, which we're going to get into a second. That wasn't actually something that you claimed in the article, the claim for MFN rights related to the Series A and 2, I guess the bigger, more substantive piece that he said, which he actually updated the article this morning to incorporate, is that the refund, right, was really meant as a hedge against. And I'm paraphrasing here, but it's really meant as a hedge against Bear chain, not launching a token or getting listed on an exchange. But one of the things I know you pointed out when you followed up on his thread on X is that how does that square with the fact that the refund, right, is available for up to a year after the tge? Long past, obviously, when the token would be launched and listed on exchanges. And at least as far as up to this recording, we've gotten no response to that. So. So we'll just have to see what happens with all that. But we're very conscientious always about trying to give every person every opportunity to comment on a story before it goes live. I think that's why this job is so difficult sometimes, but also so important. Okay, so let's get into the MFN rights because that's really the crux here and that gets into who might feel aggrieved about this and what could happen next with the story. So briefly, just walk us through what that is and why it's so relevant here.

B (21:26)

Yeah, so a most favored nation, right, is a clause that you generally will see in some venture deals which basically say, like, if I'm an early investor in a startup, I get equally good terms as any later investor. So, you know, you can't have someone come in, in the Series B. If I invest in the Series A and get much better terms than I got, like, I'm entitled to get as good of terms as the Series B person. Right? That, that's a. A basic overview of what these things mean. Now, what we reported on is that at least one investor who's not Nova Digital, I think they, I think they have an MFN as well, if you look at the side letter. But one investor who's not Nova Digital had an MFN that would apply to the Series B. So, you know, Series A seed. So some earlier investor we're reporting had an mfn. Now, what this would mean is that. And Steve, I actually might lean on you a bit here because I think you have more expertise in this area. But there's basically an argument to be made that giving a refund right to Nova Digital should trigger that MFN clause that says, hey, this is a more favorable term that a later investor is getting that I'm not getting. And so, you know, we, we would need to see all of the documents, I'm sure. But there is a world where basically Barachain offering Nova Digital slash the fund within Brevin Howard a refund. Right? And not informing other investors would trigger that most favored Nation. Right. And you know, basically violate the clause that those that investor was given.

C (23:07)

Yeah, I think that's a good way to put it. I mean I did as you mentioned, I helped a little bit with this part of the story. The MFN right. Relates to almost like free trade, like most favored nation status where like if the US has a trade agreement with one country, they always have to have. You can't offer the same or better terms to somebody else. In this case there is some nuance. I mean at a very high level the idea is yes, that if you have this clause, no one else should be given better, better terms than you. What do better terms mean? That can mean a lot of different things. But I mean when it comes to someone basically having a free, a free put on a token that especially is down 67%, that's pretty meaningful. And if you were that firm, you might feel aggrieved. If you were one of the, that one of those firms, LPs, you might be really a breed. So like it. So it, it seems easy to think that this is a triggering clause for that. There is some nuance though, as I said, I mean, because it really comes down to like, are all these investors, can you sort of compare them on an apples to apples basis? And when we spoke with a couple of lawyers about this, it's not always as clear cut as you think. For one, if for instance, Brevin had separate commercial agreements or something else beyond just investing money, that could theoretically be used as justification for not extending for the refund right, not falling under the MFN clause. And this is also one of the reasons we wish, I guess Smokie had spoken to us or to you when you're doing the story. Because in his long Twitter post last night, I think actually in one of the quote he gave you for the story, he mentioned some commercial agreements with Brevin and you followed up and asked him what those were, but we didn't get a response. And then in the Twitter post he did hint at, I think market making and some other commercial agreements there as well, which like if other investors that had that MFN clause but weren't engaged in that, maybe that's something that could sort of be like exculpatory for lack of a better term. Another lawyer we spoke with also highlighted how if there's a significant disagreement or divergence in the amount of money invested, maybe that's something that could also sort of clear out the way of having to fall afoul of this MFN clause. So there are potentially some mitigating circumstances here. Unfortunately, it's hard for us to exactly know what those were, which is why in the story we wrote, or I guess you wrote, how you basically put this out there for the reader so they could understand what, like, the different factors that need to be weighed here. And then I guess we'll just have to see what happens. The one thing that, though, I think is very clear. I mean, you. You put out, I mean, one of the other major investors, Framework Ventures, I mean, they bought, I think, $72 million worth of this token. And I believe their purchase price for a token was $3.42, which is, you know, higher speed, where. Yeah, where Brevin bought it. I know that we're not able to disclose who the investor was with the mfn. Right. But, I mean, Framework, I mean, I think when we did the story, they're looking at a paper loss of $50 million from. From $50 million plus from the BERA investment. And obviously, I would imagine almost every other investor is also sitting on a loss of at least a similar percentage, if not nominal dollar terms. So I would imagine they all would be. Would love to have this type of refund. Right. If they were able to get it.

B (26:48)

Yeah, exactly. And look, the most favored nation stuff is a little complex, I'll grant that. And the reason we think it's important is that that begs the question of, was this refund right, illegal? Did Barichain violate the law by offering one investor this right? But you don't need to say that this right is illegal to say that it's a bit unsavory. And I think it speaks to a larger issue that we've seen in crypto recently, which is that oftentimes the way business is really done behind the scenes is not the way that it appears in public or on podcasts or however else. Right. There can be a way that certain insiders are given terms that are not available to all the investors that are being encouraged to buy these tokens or become part of the community or, you know, stake their bearer or whatever it is. Right. Brevan Howard's fund was given this right that nobody else got. And, you know, nobody in public, even as they were encouraged to follow invest in care about this ecosystem, was told about that. And so this doesn't need to be illegal to just be something that's quite unsavory. And I think the type of behavior that the crypto industry would do better to go without.

C (28:05)

Yeah, actually, I think it's kind of interesting that. I mean, Brevin Howard I don't believe is getting out of crypto, but you did point out in the article how the particular fund under Brevin's umbrella is being spun out. Why don't you just tell us about that and what you think that might mean in the bigger picture?

B (28:23)

Great note, Steve. Yeah, thanks for bringing that up. So over the course of reporting, something really interesting that came up is that basically Brevin Howard Digital itself did not exactly invest in Barachain. What happened is that there's this long, short crypto fund called Nova Digital that was initially within Dragonfly and other crypto VC. It was acquired by Brevin Howard in 2023, I believe this guy, Kevin Hu reportedly sort of runs the operations in there. The, the way I've heard it talked about is they're a little more defined, native, you know, in the trenches, that kind of thing, within this really large institutional hedge fund. Right. What I learned as we were reporting this article out is that Nova Digital is in the process of being spun out from Brevin Howard Digital. They're parting ways. I learned this based on my own sourcing. It's also been reported in Bloomberg at an earlier time. And so what that basically means is that going forward, Brevan Howard is going to have no actual involvement with Barachain anymore. The severance is not technically complete, the last that I heard, but it should be complete sometime soon. And once that's the case, you know, it's Nova Digital on the cap table. It's not Brevin Howard Digital. And I think that's kind of an annoying little note we have to make again and again. But it's, it's an important distinction, I think, which is that, you know, Brevin Howard Digital is not really involved with Barachain going forward. And for what it's worth, per a source I spoke with, this is not a typical practice within Brevin Howard Digital. Right. They have other kind of crypto venture activity outside of the Nova Fund, and this is not something that they typically seek out is refund rights. This was kind of a, from what I'm told, Nova Digital unique thing.

C (30:22)

Yeah. And it's actually kind of interesting, the timing, because I don't believe we're clear on exactly when the spin out will be completed. And I guess what that means for who would get the $25 million if it, like if they execute this, this refund. Right. Which seems very, very likely. So we'll have to watch that. I mean, it would make sense maybe for Brevin to keep the fund in house until that's done. But I don't know what kind of legal paperwork, I don't know what the arrangement looks like as far as, like, who actually might be the beneficiary of those funds. So that's something else that's interesting to watch.

B (30:58)

It's an interesting question and another interesting, I think, kind of open question that we didn't get into in the article because it's land of speculation. But Barrichain recently launched a DAT with Green Lane holdings. It's called, and a number of their investors are stockholders in the DAT. You have Polychain Framework, DAO5. I think there's a couple others on there. Nova Digital is nowhere to be found. They're not investing, they're not stockholders in the dat. They're a liquid fund, according to what Smokey is saying on Twitter. And so they could go buy, buy the bar dat, but they've chosen not to. And I think that's just an interesting detail. I don't have any idea why, but I'd be curious to know sort of why their name was kind of absent from that list of investors.

C (31:48)

Well, if nothing else, it seems like it was a smart move because you put a price table for Bara and Green Lane in the story and they're both going down. So, so, so maybe that was for the better, at least for now. All right, well, let's wrap up. But, but before we do it, I. I just want to see if you have any final thoughts, anything, any other lines of inquiry that you're really interested in following. I know we already discussed a couple of them and also you touched on this a little bit a few minutes ago. But. But what should investors think about when they read a story like this? There's a lot of backroom dealing when it comes to crypto vc. There's a lot. There's significant information asymmetries between, like, teams and investors. And this story really highlighted a lot of that. So, like, what? Yeah, I mean, again, other areas to follow up or just like, what are some key takeaways that readers should have so that they can use your story to make better decisions in the future in a Official, not financial advice.

B (32:55)

Yes. Look, anyone who's spent time in crypto knows that the industry has a bit of a transparency problem. The deeper you get into the industry, you see that oftentimes what is going on behind the scenes is not the same as what's talked about publicly. And that was really my motivation in pursuing this piece. You know, even though I'm not at blockworks anymore, I really wanted to take the time to bring the reporting to Unchained and kind of get their eyes on it and get this piece out. Because, you know, I think investors in the public deserve transparency of what's really going on behind the scenes. What types of deals are people really getting that, that retail investors kind of aren't being told about? And in that spirit, I just want to say, like, look, maybe we got the story wrong. And if that's the case, I would love to see the evidence for it. I don't believe that there's been any compelling evidence that our interpretation of events is incorrect. But, you know, if there are some kind of commercial agreements that sort of add more context or can kind of rationalize why Barachain chose to offer Nova Digital this refund, right? Like, please put it out in public. It would be a little embarrassing for me or whatever, but that's fine. That's not really the point of this. The point is that, you know, the public gets to be informed about what's going on. Really what I'm just hoping for is transparency here. As far as navigating all the comms around this. It's a very complex story. I would think that of the however many people viewed the article on Twitter, you know, viewed the reporting on Twitter, the number who actually clicked through to the Unchained article is fewer, and the number of people who actually read the docs is even fewer than that. So I kind of understand how this game works a little bit. What I would ask is, if you're confused, go read the article and if you're still confused, click on the docs. The full documents unredacted, are linked in the article. This is pretty unprecedented in journalism. This is something I've never done before. But we were able to get the documents in a place where we were able to actually publish them for transparency. So we can say with know, complete certainty that we know that this refund right document was, was sent and signed. We know that this, this SAFT and this term sheet were signed and, and exactly what was in them. So we've put all the evidence out there for you. You can do your research on your own. And, and just as you watch things come out, you know, crypto Twitter, it's a bit of a cesspool for anyone who's spent any time there. Look at the questions that people are, are, are answering, right? The, the, the questions I want to see answered are why was Brevan Howard's fund given a refund. Right. And were other investors told about that refund? Right. And. And other MFN investors as well. That's really what I want to know. And I guess you could throw in there as well. Has Nova Digital exercised this refund? Right. If they wanted to ask for their $25 million tomorrow, could they still do that? These are the types of questions that I think could very easily be answered with, you know, a sentence response, and I don't think that anybody has answered those questions yet. And so there's a lot of noise and a lot of speculation and so forth. But just keep focused on the real core questions of the article. And, you know, myself and a lot of us, I think, hope to get more kind of transparency on that down the line.

C (36:22)

All right, great. Well, I think that's a great way to wrap things up. Thanks for bringing the article to us and working with us to get it out. Thanks to everybody for watching and listening. And tune in again for new episodes and new conversations on bits and bits the interview. Have a good day.

B (36:43)

Thanks so much, Steve.