2025 Web3 Funding Transparency Crisis: Interpreting Investment Risks from the nova Incident

The Web3 industry in 2025 is like a masterpiece of magical realism, filled with fraud, manipulation, and broken trust. The top ten risk events of this year not only set new records for absurdity but also deeply exposed systemic issues within the current financing ecosystem. Among them, the nova incident involving Berachain became a typical case of lack of transparency in investment, prompting the entire industry to reflect on the fairness of financing terms.

Political Coin Turmoil: The Dark Dance of Power and Money

At the beginning of the year, after the new U.S. President Trump issued the TRUMP Meme coin, this trend quickly spread to the global political scene. Melania Trump and Argentine President Milei also launched MELANIA and LIBRA tokens for promotion. However, this seemingly glamorous “political digital asset show” ultimately turned into a carefully orchestrated plunder feast.

Just hours after Milei’s government launched the LIBRA token, the project team withdrew $87 million USDC and SOL from the liquidity pool, causing the coin’s price to plummet over 80%. On-chain data tracking agencies found that the deployment addresses of MELANIA and LIBRA were linked to multiple historical rug pull projects. Even more shocking, Milei’s confidants were exposed to have received a $5 million bribe to promote LIBRA via a tweet from the president. The cost of several million dollars resulted in illegal profits exceeding $100 million, dealing a fatal blow to the credibility of the Web3 industry.

Multiple Faces of Internal Corruption

Infini’s Self-Serving Tragedy

On February 24, the stablecoin digital bank Infini suffered a major theft, with $49.5 million of user funds disappearing from the Morpho MEVCapital Usual USDC Vault. Investigations revealed the shocking true identity behind this “hacker event”—a senior developer with the highest permissions within the Infini team, Chen Shanxuan.

Chen Shanxuan was supposed to transfer control after contract development but secretly retained control over the contract by exploiting team trust. According to the team, this technical talent was addicted to gambling and contract trading, borrowing heavily despite earning millions annually, ultimately leading to occupational embezzlement. This incident once again proves that high salary and status are no panacea against human nature’s distortions.

USDX Founder Cash-Out Drama

In the stablecoin sector, the USDX project was exposed to have its founder, Flex Yang (former founder of PayPal Finance and HOPE), linked addresses that, before the crisis, engaged in reckless borrowing of other stablecoins by collateralizing USDX, allegedly abusing authority to cash out. Two suspicious addresses ignored annualized interest rates over 30%, draining all collateralized USDX lending pools on Euler, directly causing USDX to severely depeg. On November 8, the project announced a compensation process, but progress remains uncertain.

Notably, Flex Yang has a history of entrepreneurial comings and goings. PayPal fell into insolvency during the 2022 bear market and is still in restructuring; HOPE suffered a severe blow after an attack on its lending products. Now, the collapse of USDX raises suspicions about systemic risk control flaws or deliberate manipulation behind the scenes.

The Fall of Oracles and Governance

Polymarket Whale Manipulation

On March 25, the celebrity prediction market Polymarket staged a ridiculous “reality rewriting.” In the market “Will Ukraine agree to Trump’s mineral rights agreement before April,” a whale holding 5 million UMA tokens manipulated governance voting rights to force an incorrect outcome as “correct,” causing the probability of “Yes” to jump from near zero to 100%.

This manipulation set a precedent, causing ordinary investors to fear being unable to oppose whales and choose to collude. Although Polymarket officially admitted it was an error afterward, they refused to correct it citing “game rules.” By August 2025, UMA introduced a whitelist mechanism, but it seems more like managing symptoms rather than curing the root cause.

Sui’s “Selective” Freezing

On May 22, Sui’s largest DEX, Cetus, was attacked, resulting in the theft of $223 million. Surprisingly, the Sui network voted with 2/3 majority to selectively ignore transactions from the hacker address, forcibly freezing $162 million of stolen funds. While this move appeared “just,” it raised a sharp question: if users transfer funds incorrectly, will Sui be so “helpful” to recover them?

This “exception” reveals a level of centralized power that starkly contrasts with the original vision of decentralization.

Trust Crisis in the Financing Ecosystem

Nova Incident: The “Zero-Risk” Trap of Financing Terms

In November 2025, the financing scandal involving Layer1 project Berachain became a mirror for the industry. According to disclosed documents, Berachain offered a special clause to investor Nova Digital (a fund under Brevan Howard) during Series B: the $25 million investment could be fully refunded within one year after TGE, making the investment nearly “risk-free.”

More seriously, Berachain did not disclose this “material information” to other Series B investors. Multiple anonymous investors stated they were unaware of this clause, and lawyers pointed out it might violate securities disclosure laws. Berachain claimed the clause was designed to prevent token launch failure, but this explanation has already damaged perceptions of fairness in investment.

The nova incident exposes a core issue in Web3 financing: there is information asymmetry between project teams and leading investors, with retail investors entering later bearing hidden risks. This not only breaches financing ethics but also threatens the industry’s long-term health.

The Blurring Boundaries of Deception and Marketing

Zerebro’s “Fake Death” Marketing

On May 4, 22-year-old co-founder Jeffy Yu staged a shocking “suicide show” during a live stream—allegedly pointing a gun at his neck. The video quickly spread on social media, triggering widespread mourning. But the subsequent twist was even more absurd: Jeffy had previously published an article about the “heritage coin” concept, and the token LLJEFFY related to that concept launched on the same day.

Further investigation revealed this was likely a carefully planned “fake death exit.” On-chain tracking showed a wallet possibly linked to Jeffy sold 35.55 million ZEREBRO tokens after the event, cashing out $1.27 million. Jeffy claimed he had long suffered harassment and extortion, choosing to “fake death” to exit safely. Regardless of the truth, this incident tore community trust apart.

Faraday Future’s New Crypto Story

On August 17, Jia Yueting’s Faraday Future ((FF)), known for “returning to China next week,” announced entry into the crypto space, launching the “C10 Treasury” product—a fund tracking the top ten cryptocurrencies globally. FF claimed it would raise $500 million to $1 billion in crypto assets, with a long-term goal of expanding to $10 billion.

Remarkably, this entrepreneur successfully raised funds. He even invested $30 million from Faraday into another company to help it “transition into crypto assets.” Jia Yueting, who repeatedly faced difficulties in traditional business ecosystems, seems to have found a new financing secret in Web3.

Conflux’s Reverse Merger Dream Shattered

In July, the public chain Conflux attempted a reverse merger by having its founder join the Hong Kong-listed company “Linghang Pharmaceutical.” The company even renamed itself “Xingtai Chain Group” in September, causing its stock price to soar temporarily. However, due to unmet financing conditions, the placement plan failed, and the stock price plummeted. Ultimately, on November 26, HKEX suspended trading for “failure to meet continued listing requirements.”

Industry Reflection: The Root of the Trust Crisis

These top ten risk events involve issues across fraud, manipulation, governance failure, regulatory loopholes, and more. From the nova incident, it is evident that even fundamental aspects like financing still suffer from severe information asymmetry and unfair rules within the current Web3 ecosystem.

On the surface, these events reflect moral lapses of individual participants, but their deeper causes point to more systemic problems: lack of transparency in financing, inadequate investor protection mechanisms, excessive concentration of governance power, and weak internal monitoring systems. If the financing traps exemplified by the nova incident are not effectively regulated, the Web3 industry will continue to become a playground for speculators and fraudsters.

Only by strengthening disclosure requirements, improving investor protection, and reinforcing internal audits can the Web3 ecosystem truly awaken from this “magical realism” cycle. This is the urgent reflection the entire industry needs.