DeFi’s blue-chip protocol is imploding. The AAVE token is down about 18% over the past seven days, making it the worst performer among the top 100 cryptocurrencies, even as bitcoin, ether and other large tokens trade flat to slightly higher. The selloff stands out in a market that has otherwise stabilized, suggesting the pressure is specific to Aave rather than a broader risk-off move.
At the center of the chaos: a governance “civil war” between Aave Labs, the development company founded by Stani Kulechov, and the Aave DAO over who truly owns the protocol’s brand, revenues, and future. One large holder sold roughly 230,000 AAVE — worth nearly $35 million at current prices — over a short window on Monday, swapping the tokens for ether derivatives and bitcoin and triggering a sharp intraday drop of nearly 10%.
Meanwhile, Kulechov himself is attempting to catch the falling knife. Stani Kulechov bought 32,660 $AAVE ($5.15M) at $158 again 7 hours ago. He has bought a total of 84,033 $AAVE ($12.6M) at an average cost of $176 over the past week, currently sitting on an unrealized loss of $2.2M. When a founder’s buying can’t stop the bleeding, the situation isn’t just bad—it’s existential.
The Catalyst: $10M Revenue “Stealth Privatization”
How It Started:
The conflict became public in December following a partnership announcement between Aave Labs and CoW Swap on December 4 to improve swap pricing and provide MEV protection on the Aave interface, according to statements from Aave Labs.
What seemed like a routine technical upgrade revealed itself as something far more controversial. Earlier, swap-related referral fees and positive slippage surplus from ParaSwap flowed directly to the Aave DAO treasury, providing a voluntary but significant revenue stream for token holders. Estimates suggest this amounted to around $200,000 per week, potentially totaling over $10 million annually across supported chains.
The Discovery:
On December 11, a prominent delegate, @DeFi_EzR3aL, releases on-chain analysis. The findings raise alarms. Swap fees from the new CoWSwap contract route to a private wallet controlled by Aave Labs rather than the DAO treasury. In short, DAO revenue is quietly cut off.
The diversion of over $10 million in annual revenue that previously went to AAVE token holders—estimated to be worth $200,000 per week—suddenly flows to Aave Labs’ private wallet instead. For token holders who believed the DAO controlled protocol economics, this felt like theft.
The Explosion:
Marc Zeller, Aave’s largest delegate and lead of the Aave Chan Initiative, responds. He calls the move “stealth privatization.” Tensions explode. Delegates like those from Orbit and the Aave Chan Initiative (ACI), led by Aave Chan Initiative Founder Marc Zeller, labeled this a “stealth privatization” of DAO-funded value.
The Ownership Battle: Who Controls Aave?
The Core Question:
As discussions heated up on the Aave governance forum, the debate shifted to a broader existential question: Who truly owns Aave?
Ernesto’s Proposal:
On December 16, 2025, Ernesto Boado—former Aave Labs CTO and Co-Founder of BGD Labs—posted a proposal titled “[ARFC] $AAVE Token Alignment Phase 1 – Ownership.” The proposal called for transferring key brand assets, including the ‘aave.com’ domain, social media handles, GitHub repositories, trademarks, and naming rights, to a legally structured DAO-controlled vehicle.
The goal was to prevent private monetization of collectively built value and include anti-capture mechanisms to protect the community. The argument: Aave Labs built the protocol using DAO funding and community contributions. Therefore, the DAO—not a private company—should own the brand, code, and revenue streams.
Aave Labs’ Response:
The company maintained it is a private entity and that while the DAO owns smart contracts, Aave Labs retains ownership of the website and covers hosting, security, and frontend engineering costs, according to the company’s statements.
Kulechov said the original revenue stream had only been donated to the DAO due to “regulatory uncertainty,” rather than any sort of obligation or duty. As for the idea that Labs owed the DAO a fiduciary duty, that was “nonsense,” he said.
The Holiday Vote Controversy: “Disgraceful” Timing
The Rushed Escalation:
After just five days of discussion on the matter, what followed was procedural chaos. On December 22, Aave Labs unilaterally escalated the proposal to a Snapshot vote, starting December 23, 2025, and set to conclude on December 26.
The timing—launching a critical governance vote on December 23 with voting ending December 26, during peak holiday travel and family obligations—sparked outrage. Critics argued this was deliberate suppression of voter participation.
Ernesto Rejects His Own Proposal:
On Dec. 22, Kulechov submitted a brand ownership proposal to Snapshot for voting, based on Ernesto’s earlier draft. Ernesto rejected the move, saying his name was used without approval and criticizing the holiday timing. The former CTO stated he did not approve the vote and called the timing “disgraceful,” urging voters to abstain because discussions were ongoing, according to social media posts.
To be very clear: – This is not, in ethos, my proposal. Aave Labs has (for whatever reason) unilaterally submitted my proposal to vote in a rush, with my name on it, and without notifying me at all. If asked, I would not have approved it.
Marc Zeller’s Accusations:
We acknowledge @aave unilaterally escalated the proposal to Snapshot without resolving discussion, without clear consensus, and without consent from @eboadom We’ve posted our position in response to this unprecedented interference in the DAO governance process. Worst outcome…
Zeller described the move as a hostile takeover attempt by Aave Labs. He said control over timing, escalation, and information flow can shape outcomes even when the vote itself follows written rules. Zeller raised concerns about the vote launching during the holiday period and noted that new delegations gained voting power shortly before the snapshot, suggesting potential vote manipulation.
The Market Response: Brutal Selloff
Price Collapse:
AAVE has fallen 18% over the past week and shed more than $500 million in market value. The drop follows a growing fight inside Aave governance over who controls the protocol’s brand, domains and public channels, as CoinDesk reported early last week.
Current Status:
- Price: $153-$158 (varies by exchange)
- 7-Day Performance: -18%
- Market Cap: ~$2.3 billion (down from $2.8B+)
- Worst Performer: Top 100 cryptos
- Volume Surge: 35% above monthly average
Whale Exodus:
Data tracked by blockchain sleuth Onchain Lens shows large holders acting decisively. One large holder sold roughly 230,000 AAVE — worth nearly $35 million at current prices — over a short window on Monday, swapping the tokens for ether derivatives and bitcoin and triggering a sharp intraday drop of nearly 10%.
On-Chain Devastation:
DexCheckAI reported that AAVE lost more than 980 on-chain holders in the past day, while trading activity dropped by over 85%. When holders flee en masse and activity collapses, it signals deep loss of confidence in governance and future value accrual.
Sentiment Collapse:
Social sentiment around the Aave has also dropped. According to the data by DexCheckAI, roughly 59% of posts about AAVE are currently negative. At least 2 out of every 100 posts on CT are discussing @aave, unfortunately, not for the best reasons.
Founder Buying: Confidence or Desperation?
Kulechov’s Accumulation:
This latest purchase follows several buys earlier in the week. Kulechov has accumulated a total of 84,033 AAVE over the past seven days at an average cost of $176, spending roughly $12.6 million. The position sits at an unrealized loss of about $2.2 million at the current price of $153.75.
Two Interpretations:
Wallet data show Kulechov purchased roughly $12.6 million worth of AAVE over the past week at an average price of around $176, leaving him with an unrealized loss of about $2.2 million as the token slid further. Founder buying is often read as a confidence signal, but in this case it has not been enough to offset broader selling.
The Bearish View:
When even the founder’s $12.6M cannot stabilize price, it suggests the governance crisis is worse than insiders admit. Kulechov’s buying may be defensive—attempting to accumulate voting power to control the December 23-26 Snapshot vote rather than genuine confidence in recovery.
The Bullish View:
Alternatively, Kulechov buying at $176 avg (now $154) signals he believes resolution will restore value. If the vote passes and DAO ownership is established, AAVE could rally as uncertainty clears. His unrealized $2.2M loss becomes irrelevant if AAVE recovers to $200+.
The “Poison Pill” Proposals
Three Nuclear Options:
The battle has inspired at least three proposals in the Aave DAO forum:
- Purchase Competitor Spark: The DAO would acquire Spark Protocol, a direct Aave competitor, to reduce dependency on Aave Labs
- The “Poison Pill”: The DAO would sue Aave Labs for “full ownership of all code, intellectual property, and brand,” 100% of Labs’ equity, and all past revenue the company generated from Aave-branded products
- Brand Transfer (Current Vote): The proposal asks whether AAVE token holders should regain control over domains, social media accounts, naming rights, and other intellectual property through a DAO-controlled legal structure
Voting Status:
As of this writing, Snapshot results show that 63.64% of voters have voted against the measure, while 33.21% have chosen to abstain. Only 3.16% have voted in favor. The proposal is failing badly—but low voter turnout during holidays means results remain uncertain.
What Happens Next: Three Scenarios
Scenario 1: Proposal Fails, Aave Labs Wins
If the vote fails (currently 63.64% against), Aave Labs retains brand control and revenue streams. Short-term: AAVE may bounce 10-15% on clarity. Long-term: DAO delegates likely escalate with legal action or fork proposal. Community trust permanently damaged.
Scenario 2: Proposal Passes, DAO Takes Control
If sentiment shifts and vote passes, brand assets transfer to DAO control. This forces Aave Labs to either comply (becoming DAO contractor) or fork the protocol under new branding. Short-term: massive uncertainty, price volatility. Long-term: depends on execution quality.
Scenario 3: Stalemate and Fork
Most dangerous outcome: vote inconclusive, neither side backs down, protocol forks into Aave Labs version and DAO version. Liquidity fragments, users confused, TVL crashes. Both versions likely fail as
Conclusion: When Governance Breaks, Price Follows
The AAVE token is down about 18% over the past seven days, making it the worst performer among the top 100 cryptocurrencies. Stani Kulechov has bought a total of 84,033 $AAVE ($12.6M) at an average cost of $176 over the past week, currently sitting on an unrealized loss of $2.2M. One large holder sold roughly 230,000 AAVE — worth nearly $35 million at current prices — triggering a sharp intraday drop of nearly 10%.
Unlike macro-driven selloffs, governance disputes create open-ended risk. There is no clear timeline for resolution, and outcomes can reshape how value flows through a protocol. In Aave’s case, the question of who controls the brand and front-end gateways cuts directly into how the DAO exerts power offchain, an issue that does not lend itself to quick fixes.
The next 72 hours determine Aave’s fate. If the December 23-26 vote establishes clear ownership, recovery is possible. If stalemate persists, AAVE risks becoming 2025’s cautionary tale about what happens when founders and DAOs go to war. Either way, DeFi has learned a harsh lesson: decentralization is only as strong as governance structures—and when those break, billions in value vanish overnight.
Disclaimer: This content is for educational and reference purposes only and does not constitute any investment advice. Digital asset investments carry high risk. Please evaluate carefully and assume full responsibility for your own decisions.
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