Aave DAO and Aave Labs recently clashed over front-end fee allocations, diverting a weekly cash flow of $200,000, which triggered token holders to question governance failure.
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Table of Contents

• $200,000 weekly flow to unknown addresses
• Shareholder uprising: token holders’ strong backlash
• The boundary between Labs and DAO
• Governance quiz and future risks

On-chain detective and Aave DAO representative EzR3aL discovered one weekend in December 2025 that a fee originally intended for the public treasury was being directed to a private address controlled by Aave Labs, amounting to about $200,000 per week. This event, dubbed the “Living Room Civil War,” has put the leading decentralized lending platform Aave under its most severe governance test in history.

$200,000 weekly flow to unknown addresses

Recently, Aave’s frontend integrated CoW Swap services, aiming to optimize user transaction routes. On-chain data shows that the fees generated from this integration no longer flow into the DAO but directly into 0xC542…8380. At the current rate, approximately $10 million will leave the public account in one year.

Shareholder uprising: token holders’ strong backlash

After the fund flow was exposed, the community quickly ignited anger. Marc Zeller, founder of the Aave-Chan Initiative, directly accused the development team of abusing trust:

“Aave Labs, in pursuit of monetization, is directing Aave users’ transaction volume toward competitors. This is unacceptable.”

For institutions and retail investors holding AAVE tokens, this unauthorized cash flow transfer is equivalent to asset theft—akin to management secretly diverting revenue.

The boundary between Labs and DAO

Aave Labs states that the frontend is a “product” developed and maintained at their own expense, not a public good. In other words, while the protocol’s smart contracts are managed by the DAO, the entry points are controlled by Labs, charging users fees “in line with commercial logic.” This explanation highlights the common dilemma faced by Web3 startups in 2025: after token issuance, how can development entities sustain cash flow without undermining community trust?

Governance quiz and future risks

If the development company can redirect revenue without voting, the DAO effectively loses substantive authority. If the treasury continues to be drained, subsequent buybacks or development incentive plans will be difficult to sustain, and the community may even be forced to fork the protocol and start anew.

Wall Street is accelerating the tokenization of traditional assets, where predictable governance structures and clear property rights are becoming primary evaluation criteria. This $10 million defense and offensive in the Aave incident essentially rings the bell for the entire DeFi industry: are governance tokens in our hands “digital equity” capable of asserting cash flows, or just powerless voting tickets? The answer is being written on-chain by the market, and the outcome will determine the future trust and capital flow into DeFi.

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