Backstage Pass: Stani Kulechov with jingle bells on
Aave drama // Pump.thief // Caroline the Scrivener // Regulatory Wonder Twins // Kain's home town
Hi everyone. Not really sure why I’m doing a send today other than the fact I said I would. Maybe you could use a couple of pithy metaphors about the crypto world?
Maybe your mom asked you to help with the ham! What do people do with hams? I don’t know, but now you can say: ‘Oh sorry, mom, I gotta read this email’
I’m here to help!
So here it is because I said I would do it, and I stick to my commitments. But I also kept it short
.Nice flex, bro
Aave turned from the calm king of decentralized finance to a Godzilla versus King Kong movie for Crypto Twitter.
On one side, Stani Kulechov, CEO of Avara, founder of Aave, one of the best-known founders in crypto. On the other side, the whole DAO that grew up around Aave, the gigantic money market.
Not really sure which to call Godzilla and which to call King Kong, but I know this: the landscape is low on threats for crypto right now. There’s no Mechagodzilla coming to unify them around a common enemy.
They have just got to work it out.
But no one seems to have much interest in working it out! It appears that long simmering tensions have exploded into real public vitriol. It’s like when your partner comes home and starts asking you if you know where the lettuce is? Where the peanut butter is? Where is the wine?
What she’s saying is: It’s your job to go to the store, mook. I have a day job. I take the train. We agreed to this. And you’re sitting there in track pants and a tee-shirt with holes in it and thinking to yourself “I’m the voice of my generation.” But you’re also thinking, “This sucks, there really isn’t any wine.”
Avara, the voice of the generation in this metaphor, thought it deserved to keep getting paid for what George Bush, Sr., called “the vision thing,” so it redirected aave.com’s money spigot from the treasury of the DAO (the girlfriend with a real job) and back to itself (the layabout visionary).
Hijinks ensued.
This will be a great movie one day. For AI. When AI watches movies.
Look, I could steelman either side of this debate, but at the end of the day the lesson for future founders is that, if you’re going to DAO, you have to decide, out of the gate, what resources and properties the DAO needs control over if it wants to break up with its founder. Any founder proposing a DAO that’s not willing to think about this seriously — and give up what he needs to give up! — is faking it.
The narrative right now is that DAOs were always nonsense. They were always a fiction, just there to stymie Gary Gensler. I’m not sure I believe that, though.
But the crux of Aave’s problem is that it didn’t have any of these conversations back in the day because of course it didn’t. No one knew if DeFi would get this far. It’s like if the blockchain game were actually basketball and the year was 2023 again. Aave is Florida Atlantic University and it’s made it to the Final Four.
The coach is sitting on the bench watching his boys, thinking of things he didn’t do and telling himself, “Never thought we’d make it this far.”
The Aave dispute, the glory of a DAO, and the discomforts of DeFi growing up
Some controversy has broken out this week over the Aave protocol, as the Aave DAO accuses Aave Labs, the company that first developed the giant money market’s smart contracts, of siphoning off profits that should be going to the DAO.
Robbin’ No-good
One depressing thing about the crypto world is that it’s full of copycats. Another depressing thing about crypto is that it’s full of scammers and thieves. A third depressing thing about the crypto world is that you get inured to stories of chaos agent selfishness because it’s ever-present.
Why am I doing this to myself again, actually.
But frabjous day! This is a new one! Somehow I had missed this story up to now, but last week judges in the UK sentenced Jarrett Dunn to six years in prison. He was a former employee of Pump.fun, the company that gave us memecoin mania.
What did he do? He stole $2 million from the company and then just redistributed it to a bunch of users on Solana. (Quick, someone tell me if I still have the seed phrase for my old wallet — maybe I got a taste?).
My favorite part of the story? He quoted the opening scene of Pulp Fiction as he told everyone on Twitter what he was up to.
And now; Magick: everybody be cool, this is a r o b b e r y. What it do, staccattack?
So, that’s a new one right? Tell me I haven’t heard a version of this one before?
Free, Caroline
Rationalist nerds of the Bay Area, rejoice. Your ideal girlfriend is free. Caroline Ellison has been released from prison.
Recap: Caroline Ellison was a key executive in the FTX empire cooking the books at Sam’s behest. I watched her on trial for Axios. She was the star witness against him, though honestly that’s just what everyone says. The evidence against him was epic, even without her. My jaw was on the floor half the trial, and that wasn’t just because I waited in line to get in the room from 2 AM most nights.
The judge basically didn’t want to send her away because he thought she was so great. He said so at sentencing (which I also watched). But he said he had to, but she didn’t actually end up staying in prison for anywhere close to the two years she served (she did 11 months).
Here’s something I don’t know but I am sure of: Ellison was writing a horny romance novel behind bars. I’m thinking like Ferrante but with elves and a side helping of uncomfortably steamy nerd fantasy. I just hope she served long enough to finish.
I know that I know people who will read whatever she publishes and they will report back to me. I will not be able to do this myself, but I will want to know. If her ultimate book includes a handsome stranger with wild fuzzy hair, an aquiline nose and a manic, unsteady energy causing him to move and shift his attention constantly, well. I’m gonna die.
By the by, the SEC has also signed consent agreements with Ellison and two other members of the FTX inner circle, Nishad Singh and Gary Wang, basically keeping them out of executive roles at public companies for a good long while.
Nothing about writing horny trilogies though.
Clarity Act passage update
However, this will not matter. Just wait.
Especially with one of SEC Chair Paul Atkins’ lieutenants officially in charge of the CFTC, the lesser financial regulator.
Wonder Twin powers gonna activate.
Historically, the SEC and the CFTC have a dysfunctional rivalry. Ever since Trump II began, though, there has been no evidence of that.
Meanwhile, during the last admin, any time CFTC Chair Rostin Benham took the stand before Congress and crypto came up, the look in his eyes read, to me, like it was all he could do not to say some version of:
Gary Gensler is running his agency like a theater kid with a Napoleonic complex, Congressman.
He did not say that, but it felt like he wanted to.
But now we’ve got a man running Washington like a mob Don and the capos have fallen in line. That’s kind of the way. Govern with consensus, get in-fighting. Hierarchy yields collaboration. Don’t blame me! I just work here.
Wait are we talking about DAOs again somehow?
The DAO model is either in crisis or in chrysalis
Almost everyone agrees that decentralized autonomous organizations (DAOs) are a dream.
The prodigal son returns
Synthetix, one of the O.G. DeFi protocols, the one that probably ought to get the credit that Compound gets for creating liquidity mining, is on its way back to Ethereum, because the fee market for transactions has improved so much.
As the High Muckety-Muck, Lord Skinny Fingers, Herald of Doge said recently, “You can just build on L1 now.”
It’s kind of like how NYC was a hot mess up into the 90s and then Giuliani in more estimable days showed up and cleaned things up. Got things in order. In NYC they had crime and dirtiness. On Ethereum they had highway robbery (congested network fees). But those days are over! The hipsters are moving back in, setting up coffee shops. The wifi is so so good.
It’s like how Manhattan came back in the 2000s. Feels good man. Of course the natural next thing to worry about is Ethereum ending up full of the Web3 equivalent of Pinkberries. Could happen!
But...
I’m not too worried about it, honestly.
Kinda think that’s just Solana.
Merry Christmas! Happy holidays! Season’s greetings! Joyeux Noël!
Next Tuesday, look for my roundup of the biggest news of 2025. There are many, but none of them have a sense of humor. Only mine!
Then the next edition of Backstage Pass will be in your inboxes in 2026. We’re going to level this thing up next year. The Front Stage Exit dynasty has begun. We will soon send out emissaries to warn the other nations. The hordes are coming. (translation: forward this to your coworkers).