Chaos Labs Exits Aave Over Risk Control Misalignment
Chaos Labs founder Omer Goldberg cited concerns over risk management philosophy and undefined legal liability for DeFi risk managers as reasons for departing Aave, despite a ₱301 million ($5 million) budget offer to stay.
Key Takeaway
DeFi risk managers face undefined legal exposure with no framework to protect them when protocols fail.
Chaos Labs founder Omer Goldberg announced Monday the firm is ending its three-year engagement with Aave, despite the protocol offering ₱301 million ($5 million) to retain them.
The departure comes as Aave prepares to migrate from V3 to V4, a transition Goldberg said could take months or even years. During this period, both V3 and V4 would need simultaneous management until V3's markets and liquidity fully migrate. Goldberg said the engagement no longer reflects how his firm believes risk should be managed.
Aave Labs CEO Stani Kulechov offered a different account. He said Chaos Labs wanted to become Aave's sole risk provider, forcing out LlamaRisk and replacing Chainlink's price oracles with Chaos-built alternatives. Kulechov said Aave declined because users are more comfortable with Chainlink's services at scale. The protocol will now increase focus on LlamaRisk for risk management.
Chaos Labs raised legal liability concerns as a factor in the exit. Goldberg said there's no regulatory framework or settled law defining what a risk manager owes when a DeFi protocol fails. The firm has operated at a financial loss for three years while serving as Aave's risk manager, according to the company's statements.
Aave crossed ₱60.2 trillion ($1 trillion) in cumulative lending volume in late February and recently integrated with OKX's X Layer Ethereum scaling solution. Chaos Labs raised ₱3.31 billion ($55 million) in a Series A funding round in August 2024.
This article was written based on reporting from Cointelegraph.
