SEC Drops Aave Probe; Token Retraces Amid $540M Market Flush
A major regulatory win for DeFi gets buried in a leverage wipeout, as Stani Kulechov confirms the SEC won’t sue.
The Securities and Exchange Commission has formally closed its four-year investigation into Aave, deciding against enforcement action. Founder Stani Kulechov confirmed the closure on X late Tuesday, sharing a letter from the agency dated August 12.
The regulatory victory, usually a catalyst for a double-digit rally, was immediately suffocated by broader market mechanics. AAVE spiked 7% to $195 on the news before surrendering all gains, trading down to $184 (-2%) as of Thursday morning.
Signal vs. Liquidity
The price suppression is structural, not fundamental. While Kulechov posted the receipts, the wider crypto market suffered a $540 million leverage flush over the last 24 hours. Bitcoin slid 2.2% to $86,400, dragging the altcoin sector into the red.
“DeFi has faced unfair regulatory pressure in recent years. We’re glad to put this behind us as we enter a new era where developers can truly build the future of finance.” — Stani Kulechov
The investigation’s closure marks a definitive shift in U.S. regulatory posture. The SEC has now retreated from probes into multiple DeFi incumbents, including a similar closure for Ondo Finance earlier this month. The agency’s decision not to recommend enforcement action against the largest lending protocol on Ethereum effectively validates the non-custodial model.
The Market Flush
Traders ignored the long-term clarity in favor of short-term survival. Coinglass data shows $167 million in Ethereum long positions were liquidated in a single session. The wipeout erased the immediate bullish impulse from the Aave announcement, forcing the token to re-correlate with a bleeding ETH ($3,016).
With the regulatory overhang removed, Aave’s governance now operates without the threat of a Wells Notice, a status few peers can claim. The market has priced in the panic; it has yet to price in the precedent.
