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This week, Alex Thorn analyzes the potential second-order effects of Jensen Huang’s ouster from Nvidia; Zack Pokorny explains Aave’s move to offboard some assets from the protocol; and Thad Pinakiewicz unpacks the latest Ethereum Foundation controversy.
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💻 Open-Weight AI Loses Its Best Advocate at the Worst Possible Time
WHAT HAPPENED
Jensen Huang resigned as Nvidia CEO after admitting marital infidelity and following news reports he had multiple affairs, including one with a woman suspected by the U.S. government to be an asset of Chinese intelligence.
Nvidia said Thursday that Huang, 63, stepped down as president, CEO and board member effective immediately, ending a 33-year run atop the company he co-founded in 1993. CFO Colette Kress was named interim CEO while the board weighs internal and external successors, and former Synopsys chief Harvey C. Jones became Nvidia's first-ever chairman. The company gave no reason for the shake-up. The exit came four days after Huang told employees he had been unfaithful to his wife, and after the board opened a probe into whether he had been the target of a "foreign intelligence effort" while initially saying it retained confidence in him.
The woman at the center of the story is Alice Huang (a.k.a. Huang Le, no relation), a Chinese citizen and former top executive at Megaspeed, a Singapore-based data center company. It was spun out of a Chinese gaming firm in 2023, shortly after Biden-era chip export controls tightened. Megaspeed became an official Nvidia cloud partner, buying Nvidia GPUs and renting the compute to Chinese firms including Alibaba. U.S. authorities have reportedly investigated Megaspeed since 2024 over suspected diversion of chips into China, and Singapore opened its own probe in October. The Information has reported, citing two people who know her, that Alice Huang helped arrange at least $7.5 billion of Nvidia chip shipments that moved roughly 240,000 restricted chips into China.
The New York Times reported on Oct. 29 that U.S. intelligence, surveilling Alice Huang during the Megaspeed investigation, concluded she had been recruited by China's Ministry of State Security (MSS) and was passing information to Beijing, and that she had developed a close relationship with Jensen Huang. Her alleged objectives were to gather intelligence on Nvidia's plans and on Huang's lobbying of the Trump administration to loosen export controls, and potentially to push him to advocate for selling Nvidia's most advanced chips into China. Officials reportedly did not believe Huang knew about her alleged role, and he reportedly never received a defensive briefing. On Nov. 6, the Financial Times reported that a U.S. intelligence memo, circulated among senior officials before President Trump's May trip to Beijing, described Jensen's relationship with Alice as romantic. Nvidia has said it does not share classified information with customers, Beijing has called the allegations smears, and no public reporting shows Jensen Huang knowingly passed anything along. The chairs of the House China, Foreign Affairs and Intelligence committees have asked him to testify in a closed-door briefing on Nov. 18.
The second shoe dropped Wednesday night. The Times reported, citing video evidence its reporters had heard descriptions of from unnamed sources but not seen, that Huang also had an affair with Kimberly Powell, Nvidia's vice president of health care and a subordinate. Nvidia's code of conduct cites personal relationships as a conflict of interest, and the board met that night to discuss whether to oust him. Hours after Thursday's resignation announcement, Reuters reported a third relationship, with another Nvidia employee it did not name, citing two unnamed sources (neither Huang nor the employee has confirmed it). Shareholders have already filed a potential class action alleging Nvidia failed to disclose the relationship, and the company says it will still report quarterly results on Nov. 17 as scheduled.
Nvidia shares fell as much as 14.4% at Thursday's open, to $148.80 from Wednesday's $173.73 close, the stock's steepest intraday drop since the DeepSeek selloff of January 2025. Buyers stepped in quickly, and by midday the stock had pared losses to roughly 5%, around $165. That still leaves Nvidia more than 30% below its October all-time high, and the Wall Street Journal estimated the slide has erased close to $750 billion in market value since the scandal broke. Bernstein halved its price target from $400 to $200, and Stacy Rasgon, an analyst at the brokerage, noted that an affair with a direct report made it far harder for the board to keep Huang in place.
The broader market wobbled but held. Nvidia is roughly 6% of the S&P 500, and both the S&P 500 and the Nasdaq Composite opened lower as the S&P tech sector fell 1.3%. By midday both had turned modestly positive, helped by rallies in AMD and Broadcom that picked up the slack from Nvidia, along with strength in energy as oil rose. Investors appear to be treating this episode as a Nvidia governance shock rather than a referendum on AI demand, at least until the company reports results on Nov. 17.
OUR TAKE
The speed at which this story unfolded was striking. The FT published its memo report on Friday, Nov. 6. By Sunday, Huang had admitted infidelity and the board had opened a probe while publicly backing him. By Thursday morning, the founder who ran Nvidia for 33 years and built it into one of the world's most valuable companies was gone, with no named successor. Founder-CEOs of that stature have historically been close to untouchable. Notably, the intelligence concern had reportedly been known to senior U.S. officials for about a year without consequence. What likely broke the board's posture was the Powell report: a relationship with a direct report is a plain code-of-conduct breach, and since similar indiscretions by Intel's Brian Krzanich in 2018 and McDonald's Steve Easterbrook in 2019, boards have treated it as disqualifying regardless of stature. Layer on a securities class action, a Congressional summons and a national-security overlay, and it’s understandable that the board's tolerance collapsed in roughly 48 hours.
In the longer run, we are watching for potential consequences for open-weight AI. Huang was the most important corporate champion of open models in the U.S., and he backed it with the balance sheet: a five-year, $26 billion commitment to open-weight model development disclosed in an SEC filing; the Nemotron family, including a 550-billion-parameter open-weight Ultra model; a coalition of eight labs building frontier open models; stakes in Reflection AI and Thinking Machines; and a pending $12.9 billion acquisition of Hugging Face, the default distribution layer for open models. He also led a July open letter from about 25 companies urging Washington not to broadly restrict open-weight models, many of which are Chinese. With Meta retreating from fully open releases, Nvidia had become the primary U.S. counterweight to the Chinese labs that now lead in open weights.
Founder priorities rarely survive leadership transitions intact, and an interim CEO coming from the CFO seat, a stock down more than 30% from its high and a board in damage-control mode make discretionary spending a natural target. Multibillion-dollar open-model programs and a Hugging Face deal that has not closed (it is targeted for the first half of 2027, and the DOJ has begun asking questions) are the type of line items that could come under review.
The long-term viability of the open-weight movement in the U.S. is also at risk. The open-weight coalition just lost its best-resourced advocate in Washington at the worst possible moment, and the manner of his exit hands restrictionists a narrative: the executive most associated with both loosening China chip controls and defending open weights is now tied to an alleged asset of the Ministry of State Security. The two issues are distinct on the merits, but we expect them to become conflated, starting with the Nov. 18 Congressional briefing.
To be fair, Nvidia's incentive to support open weights does not leave with Huang. Every downloaded model is a GPU workload, and spreading AI beyond a handful of frontier labs that are designing their own silicon is core to Nvidia's moat. Hugging Face CEO Clem Delangue has vowed to keep fighting for open source, and the open-weight coalition includes Microsoft, Meta, IBM and Palantir. Our base case is erosion rather than reversal, but erosion matters. For crypto, open weights are the substrate for decentralized and privacy-preserving AI, local inference, and permissionless agents. A thinner U.S. open-weight frontier would leave builders more dependent on closed APIs, or on Chinese models that face growing political and regulatory risk in the U.S.
We will be watching whether Kress addresses Nemotron and Hugging Face on the Nov. 17 earnings call, whether the Hugging Face timeline holds, and how hard Capitol Hill leans on the open-weight question in its China hearings. – Alex Thorn
👻 Aave Moves to Deprecate More Assets as Protocol Cleanup Continues
WHAT HAPPENED
This week LlamaRisk, the primary risk service provider to the Aave DAO, set forth an Aave Request for Comment (ARFC) to begin freezing, migrating, and offboarding a collection of assets from Aave V3 Core, the top DeFi protocol’s most widely used version.
The move would be a continuation of a larger campaign by the protocol to tighten its operational risk in the wake of the KelpDAO exploit from April [1][2]. The cleanup effort has also included introducing a framework for assessing protocol risk, deprecating assets with little adoption and implementing updated oracle designs for tail assets on the protocol.
Now, LlamaRisk is calling to purge V3 of assets with the following characteristics:
Restaking exposure: assets whose backing is delegated to secure other services or networks. rsETH is the main example on the list.
Leveraged wrapping strategies: assets where most of the backing is itself a leveraged position in another asset, so the collateral and its underlying move together under stress.
Derivatives strategies in the backing: staked or wrapped assets where part of the backing goes into derivatives beyond simple hedging, such as covered-call writing.
Custom non-custodial bridge designs: wrapped assets whose backing is held by a purpose-built signer or enclave network rather than an established custodian.
Reserves with limited demand: positions too small to justify ongoing maintenance, regardless of asset quality.
Issuer risk: issuers with insufficient operational and security resourcing relative to the size of their exposure on Core, as judged by the Aave Risk Framework.
The significance of this move rests on the sheer size of the assets recommended to be offboarded. At the time of LlamaRisk’s governance post, it covered $1.33 billion of collateral assets and $1.03 billion of borrowed assets (roughly 8% of outstanding borrows on V3 Core). This potentially poses monumental operational efforts to get the assets migrated and offboarded and could crimp Aave revenue if not migrated effectively. Most of the size comes from assets used in looping strategies (i.e. liquid staking and liquid restaking tokens used to gain leverage to Ethereum’s staking rate). The proposal primarily targets ETH liquid staking/restaking tokens on a USD basis for removal. As demonstrated by Galaxy Research, the strategies in which these asset types are present pose acute risk to Aave in that they carry high amounts of leverage by users borrowing close to their liquidation thresholds. As a result, even small deviations in price as a result of issuer shortcomings can have large implications for Aave.
It’s worth noting that Aave is not rejecting these assets outright. The overarching plan is to make V3 Core a place for pooled blue-chip asset lending and borrowing, while V4, which has greater flexibility around risk siloing, can house a fuller spectrum of assets.
OUR TAKE
Net, this would be a positive step for Aave, and DeFi at large, to take. Aave is now building a more formal view on how assets are constructed and setting risk parameters that align with it, using past failures as a guide. The risk doesn’t fully disappear, however. The attack surface for the assets that remain active will still exist, and attackers will keep finding new angles of exploitation, possibly using AI assistance to break through.
This is why collateral listing is a security decision. Lending markets have been a popular route for attackers to turn forged and stolen assets into something they can keep at market value, by converting collateral into liquid assets instantly, at oracle prices, with no real slippage outside of loan-to-value parameters (and the assets they pilfer come at the expense of protocol liquidity providers). In the KelpDAO exploit, attackers minted approximately 116,500 unbacked rsETH tokens and used them as collateral to drain real wrapped ether from Aave’s pools, leaving roughly $200 million in bad debt. In the October Binance exploit, the attackers held USDT that Tether could freeze, so they deposited $60 million of USDT into Aave V3 and borrowed $44.6 million of wrapped ether around 40 minutes before the first freeze. That position stayed overcollateralized, but suppliers’ WETH ended up with the attacker, and recovery now depends on collateral that blacklisting the attacker’s wallet could not automatically retrieve from the pool.
From this perspective, the updates being proposed to Aave’s collateral set are about protecting liquidity providers (LPs). For example, on Aave V3 Core every WETH and stablecoin supplier underwrites every listed collateral asset at the same pooled rate, while the extra yield from riskier collateral mostly goes to the borrowers looping it rather than to the suppliers carrying the risk. Narrowing V3 Core to a tighter set of blue-chip collateral would rebalance this trade. LPs would take less tail risk for the same return and attackers would have fewer routes to converting their positions into desirable, censorship-resistant assets.
What makes this repositioning possible is V4. Before Aave’s latest version launched, its choice was binary: list an asset and have every supplier underwrite it or turn it away and lose the business. V4 removes that tradeoff. Each collateral asset sits in a “spoke” with its own caps, and borrowers pay a premium in proportion to their collateral risk, so suppliers are paid for what they underwrite and exposure to any one asset is bounded and becomes a more explicit choice. That frees V3 Core to concentrate on blue chips while collateral assets the protocol views as riskier can be siloed off and be more compensatory to LPs.
The open question around the proposal is migration, and the risk stays in the meantime. A freeze would stop these markets from growing and cut off new collateral as a route for attackers, but it wouldn’t remove the exposure for LPs already on V3 Core. That will only disappear when the borrows backed by these assets are repaid or moved. rsETH has been frozen since April and still backs over $600M of WETH debt, so this process is likely to be slow, and suppliers will carry the legacy risk until it’s done. Notably, LlamaRisk proposed reflecting the Emode configurations of collateral assets being deprecated across those that will remain on the platform (e.g. rsETH’s emode configs will apply to weETH, wstETH, and cbBTC), so borrowers and loopers can swap out their collateral assets to maintain a loan with the same configuration.
The plan would work optimally only if V4 absorbs the demand V3 Core is pushing out, or if borrowers swap out deprecated collateral assets for retained ones. If borrowers move to V4 or swap into retained Core collateral, Aave will keep the business and shed the risk. If they leave, Aave will give up revenue to competitors willing to take the risk (a scenario which could also be read as the premium of taking risk being removed from protocol economics).
LlamaRisk is betting on the first outcome and moving slowly to get there: positions are frozen rather than forced out, and harsher levers, like higher borrow rates on the leveraged loops that get netted out through incentive programs for users not using collateral on the chopping block, are held back as a last resort.
Nonetheless, slowness is a reasonable price given the magnitude of the plan and the possible long-term benefits it should bring to V3 Core and the Aave product consortium generally. – Zack Pokorny
🔷 Mandatory Fun? Suit Claims Ethereum Foundation Took Irony Too Far
WHAT HAPPENED
A former Ethereum Foundation employee alleges she and a colleague were fired for organizing a written objection to a clause in its institutional mandate that, read plainly, asks violators to take their own lives with a sword.
Kayleen Fulton, who led the Foundation’s protocol support team and facilitated All Core Developers, the open process through which the protocol is upgraded, filed a lawsuit last week against the Foundation and Vitalik Buterin, Ethereum’s creator. Her complaint, in the U.S. District Court for Colorado, describes a workplace where an inside joke from the Milady corner of crypto became a condition of employment, and where leadership passed up multiple opportunities to make the apparent suicide pledge optional, let alone remove it.
According to the complaint, the foundation circulated the mandate on Feb. 25 with a “Source Seppuku License” attached, a bit of Remilia-flavored internet theater that names ritual suicide as the penalty for violating its terms. Within a week 79 employees had backed removing the language, some pointing to a colleague’s suicide the year before as the reason it was more than a matter of taste. Leadership responded by keeping it in an illustrated edition with anime art and cartoon cats, which is roughly what you would do if you had decided the problem was that the clause wasn’t whimsical enough.
On March 20, employees were told to affirm the mandate or leave, and were reassured that the seppuku language was a cultural reference and not meant literally. Five days later, 53 of them signed a letter affirming Ethereum’s principles while rejecting the conditions under which they were being made to affirm them, which is about as polite and pro-institution as dissent gets. On April 6, the letter’s two organizers, Fulton and Trent Van Epps, were fired, according to the suit. Fulton’s suit alleges retaliation, disability discrimination, and medical-leave violations, and notes she had disclosed a cancer diagnosis shortly before her dismissal. These are still allegations, but it is hard to miss that the mandate itself describes Ethereum as liberating people from power relationships “where dissent imposes a heavy price.”
According to the complaint, the EF’s lawyers denied in May that Ms. Fulton “was subjected to unlawful conduct, economic duress, retaliation, or termination in violation of public policy,” but did not state a reason for her termination. The EF has not made any public comments about her claims since they became public.
OUR TAKE
I put very little stock in the criticism the Ethereum Foundation usually gets, most of which comes from people wishing their bags were heavier. Crypto Twitter has blamed the EF for not doing enough, not promoting projects, and not pumping the token. Meanwhile Ethereum has the deepest DeFi ecosystem and the most TVL of any chain by a wide margin, and foundations that did pick winners, like Avalanche’s, got hammered when those memes went nowhere. The EF exists to steward a vision, not a price. It is a nonprofit foundation, not a corporation, a home for developers thinking decades ahead rather than for suits, and that is part of why the weirdness is a feature. When Vitalik gives a conference talk in a cape and a mask, I mostly think it’s fine.
All of that said, the suit’s allegations are concerning. Imagine the HR department at a normal company hearing from 79 employees, some of them grieving a colleague, that a mandatory document was hurtful. It could have deleted the clause that afternoon without even consulting a lawyer, and it would certainly not have fired the people who asked nicely. Being esoteric is all well and good (especially when the work is mysterious, and important). But enforcing your esoterica by firing people, as the foundation allegedly did, is how you become Lumon, the fictional company in television’s “Severance,” an institution whose mission talks about care while its actions treat employees as disposable.
Crypto Twitter may want the EF to start acting like a corporation, but it doesn’t need to. If the suit’s claims prove correct, the foundation needs to act like the organization its own mandate describes, one where disagreeing doesn’t cost you your job. Until then, please report to the Break Room. – Thad Pinakiewicz
Other News
🪨 NYSE to settle tokenized stocks on Avalanche blockchain ...
🚀 ... as parent’s OKXICE JV gears up to launch Nov. 23
✅ Coinbase approved for U.S. federal trust bank charter
👔 Solana gets its first tokenized stock venue under SEC framework ...
📅... as DTCC plans to bring tokenized securities to chain in 2H ‘27
🇩🇪 Deutsche Bank launches digital asset custody service
🏦 PNC Bank to offer clients stablecoin payments via Coinbase
🩹 Bitcoin Core dev team discloses three patched security flaws
🦻Startup proposes replacement for data centers’ loud diesel generators
⛆ Stablecoin card startup Rain launches vaults for AI agents
Chart of the Week: How Polymarket Priced Odds of Huang’s Exit
Jensen Huang’s exit from Nvidia was a slow-building story before it became a fast one. As they say: gradually, then suddenly.
The New York Times first reported his close relationship with Megaspeed executive Alice Huang, an alleged Chinese spy, on Oct. 29. On Nov. 8, Huang admitted infidelity in a letter to employees and the company said the board had opened an investigation. At the time, Nvidia said he remained committed to continuing as CEO.
Nevertheless, observers began speculating (in the armchair sense) whether he was on his way out, and financial speculation followed as prediction markets spun up. Initially, they gave low odds for a Huang departure.
Then, on Nov. 11, the Times reported Huang had also had an affair with an Nvidia executive who reported to him. Within about two hours, Polymarket contracts on whether Huang would leave had repriced from ~17-30% to ~90%. About 12 hours later, Nvidia announced his ouster.
Data note: Prices are Polymarket CLOB price history (1-minute fidelity) for each contract’s YES token, with token IDs pulled from the Gamma API. Price history is a sampled series, not individual trades. – Will Owens
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