A VAE or Variational Auto-Encoder is the part of Stable Diffusion responsible for transforming pixel-space into latent-space and vice-versa. In this case, the VAE is bad. Usually, with the result of AnythingV3 derived models, this is the result of poor and irregular merging techniques that displace VAE tokens. This can generally be fixed by either using an external VAE or merging a good VAE in to replace the bad VAE.
Images generated with a bad VAE have a tendency to appear extremely desaturated and sometimes grainy. It also may include purple smudges in the image.
