East Belfast UVF boss Stephen 'Mackers' Matthews is being targeted in a non-violent coup by elements of the terror gang's Shankill Road leadership.
They want to oust the 58-year-old while he and close associates Derek 'Banic' Lammey (56) and David Matthews (34) are on remand charged with affray connected to a paramilitary show of strength in east Belfast earlier this month.
Belfast Magistrates Court was told on Friday that police believe the group of 60 men in a "display of sinister force" at Pitt Park was linked to the East Belfast UVF.
The move against Matthews has the backing of veteran UVF chief-of-staff John 'Bunter' Graham and his second-in-command Harry Stockman.
They have been told that if they want £5m of government financial aid to help members of the group morph into the Action for Community Transformation (ACT) charity, the gang must abandon criminality.
Getting rid of Matthews is seen as being central to this, as police say his East Belfast UVF is heavily involved in drug dealing and racketeering.
"There have been conversations with UVF figures in east Belfast about replacing Matthews. It won't be violence that forces him out - there is no prospect of that. If he goes, it will be a velvet coup," said a senior UVF source.
"Matthews is shrewd enough to realise that his time is coming to an end, and it would be better for everyone concerned if he went of his own accord.
"Government officials have told the UVF leadership at meetings that Matthews has to go, but the onus shouldn't be on us. It's a matter for the police."
Matthews' East Belfast UVF is the gang's biggest unit with approximately 2,000 members.
PSNI chiefs consider it a huge money-making machine that pulls in £2m per year from criminality. It is because of this that a dedicated team within the Paramilitary Crime Taskforce has been ordered to take him down.
In preparation they have been speaking to other police forces within the UK and Ireland that have dismantled drug gangs in London, Manchester and Dublin. Cops were briefed that at the centre of such crime groups is a core of up to a dozen individuals into which all the other members feed. If police can remove these leaders, then the rest of the gang ceases to function properly.
PSNI insiders told Sunday Life that having Stephen Matthews, Derek Lammey and David Matthews on remand in prison takes away the East Belfast UVF's core.
Our source said: "Lammey is Matthews' 2IC (second-in-command) and his son David Matthews acts as a UVF enforcer and bagman.
"Having them off the streets really hurts the East Belfast UVF's ability to function as a criminal organisation.
"It also opens up the possibility for a new leadership to be installed, one that is more receptive to the transformation process other UVF brigades are currently going through."
Supporters of Matthews are adamant he has the full backing of the UVF, not just figures in east Belfast. They insist he and his co-accused have been remanded on "trumped-up" charges and the case against them is going nowhere.
Pals of the loyalist leader are also in agreement with other senior UVF sources that any idea of an internal feud is "fanciful".
A spokesman for Matthews said last night: "Mr Matthews robustly denies the common law public order charges brought against him. He will be strongly challenging the veracity of the evidence in this case.
"Mr Matthews is entitled to the presumption of innocence and a fair trial. Public commentary should be mindful of the need not to prejudice those fundamental principles to which every citizen is entitled."
Stephen Matthews, Derek Lammey and David Matthews are expected to apply for high court bail later this week after being remanded on charges of affray and unlawful assembly in Belfast last Friday.
They are alleged to have played prominent roles in an East Belfast UVF show of strength earlier this month when 60 masked and hooded men swaggered around an estate at the bottom of the Newtownards Road.
PSNI Chief Constable Simon Byrne told a meeting of the Policing Board that officers received specific information relating to a threat against a person and went to find him.
According to Mr Byrne, cops then put "themselves between the person sheltering and the crowd" until back-up arrived.
Belfast Magistrates Court was told the charges against the Matthews and Lammey were based on identification evidence.
It was alleged that Stephen Matthews was spotted near the front of the group "displaying a leadership role". While masks were worn during the show of strength, a prosecution lawyer said that all three defendants were recognised by build and facial recognition.
PSNI sources have identified Stephen Matthews as dressed in a black coat and bobble hat, and his son David Matthews as wearing a sand-coloured snorkel jacket.
Derek Lammey, they claim, is the man seen in the crowd in a dark-blue tracksuit, black monkey hat and facemask.
While up to 60 UVF members walked around Pitt Park, a dozen men and women were forced to seek shelter in the Ballymac Friendship Centre.
Opposing bail at their court case on Friday, a prosecution lawyer argued that the wearing of masks was "highly indicative of those involved clearly knowing this was unlawful activity". She added: "This involved a display of sinister force."
As none of the three accused are charged with any paramilitary offences, their lawyers have disputed the evidence against them.
Stephen Matthews' barrister told the court no face coverings or clothing to match the alleged description were discovered at his client's home.
"This case has been all over the news. There have been politicians getting involved with complaints about how police dealt with it and then mysteriously a number of arrests are made," he said.
David Matthews' lawyer, meanwhile, argued that the alleged UVF connection should be ignored.
He said: "The court simply cannot take account of claims in the community that someone may or may not be a member of an organisation."