Aave, a prominent lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The platform noted, "AAVE has so far raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together raised 55,000 ETH or $127M." This development comes on the heels of a coordinated recovery effort, dubbed DeFi United, announced by Aave and several major crypto firms last week.
The initiative aims to stabilize DeFi markets following a $292 million security breach that left Aave facing a significant financial crisis. DeFi United, led by Aave service providers, seeks to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit. Aave founder Stani Kulecho has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price.
The exploit, which originated from a vulnerability in the KelpDAO integration with LayerZero, resulted in the minting of 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion. The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and minimizing losses. This incident is preceded by the second-largest exploit of the year, which occurred in late March, where an attacker exploited the Drift Protocol on Solana, draining at least $270 million by abusing a feature called 'durable nonces'.