Decentralized lending platform Aave has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The platform stated, 'AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth.
The largest contributors, Mantle and AAVE DAO, have together raised 55,000 ETH or $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company and several major cryptocurrency firms launched a coordinated recovery effort, DeFi United, to stabilize DeFi markets. Led by Aave service providers, the initiative aims 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. The exploit originated from a vulnerability in KelpDAO's integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion. The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, recapitalizing rsETH and mitigating losses.
Earlier this year, the second-largest exploit occurred in late March, when an attacker exploited the Drift Protocol on Solana, draining at least $270 million by abusing the 'durable nonces' feature.