Aave, a prominent lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by blockchain analytics platform 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 the crypto borrowing sector facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort, known as DeFi United, to stabilize DeFi markets. The initiative, led by Aave service providers, aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the core of the exploit.
Aave founder Stani Kulecho personally contributed 5,000 ETH to DeFi United, valued at roughly $11,730,000 at the current ether price of $2,346. The exploit, attributed to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of $10 billion. The recovery effort focuses on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses. This incident follows the second-largest exploit this year, which occurred in late March when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'