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, collectively raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company and major crypto 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 center of the exploit.
Aave founder Stani Kulecho personally contributed 5,000 ETH, valued at $11,730,000. The exploit, which originated from a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and a subsequent run on deposits. The effort to eliminate the bad debt focuses on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses. This incident is the largest exploit of the year, surpassing the second-largest exploit in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana.