Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The blockchain analytics 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, valued at $127M." Following a $292 million security breach that left the largest DeFi lender facing a financial crisis, Aave 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 core of the exploit.
Aave founder Stani Kulecho personally contributed 5,000 ETH, worth around $11,730,000 at the current ether price. 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 a subsequent run on deposits. The bailout effort focuses on stabilizing the system by recapitalizing rsETH and mitigating losses.
This year's second-largest exploit occurred in late March, with an attacker draining at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.