Aave, a prominent lending platform, 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 noted that "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 follows the announcement of a coordinated recovery effort by Aave and several major crypto firms to stabilize DeFi markets after a $292 million security breach. The initiative, known as DeFi United, aims to restore support for rsETH, a yield-bearing derivative token of ether at the core of the exploit.
Aave's 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 KelpDAO integration vulnerability with LayerZero, led to the minting of 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 breach in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'