Aave, a prominent lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform stated, "To date, 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 contributed 55,000 ETH, valued at $127M." Following a $292 million security breach that left Aave facing a financial crisis, the company and several major crypto firms launched a coordinated recovery effort, known as 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 announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit was linked to 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 run on deposits.
The effort to eliminate the bad debt focuses primarily on stabilizing the system through a coordinated bailout to recapitalize rsETH and minimize losses. Earlier this year, the second-largest exploit occurred in late March, when an attacker exploited the Drift Protocol on Solana, abusing a feature called 'durable nonces' to drain at least $270 million.