Aave, a leading lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by blockchain analytics platform Arkham on Saturday. The largest contributors to this effort are Mantle and Aave DAO, which together have raised 55,000 ETH, valued at $127 million.
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, aiming to stabilize DeFi markets and restore support for rsETH, the yield-bearing derivative token of ether at the heart of the exploit. Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH to DeFi United, equivalent to $11,730,000 at the current ether price.
The breach, which occurred due to a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion. The primary objective of the bailout is to stabilize the system, recapitalize rsETH, and minimize losses. This incident follows another significant exploit 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'.