Aave, a lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the year's largest decentralized finance exploit, as reported by Arkham on Saturday. The platform stated, '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.' Following a $292 million security breach that left the largest lender in the crypto borrowing sector 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, valued at $11,730,000, to DeFi United. The exploit, which was traced back to a KelpDAO integration vulnerability with LayerZero, resulted in an attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a 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. Earlier this year, the second-largest exploit occurred in late March, when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'