Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt stemming from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform stated, "AAVE has raised $160M to address the bad debt from the Kelp DAO Exploit, facilitated through defiunited.eth." It was noted that Mantle and AAVE DAO are the largest contributors, collectively raising 55,000 ETH, equivalent to $127 million. Following a $292 million security breach that left the largest DeFi lender facing financial instability, Aave and major crypto firms launched a coordinated recovery initiative, DeFi United, to stabilize the DeFi markets. Led by Aave service providers, the primary goal of DeFi United is to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit.
Aave founder Stani Kulechov 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 originated from a vulnerability in the KelpDAO integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion as lenders rushed to exit.
The recovery efforts focus on a coordinated bailout to recapitalize rsETH, stabilize the system, and minimize losses. Earlier this year, the second-largest exploit occurred in late March when an attacker exploited the 'durable nonces' feature of the Drift Protocol on Solana, draining at least $270 million.