Aave, a 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 Arkham on Saturday. The analytics platform stated, '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 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 several major crypto firms announced a coordinated recovery effort to stabilize DeFi markets. Led by Aave service providers, the initiative, known as DeFi United, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit.
Aave founder Stani Kulecho has personally contributed 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 KelpDAO's integration with LayerZero, where an attacker minted 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 minimize 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.'