According to a recent update from Arkham on X, Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, the largest DeFi incident of the year. The largest contributors to this effort are Mantle and Aave DAO, which have collectively raised 55,000 ETH, equivalent to $127 million. Following a $292 million security breach that left Aave facing a significant financial crisis, the lending platform joined forces with major crypto firms to launch a coordinated recovery effort, dubbed DeFi United.
Led by Aave service providers, this initiative aims to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave founder Stani Kulecho has personally contributed 5,000 ETH to DeFi United, valued at roughly $11,730,000 at the current ether price.
The exploit, which was linked to a vulnerability in KelpDAO's integration with LayerZero, resulted in the minting of 116,500 unbacked rsETH tokens, causing Aave to experience impaired 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 is the largest DeFi exploit of the year, surpassing the $270 million drained from the Drift Protocol on Solana in late March, which was attributed to the abuse of a legitimate feature called 'durable nonces'.