Aave, a leading lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The platform stated, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. Notably, Mantle and AAVE DAO are the largest contributors, collectively raising 55,000 ETH, equivalent to $127M." Following a $292 million security breach that left the crypto borrowing sector's largest lender facing a financial crisis, Aave and several major crypto firms launched a coordinated recovery effort, dubbed 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 announced his 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, which originated from a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a massive withdrawal of $10 billion. The recovery effort is primarily focused on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
This incident is the largest exploit of the year, surpassing the second-largest 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'.