Aave, a prominent lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The analytics platform noted, '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 collectively raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left the crypto borrowing sector's largest lender facing a financial crisis, Aave and major crypto firms announced 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 has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price. The exploit was attributed to a KelpDAO integration vulnerability with LayerZero, where an attacker minted 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of deposits. The primary focus of the effort to eliminate the bad debt is on stabilizing the system through a coordinated bailout, aiming 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.'