Aave, a leading lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The platform stated, "To date, AAVE has secured $160M to offset the bad debt from the Kelp DAO exploit, facilitated through defiunited.eth.
Notably, Mantle and AAVE DAO have collectively contributed 55,000 ETH, equivalent to $127 million, making them the largest contributors to this effort. In response to the $292 million security breach that impacted DeFi markets, Aave and major crypto firms launched a coordinated recovery initiative, DeFi United, aimed at stabilizing the markets.
Led by Aave service providers, the 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 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 the KelpDAO integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a deposit run as lenders sought to exit, resulting in $10 billion in withdrawals. The primary focus of the effort to eliminate the bad debt is on system stabilization through a coordinated bailout, aimed at recapitalizing rsETH and mitigating losses.
This year's 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, rather than exploiting a code bug or stolen keys.