Aave, a lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the year's most significant DeFi exploit, as reported by Arkham on Saturday. The analytics platform stated, 'So far, 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, valued at $127M.' Following a $292 million security breach that left the largest DeFi lender facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort to stabilize DeFi markets.
Dubbed DeFi United and 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 $11,730,000 at the current ether price of roughly $2,346. The exploit, linked to a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of $10 billion.
The effort to eliminate the bad debt focuses on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses. Earlier this year, the second-largest exploit occurred in late March, when an attacker exploited the Drift Protocol on Solana, abusing a legitimate feature to drain at least $270 million.