Aave, a leading lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The blockchain 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 together raised 55,000 ETH, valued at $127M." In response to the exploit, Aave and several prominent crypto firms launched a coordinated recovery initiative, DeFi United, aimed at stabilizing DeFi markets.
This effort, led by Aave service providers, seeks to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the center of the exploit. Aave founder Stani Kulechov 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, which originated from a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion. The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and mitigating losses.
This incident follows the second-largest exploit of the year, which occurred in late March, where an attacker exploited the Drift Protocol on Solana, abusing a feature called 'durable nonces' to drain at least $270 million.