Aave, a lending platform, has successfully raised approximately $160 million to compensate for the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The blockchain analytics platform stated, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together have raised 55,000 ETH, valued at $127M." This development comes after Aave and several major crypto firms launched a joint recovery effort, dubbed DeFi United, to stabilize DeFi markets following a $292 million security breach that left the sector's largest lender facing a financial crisis.
The initiative, led by Aave service providers, aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) 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, which originated from a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion. The primary focus of the effort to eliminate the bad debt is to stabilize the system through a coordinated bailout, aiming to recapitalize rsETH and mitigate losses.
This incident follows the second-largest exploit of the year, which 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.'