Aave, a leading lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on social media. The platform noted that "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 raised 55,000 ETH or $127M." Following a $292 million security breach that left Aave facing a financial crisis, the company joined forces with major crypto firms to launch a coordinated recovery effort, dubbed DeFi United, aimed at stabilizing DeFi markets.
Led by Aave service providers, the initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether at the heart of the exploit. Aave founder Stani Kulecho announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price.
The exploit, attributed to a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, ultimately leaving Aave with impaired collateral and triggering a massive withdrawal of $10 billion. The bailout effort is focused on stabilizing the system by recapitalizing rsETH and minimizing 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.'