Aave, a leading lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The blockchain analytics platform noted that "AAVE has so far 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, equivalent to $127 million.
Following a $292 million security breach that left the crypto borrowing sector's largest lender facing a financial crisis, Aave and several major crypto firms launched a coordinated recovery effort to stabilize DeFi markets. Dubbed DeFi United, the initiative aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) central to 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 roughly $2,346. The exploit was traced back to a vulnerability in KelpDAO's integration with LayerZero, where an attacker minted 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral. This triggered a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The primary focus of the effort to eliminate the bad debt is 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 drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'