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 blockchain analytics firm Arkham on Saturday. The post stated, "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 contributed 55,000 ETH, valued at $127M." Following a $292 million security breach that left the largest DeFi lender facing financial instability, Aave and major crypto firms launched a coordinated recovery effort, DeFi United, to stabilize DeFi markets.
Led by Aave service providers, the initiative aims to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave founder Stani Kulecho has personally contributed 5,000 ETH, valued at roughly $11,730,000. The exploit, attributed to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of deposits.
The bailout effort focuses on stabilizing the system and mitigating losses through a coordinated recapitalization of rsETH. This incident follows the second-largest exploit this year, in which an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.