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 platform stated, '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.' This development comes after Aave and several prominent crypto firms launched a joint recovery effort, dubbed DeFi United, to stabilize DeFi markets following a $292 million security breach that left the largest lender in the crypto borrowing sector 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 announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of roughly $2,346. The exploit was attributed to a vulnerability in the KelpDAO integration with LayerZero, where an attacker minted 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 on stabilizing the system through a coordinated bailout to recapitalize rsETH and minimize losses. This incident is the largest DeFi exploit of the year, surpassing the second-largest breach that occurred in late March, in which an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'