Aave, a leading lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The platform stated, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. Notably, Mantle and AAVE DAO are the largest contributors, having collectively raised 55,000 ETH, valued at $127M." Following a $292 million security breach that left Aave facing a financial crisis, the company and several major crypto firms launched a coordinated recovery effort, dubbed 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 (ETH) at the center of the exploit. Aave's 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 was traced back to a vulnerability in KelpDAO's 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. Earlier this year, in late March, the second-largest exploit occurred when an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.