Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest decentralized finance (DeFi) exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform stated, 'To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, via defiunited.eth.
The largest contributors, Mantle and AAVE DAO, have collectively raised 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 to stabilize DeFi markets. Dubbed DeFi United and 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, announced his personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit is attributed to a vulnerability in KelpDAO's integration with LayerZero, which allowed an attacker to mint 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 follows the second-largest exploit of the year, which occurred in late March when an attacker exploited the Drift Protocol on Solana, draining at least $270 million by abusing a legitimate feature called 'durable nonces.'