Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform 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 raised 55,000 ETH, valued at $127M." 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 announced a coordinated recovery effort to stabilize DeFi markets.
Led by Aave service providers, the initiative, known as DeFi United, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of 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 $2,346.
The exploit, which was traced back to a KelpDAO integration vulnerability with LayerZero, resulted in an attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The effort to eliminate the bad debt is focused primarily on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses. This year's 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.'