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 X. The largest contributors to this effort are Mantle and Aave DAO, which have together contributed 55,000 ETH, valued at $127 million. Following a $292 million security breach that impacted the DeFi lending sector, Aave and major crypto firms launched a coordinated recovery initiative, known as DeFi United, to stabilize the market. The primary objective of this effort, led by Aave service providers, is to restore support for rsETH, the yield-bearing derivative token of ether 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. The exploit, which was attributed to a vulnerability in the KelpDAO integration with LayerZero, led to the minting of 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and a subsequent run on deposits.
The coordinated bailout aims to erase the bad debt, stabilize the system, and mitigate losses. This incident is the largest DeFi exploit of the year, surpassing the $270 million drained from the Drift Protocol on Solana in late March.