Aave, a decentralized lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by blockchain analytics platform Arkham on Saturday. The largest contributors to this effort are Mantle and Aave DAO, who together have raised 55,000 ETH, valued at $127 million.
Following a coordinated recovery effort announced last week by Aave and major crypto firms to stabilize DeFi markets after a $292 million security breach, the DeFi United initiative aims to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave's founder, Stani Kulechov, has personally contributed 5,000 ETH, equivalent to $11,730,000 at the current ether price.
The exploit, stemming from a KelpDAO integration vulnerability with LayerZero, led to the minting of 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion. The primary focus of the bailout effort is to stabilize the system, recapitalize rsETH, and minimize losses.
This incident is the largest DeFi exploit of the year, surpassing the second-largest exploit in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana.