Decentralized lending platform Aave has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by blockchain analytics firm Arkham on Saturday. Arkham noted, 'To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together contributed 55,000 ETH, valued at $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company joined forces with major crypto firms to launch a coordinated recovery effort, dubbed DeFi United, aimed at stabilizing DeFi markets.
Led by Aave service providers, the initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave founder Stani Kulecho personally contributed 5,000 ETH to DeFi United, valued at $11,730,000 at the current ether price of roughly $2,346.
The exploit, which stemmed from a KelpDAO integration vulnerability with LayerZero, 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 recovery effort is focused on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses. This incident follows the second-largest exploit of the year, which 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.'