Decentralized lending platform Aave has successfully raised approximately $160 million to counterbalance the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The blockchain analytics firm stated, 'So far, 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, equivalent to $127M.' Following a $292 million security breach that left the largest DeFi lender facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort, DeFi United, to stabilize DeFi markets. Led by Aave service providers, the initiative aims 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, valued at approximately $11,730,000. The exploit, attributed to 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 focuses on stabilizing the system through a coordinated bailout, aiming to recapitalize rsETH and mitigate 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 the 'durable nonces' feature.