Aave, a prominent lending platform, has successfully raised approximately $160 million to address 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, 'To date, 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.' Last week, Aave and several major cryptocurrency firms announced a coordinated effort to stabilize the DeFi market following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis. 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's founder, Stani Kulecho, has personally contributed 5,000 ETH to DeFi United, valued at $11,730,000 at the current ether price of roughly $2,346.
The exploit was traced back to a vulnerability in the KelpDAO integration with LayerZero, where an attacker minted 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The effort to eliminate the bad debt focuses primarily on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
The second-largest exploit this year 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.'