Aave, a prominent 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 firm Arkham on Saturday. The firm stated, '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.' 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 has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit, which originated from a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion.
The current effort focuses on erasing the bad debt through a coordinated bailout, aiming to recapitalize rsETH and minimize 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.