Aave, a lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The analytics platform stated, 'To date, AAVE has secured $160M to cover the bad debt from the Kelp DAO Exploit, facilitated through defiunited.eth. Key contributors, Mantle and AAVE DAO, have collectively raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company, along with major crypto firms, launched 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, a yield-bearing derivative token of ether (ETH) central to the exploit. Aave's 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, 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 significant withdrawal of $10 billion. The primary objective of the bailout effort is to stabilize the system by recapitalizing rsETH and minimizing losses. This incident follows the second-largest exploit of the year, which occurred in late March, where an attacker exploited the Drift Protocol on Solana, abusing a feature called 'durable nonces' to drain at least $270 million, rather than exploiting a code bug or stolen keys.