According to a recent update from blockchain analytics platform Arkham, Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, the largest decentralized finance exploit of the year. Arkham reported on X that the primary contributors to this effort are Mantle and Aave DAO, which together have contributed 55,000 ETH, valued at $127 million. This development follows the announcement of a coordinated recovery initiative, known as DeFi United, aimed at stabilizing the DeFi market in the aftermath of a $292 million security breach that impacted Aave and other major crypto firms. The goal of DeFi United, led by Aave service providers, is to restore support for rsETH, a yield-bearing derivative token of ether that was at the center of the exploit.
Aave founder Stani Kulechov has personally contributed 5,000 ETH, equivalent to approximately $11,730,000, to support this effort. The exploit, which was traced back to a vulnerability in the KelpDAO integration with LayerZero, resulted in the minting of 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a significant withdrawal of deposits. The current focus is on a coordinated bailout to recapitalize rsETH and minimize losses.
This incident is the largest exploit of the year, surpassing the second-largest exploit in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana.