Aave, a 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, "So far, 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 and several major crypto firms launched a coordinated recovery effort, known as 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 to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit, which was caused by a vulnerability in KelpDAO's integration 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 primary focus of the effort to eliminate the bad debt is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and mitigating losses.
Earlier this year, the second-largest exploit occurred in late March, when an attacker exploited a legitimate feature called 'durable nonces' on the Drift Protocol on Solana, draining at least $270 million.