Aave, a leading 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, facilitated through defiunited.eth. Notably, the largest contributors are Mantle and AAVE DAO, who together have contributed 55,000 ETH, equivalent to $127M.' Last week, Aave and several prominent crypto firms launched a coordinated recovery effort, DeFi United, aimed at stabilizing DeFi markets following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis.
The initiative, led by Aave service providers, seeks to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit. Aave founder Stani Kulecho announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of roughly $2,346. The exploit was traced back to a vulnerability in KelpDAO's integration with LayerZero, where an attacker minted 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 on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
Earlier this year, the second-largest exploit 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.'