Aave, a leading lending platform, has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on X. The blockchain analytics platform noted that 'AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth.' It highlighted that the major contributors, Mantle and AAVE DAO, collectively raised 55,000 ETH, equivalent to $127 million. This development follows the announcement of a coordinated recovery effort, DeFi United, led by Aave service providers, aiming to stabilize DeFi markets after a $292 million security breach.
The initiative focuses on restoring support for rsETH, a yield-bearing derivative token of ether, which was at the center of the exploit. Aave's founder, Stani Kulecho, personally contributed 5,000 ETH, valued at around $11,730,000. The exploit, linked to a KelpDAO integration vulnerability with LayerZero, led to the minting of 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of $10 billion.
The current effort is centered on erasing the bad debt through a coordinated bailout to recapitalize rsETH and mitigate losses. Earlier this year, the second-largest exploit occurred in late March, with an attacker draining at least $270 million from the Drift Protocol on Solana by exploiting a feature called 'durable nonces.'