Decentralized lending platform Aave 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 Saturday. The platform stated, "To date, AAVE has secured $160M to cover the bad debt from the Kelp DAO exploit, via defiunited.eth. Notably, Mantle and AAVE DAO are the largest contributors, collectively raising 55,000 ETH, equivalent to $127M." This development follows the recent announcement of a collaborative recovery effort, DeFi United, led by Aave service providers, aiming to stabilize DeFi markets in the aftermath of a $292 million security breach. The initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit.
Aave founder Stani Kulecho has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price. The exploit was linked to a vulnerability in KelpDAO's integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of deposits. The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aiming to recapitalize rsETH and mitigate losses.
This incident is the largest DeFi 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 by exploiting a legitimate feature called 'durable nonces'.