Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The blockchain analytics platform noted, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, via defiunited.eth. Notably, the largest contributors, Mantle and AAVE DAO, have together raised 55,000 ETH, equivalent to $127M." Following a $292 million security breach that left Aave facing a financial crisis, the company, along with major crypto firms, announced a coordinated recovery effort to stabilize DeFi markets. Dubbed DeFi United, the initiative, led by Aave service providers, aims 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. The exploit, attributed to a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, ultimately leaving Aave with impaired collateral and triggering a significant withdrawal of $10 billion. The bailout effort focuses on stabilizing the system and mitigating losses by recapitalizing rsETH. This incident follows the second-largest exploit of the year, which occurred in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature.