Aave, a 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 Saturday. The blockchain analytics platform noted that the largest contributors, Mantle and AAVE DAO, have jointly raised 55,000 ETH, valued at $127 million. 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 has personally contributed 5,000 ETH to DeFi United, valued at $11,730,000 at the current ether price. The exploit was caused by a vulnerability in KelpDAO's integration with LayerZero, allowing an attacker to mint 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a $10 billion withdrawal by lenders. The effort to eliminate the bad debt focuses on system stabilization through a coordinated bailout to recapitalize rsETH and mitigate losses.
This incident follows the second-largest exploit of the year, in which an attacker drained at least $270 million from the Drift Protocol on Solana in late March by exploiting a legitimate feature called 'durable nonces'.