Aave, a 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 platform stated, 'AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors, Mantle and AAVE DAO, have collectively raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort, 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 core of the exploit. Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH to DeFi United, which is worth approximately $11,730,000 at the current ether price of $2,346.
The exploit, traced back to a vulnerability in KelpDAO's integration with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits as lenders exited, resulting in $10 billion in withdrawals. 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.'