Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the Kelp DAO exploit, 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 are Mantle and AAVE DAO, who together raised 55,000 ETH or $127M.' Following a $292 million security breach that left the crypto borrowing sector facing a financial crisis, Aave 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 core of the exploit. Aave founder Stani Kulecho has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000. The exploit, which was traced back to a KelpDAO integration vulnerability with LayerZero, resulted in an attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits. The effort to eliminate the bad debt is focused on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
This incident follows the second-largest exploit of the year, which 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.'