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 blockchain analytics platform stated, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, facilitated through defiunited.eth.
Notably, the largest contributors, Mantle and AAVE DAO, have collectively raised 55,000 ETH, equivalent to $127M." Following a $292 million security breach that severely impacted the DeFi lending sector, Aave and major crypto firms launched a coordinated recovery initiative, DeFi United, to stabilize the markets. Led by Aave service providers, the primary objective of this effort is to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave founder Stani Kulecho personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit was attributed to a vulnerability in the KelpDAO integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a massive withdrawal of $10 billion.
The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aiming to recapitalize rsETH and mitigate losses. Earlier this year, the second-largest exploit occurred in late March, where an attacker exploited the Drift Protocol on Solana, abusing the 'durable nonces' feature to drain at least $270 million, rather than exploiting a code bug or stolen keys.