Coalition Unveils Plan to Mitigate $300 Million Token Exploit Impact on Aave Users

Unlike typical massive financial shortfalls, this one has a proposed repair plan. DeFi United, a coalition comprising multiple blockchain projects and crypto ecosystem individuals, has outlined a step-by-step approach to restore the backing of rsETH after the Kelp DAO hack disrupted DeFi lending markets, releasing over 116,000 unaccounted tokens. The proposal, shared on Aave’s official X account, resembles a coordinated recovery effort, relying heavily on Aave’s infrastructure to rectify the damage and stabilize the markets. The incident began on April 18, when an attacker exploited a vulnerability in rsETH’s bridge, creating 116,500 rsETH without backing by forging a legitimate-looking message. These tokens were not idle; they were distributed across multiple wallets and utilized in DeFi, with a significant portion used as collateral on Aave and other lending platforms. This created a systemic problem: protocols like Aave found themselves holding unbacked collateral. According to the proposal, most of the exploited funds remain active, with roughly 107,000 of the original 116,500 rsETH still tied up in positions across Aave and Compound. DeFi United’s proposal aims to address both the restoration of rsETH’s backing and the unwinding of loans created with the extra tokens. The group claims to have secured enough ETH commitments to fully re-collateralize rsETH, planning to feed this ETH back into the system in stages. At the same time, the plan involves carefully unwinding the mess in the lending markets. Instead of allowing a chaotic outcome, the proposal suggests a controlled approach to dealing with the attacker’s positions on Aave, which are essentially loans backed by rsETH that should not have existed. By temporarily adjusting rsETH’s valuation within the system, those bad positions can be liquidated or closed more smoothly, potentially freeing up around 13,000 ETH from Aave. Once the collateral is recovered, it will be converted into ETH to cover the exploit-created shortfall. The process carries risks, including the need for governance approvals across multiple chains and the successful deployment of committed funds. However, the plan represents a more coordinated response than DeFi has previously achieved. If executed as intended, the goal is to fully restore rsETH’s backing and stabilize the affected markets.