Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest DeFi exploit of the year, as reported by Arkham on Saturday. The blockchain analytics 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 together 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 several 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 founder Stani Kulecho announced a personal contribution of 5,000 ETH to DeFi United, valued at $11,730,000 at the current ether price of approximately $2,346. The exploit, which originated from a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a massive withdrawal of $10 billion.
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'.