Aave, a decentralized lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on Saturday. The largest contributors to this effort are Mantle and Aave DAO, who have collectively raised 55,000 ETH, valued at $127 million.
Following a $292 million security breach that left the DeFi lending sector facing a financial crisis, Aave and major crypto firms launched a coordinated recovery initiative, known as DeFi United, to stabilize the markets. The primary goal of this effort, led by Aave service providers, is 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 caused by a vulnerability in the KelpDAO integration with LayerZero, resulted in the attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a significant withdrawal of deposits. The current effort to address the bad debt is focused on stabilizing the system through a coordinated bailout, aimed at recapitalizing rsETH and minimizing losses.
This incident follows another major exploit in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces'.