Lending platform Aave has successfully raised approximately $160 million to address 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, "To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, facilitated through defiunited.eth. Notably, Mantle and AAVE DAO have together contributed 55,000 ETH, valued at $127M.
In response to the recent $292 million security breach, Aave and major crypto firms have launched a coordinated recovery effort, DeFi United, aimed at stabilizing DeFi markets. Led by Aave service providers, this initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the center of the exploit. Aave founder Stani Kulecho announced his personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. This effort is part of a broader collaboration with partners to address the crisis.
The exploit, linked to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens. This resulted in impaired collateral for Aave, triggering a significant withdrawal of deposits as lenders sought to exit, ultimately withdrawing $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.
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.'