Decentralized lending platform Aave 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 social media. The platform noted that 'AAVE has so far raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth.' Furthermore, it highlighted that the primary contributors, Mantle and AAVE DAO, collectively raised 55,000 ETH, equivalent to $127 million. In response to the security breach that left the DeFi sector's largest lender facing a financial crisis, Aave and major crypto firms launched a coordinated recovery effort, DeFi United, to stabilize DeFi markets. The initiative, led by Aave service providers, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit.
Aave's founder, Stani Kulecho, announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price. The exploit, which originated from a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a massive withdrawal of $10 billion. The bailout effort focuses on stabilizing the system by recapitalizing rsETH and minimizing losses.
This incident follows the second-largest exploit this year, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'