Aave, a lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt stemming from the Kelp DAO exploit, as reported by Arkham on Saturday. The 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 contributed 55,000 ETH, valued at $127M.' Following a $292 million security breach that left Aave facing financial instability, the company joined forces with major crypto firms to launch DeFi United, a coordinated recovery effort aimed at stabilizing DeFi markets. Led by Aave service providers, the initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether at the center of the exploit. Aave founder Stani Kulecho announced a personal contribution of 5,000 ETH, equivalent to $11,730,000 at the current ether price.
The exploit, linked to a KelpDAO integration vulnerability with LayerZero, resulted in the minting of 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 and mitigating losses through a coordinated recapitalization of rsETH. This incident follows the second-largest exploit of the year, in which an attacker drained at least $270 million from the Drift Protocol on Solana in late March by exploiting a legitimate feature called 'durable nonces'.