Aave, a lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The blockchain analytics platform noted that 'AAVE has so far raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors are Mantle and AAVE DAO, who together raised 55,000 ETH or $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, known as 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 has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346.
The exploit, which was traced back to a KelpDAO integration vulnerability with LayerZero, resulted in an attacker minting 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The effort to eliminate the bad debt is primarily focused on stabilizing the system through a coordinated bailout 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.'