Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate 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 secured $160M to offset the bad debt from the Kelp DAO exploit, facilitated through defiunited.eth. The primary contributors, Mantle and AAVE DAO, have collectively contributed 55,000 ETH, valued at $127 million.' Following a $292 million security breach that left the sector's largest lender facing financial instability, Aave and major cryptocurrency firms launched a coordinated recovery effort to stabilize DeFi markets.
Dubbed DeFi United and led by Aave service providers, the initiative aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the center of the exploit. Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of roughly $2,346. The exploit, which was linked to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a mass withdrawal of deposits as lenders rushed to exit, ultimately withdrawing $10 billion. The effort to eliminate the bad debt focuses on stabilizing the system through a coordinated bailout to recapitalize rsETH and minimize losses.
Earlier this year, the second-largest exploit 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.'