Aave, a prominent lending platform, has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by blockchain analytics firm Arkham on Saturday. The largest contributors to this effort are Mantle and Aave DAO, who have collectively raised 55,000 ETH, valued at $127 million. This development follows a coordinated recovery effort announced by Aave and major crypto firms last week, aimed at stabilizing DeFi markets after a $292 million security breach.
The initiative, known as DeFi United, seeks to restore support for rsETH, a yield-bearing derivative token of ether core to the exploit. Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH to DeFi United, valued at roughly $11,730,000 at the current ether price. The exploit, attributed to a vulnerability in KelpDAO's integration with LayerZero, led to the minting of 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and a subsequent withdrawal of $10 billion by lenders.
The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aiming to recapitalize rsETH and minimize losses. This incident is the largest DeFi exploit of the year, surpassed only by the Drift Protocol breach on Solana in late March, where an attacker exploited a legitimate feature to drain at least $270 million.