Aave, a lending platform, has successfully raised approximately $160 million towards covering the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The analytics platform stated, 'To date, 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 raised 55,000 ETH, valued at $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company and several major crypto firms launched a coordinated recovery effort, 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 originated from a KelpDAO integration vulnerability with LayerZero, allowed an attacker to mint 116,500 unbacked rsETH tokens, leaving Aave with impaired collateral and triggering a run on deposits as lenders withdrew $10 billion.
The effort to eliminate the bad debt focuses on stabilizing the system through a coordinated bailout, aiming 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.'