Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt resulting from the Kelp DAO exploit, as reported by Arkham on social media. The analytics platform noted, 'To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, via 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 a financial crisis, the company, along with 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 center of the exploit.
Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH, valued at approximately $11,730,000, to the DeFi United effort. The exploit, which was linked 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 triggering a significant withdrawal of deposits.
The recovery effort is focused on stabilizing the system through a coordinated bailout to recapitalize rsETH and minimize losses. This incident follows the second-largest exploit of the year, which occurred in late March, where an attacker drained at least $270 million from the Drift Protocol on Solana by exploiting a legitimate feature called 'durable nonces.'