Decentralized lending platform Aave has successfully raised approximately $160 million to address 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 disclosed that "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 collectively raised 55,000 ETH, equivalent to $127M." Following a $292 million security breach that left Aave facing a financial crisis, the company, along with several prominent crypto firms, announced a coordinated recovery effort to stabilize DeFi markets.
Led by Aave service providers, the initiative, dubbed DeFi United, aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the core of the exploit. Aave founder Stani Kulecho has pledged 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of $2,346. The exploit was attributed to a vulnerability in KelpDAO's integration with LayerZero, which allowed an attacker to mint 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a significant withdrawal of $10 billion.
The primary focus of the recovery effort is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and mitigating 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.'