Decentralized lending platform Aave has successfully raised approximately $160 million to mitigate the $200 million in bad debt stemming from the largest DeFi exploit of the year, as reported by blockchain analytics firm Arkham on Saturday. The platform stated, "To date, AAVE has secured $160M to offset the bad debt resulting from the Kelp DAO exploit, facilitated through defiunited.eth." Notably, the largest contributors to this effort are Mantle and AAVE DAO, which together have contributed 55,000 ETH, valued at $127 million. Following a $292 million security breach that left Aave facing a financial crisis, the company and several major cryptocurrency firms launched a coordinated recovery initiative to stabilize DeFi markets. Led by Aave service providers, the DeFi United effort aims to restore support for rsETH, the yield-bearing derivative token of ether (ETH) that was at the center of the exploit.
Aave founder Stani Kulechov announced, "I am personally contributing 5,000 ETH to DeFi United as we continue to collaborate with our partners." At the current ether price of approximately $2,346, his contribution is valued at $11,730,000. The exploit was traced back to a vulnerability in KelpDAO's integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens.
This resulted in Aave having impaired collateral, triggering a rush of withdrawals as lenders sought to exit, ultimately leading to the withdrawal of $10 billion. The primary focus of the effort to eliminate the bad debt is on stabilizing the system through a coordinated bailout, aimed at recapitalizing rsETH and minimizing losses.
The second-largest exploit this year 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,' rather than leveraging a code bug or stolen keys.