Aave, a lending platform, has successfully raised approximately $160 million to cover the $200 million in bad debt resulting from the largest decentralized finance exploit of the year, as reported by Arkham on Saturday. The 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 collectively raised 55,000 ETH, equivalent to $127M." Following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis, Aave and several major crypto firms launched a coordinated recovery effort to stabilize DeFi markets.
Dubbed DeFi United and 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 announced a personal contribution of 5,000 ETH to DeFi United, valued at approximately $11,730,000 at the current ether price of roughly $2,346. The exploit was linked to a vulnerability in the KelpDAO integration with LayerZero, where an attacker created 116,500 unbacked rsETH tokens, resulting in impaired collateral for Aave and triggering a deposit run as lenders exited, ultimately withdrawing $10 billion. The primary focus of the effort to eliminate the bad debt is on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate 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.'