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 Saturday. The blockchain analytics platform stated, "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 joined forces with major crypto firms to launch a coordinated recovery effort, dubbed DeFi United, aimed at stabilizing DeFi markets. Led by Aave service providers, the initiative seeks to restore support for rsETH, the yield-bearing derivative token of ether (ETH) at the center 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, resulting in impaired collateral for Aave and triggering a run on deposits as lenders withdrew $10 billion. The primary focus of the bad debt eradication effort is to stabilize the system through a coordinated bailout, aimed at recapitalizing rsETH and minimizing losses.
Earlier this year, the second-largest exploit 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.'