Aave, a lending platform, 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 stated, 'So far, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth.
The largest contributors are Mantle and AAVE DAO, who together raised 55,000 ETH or $127M.' Following a $292 million security breach that left Aave facing a financial crisis, the company and 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 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 $2,346. The exploit, which was linked to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens.
This left Aave with impaired collateral, triggering a massive withdrawal of $10 billion as lenders sought to exit. The primary focus of the effort to eliminate the bad debt is on stabilizing the system through a coordinated bailout to recapitalize rsETH and minimize losses.
Earlier this year, the second-largest exploit occurred in late March, when an attacker exploited the Drift Protocol on Solana, abusing a feature called 'durable nonces' to drain at least $270 million, rather than exploiting a code bug or stolen keys.