Aave, a prominent 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 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, DeFi United, aimed at stabilizing DeFi markets.
Led by Aave service providers, the initiative focuses on restoring support for rsETH, the yield-bearing derivative token of ether at the core of the exploit. Aave founder Stani Kulecho personally contributed 5,000 ETH, valued at approximately $11,730,000. The exploit, which was traced back to 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 massive withdrawal of $10 billion. The fundraising effort is primarily focused on stabilizing the system through a coordinated bailout to recapitalize rsETH and mitigate losses.
This incident follows the second-largest exploit of the year, which 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.'