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. According to Arkham, 'Aave has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth.' The platform added that the primary contributors, Mantle and AAVE DAO, collectively raised 55,000 ETH, valued at $127 million. Following a $292 million security breach that left Aave facing a financial crisis, the company and major crypto firms launched a coordinated recovery effort, 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 (ETH) central to 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 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 objective of the bailout effort is to stabilize the system by recapitalizing rsETH and minimizing 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.'