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 blockchain analytics platform stated, 'To date, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, via defiunited.eth.
The largest contributors, Mantle and AAVE DAO, have collectively raised 55,000 ETH, valued at $127M.' Last week, Aave and several prominent cryptocurrency firms announced a collaborative recovery effort to stabilize DeFi markets following a $292 million security breach that left the largest lender in the crypto borrowing sector facing a financial crisis. Led by Aave service providers, the initiative, called DeFi United, aims to restore support for rsETH, the yield-bearing derivative token of ether at the core of the exploit.
Aave founder Stani Kulecho stated, 'I am personally contributing 5,000 ETH to DeFi United as we continue to work together with our partners.' With the current ether price of roughly $2,346, his personal contribution is worth approximately $11,730,000. The exploit has been traced back to a vulnerability in KelpDAO's integration with LayerZero, where an attacker minted 116,500 unbacked rsETH tokens.
This left Aave with impaired collateral, triggering a rush of deposit withdrawals as lenders sought to exit, resulting in a total of $10 billion being withdrawn. 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.
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,' rather than a code bug or stolen keys.