Aave Secures $160M to Address $200M Bad-Debt Hole After Kelp DAO Exploit

Aave has raised about $160 million to help cover roughly $200 million in bad debt tied to what is being described as the biggest DeFi vulnerability this year, according to CoinDesk. On Saturday, blockchain analytics account defiunited.eth said on X that the fundraising was driven primarily by Mantle and the AAVE DAO. Together, they contributed 55,000 ETH, valued at around $127 million, to backstop losses linked to the Kelp DAO incident. The update follows last week's announcement by Aave and several major crypto firms of a coordinated recovery plan after a $292 million security breach at the sector's largest crypto lender, as DeFi markets faced acute stress and authorities moved to contain disruption. The program, branded "DeFi United" and led by Aave service providers, is focused on restoring support for rsETH, a yield-bearing derivative token pegged to Ether (ETH). Aave founder Stani Kulechow said he will personally donate 5,000 ETH to DeFi United. At an ETH price of about $2,346, the contribution is worth roughly $11,730,000. Investigators trace the root cause to a flaw in the integration between KelpDAO and LayerZero. Attackers exploited it to mint 116,500 unbacked rsETH tokens, weakening Aave's collateral base. The shock set off a bank-run dynamic as lenders pulled funds, leading to about $10 billion in outflows. Work to clear the bad debt has centered on coordinated bailouts, recapitalizing rsETH, and limiting losses. CoinDesk also noted that the second-largest DeFi incident this year occurred in late March. In that case, an attacker stole at least $270 million by abusing a legitimate Solana Drift protocol feature called "persistent nonce," rather than exploiting a traditional code bug or compromised keys.