Aave is coordinating an emergency rescue effort with several crypto firms after the $292 million KelpDAO exploit shook DeFi lending markets. The plan, called “DeFi United,” is being led by Aave service providers and is centered on rebuilding the backing for rsETH, the yield-bearing ETH derivative at the core of the incident.
Aave said on X that multiple participants have already signaled support. Lido Finance was the first to move. Its ecosystem contributor, Lido Labs Foundation, submitted a proposal to allocate up to 2,500 stETH, worth about $5.7 million at current prices, into a dedicated relief vehicle. The goal is to narrow the rsETH backing shortfall and reduce the risk of forced liquidations across lending markets.
EtherFi followed with a proposal to contribute 5,000 ETH to “protect users and prevent bad debt” across DeFi. Aave founder Stani Kulechov also offered 5,000 ETH. In a post on X, he said Aave is his life’s work and that the team is working nonstop to secure the best possible outcome for users and restore normal market conditions. Aave added that more commitments will be announced once they are formally confirmed.
How the exploit damaged Aave’s collateral base
The incident stemmed from a vulnerability in KelpDAO’s integration with LayerZero. By abusing the bridge’s messaging system, the attacker minted 116,500 unbacked rsETH tokens. The tokens were not immediately dumped. Instead, the attacker deposited nearly 90,000 rsETH into Aave as collateral and borrowed about $190 million in ETH and other assets across Ethereum and Arbitrum.
That move left Aave holding impaired collateral and triggered a rush to withdraw available funds from the protocol. Following the incident, the total value of assets on Aave dropped by $10 billion. Aave’s incident report estimates the total hole at more than 112,000 rsETH.
Recovery efforts shift from clawbacks to recapitalization
Before DeFi United was unveiled, some containment measures had already begun. Earlier this week, Arbitrum’s security council froze 30,766 ETH linked to the exploit, worth roughly $71 million at the time. But the rest of the stolen funds were bridged out and swapped into bitcoin through Thorchain, which has made recovery much harder.
The current push is focused less on recovering every asset and more on stabilizing the system through coordinated recapitalization of rsETH. For Aave and its partners, restoring collateral support has become the immediate priority.