Aave DAO has revealed a proposal to deploy 25,000 ETH from its vault to support coordinated recovery efforts in the wake of the recent Kelp DAO exploit. The move forms part of the broader “DeFi United” initiative aimed at recovering user funds and stabilizing the affected lending markets.
On April 18, KelpDAO suffer A major attack targeted the rsETH Ethereum converter LayerZero, allowing the hacker to drain assets and break the backing relationship between locked ETH collateral and cross-chain tokens. The hack sparked a cascading challenge to liquidity and solvency across DeFi platforms that integrated rsETH and its wrapped variant.
There remains a gap of over $160,000 in ETH as vulnerability recovery efforts gain steam
According to Aave DAO Governance proposalThe attacker stole 152,577 rsETH, which is approximately 163,183 ETH based on prevailing conversion rates. Since then, coordinated intervention by ecosystem participants has significantly reduced this gap. Kelp DAO managed to freeze 40,373 rsETH, which is equivalent to approximately 43,168 ETH. In addition, Arbitrum’s security board recovered 30,766 ETH, which the attacker was still holding on its platform.
It is worth noting that more recoveries are expected to occur through liquidations on lending platforms. An attacker’s positions on Aave could generate up to 12,323 ETH, while an additional 1,845 ETH may be recovered from his positions on Compound. In total, these efforts represent about 87,955 ETH, just over half of the original deficit. Despite this progress, a funding gap of approximately 75,081 ETH remains, leading to further coordinated capital injections to fully restore support.
Aave DAO has made a commitment of 25,000 ETH with the coalition crowd
To fill the remaining shortfall, the DeFi United coalition is combining donations, credit facilities, and treasury support. So far, ecosystem contributors including EtherFi, Lido, and Ethena have pledged 14,570 ETH, while Mantle has provided credit facilities of up to 30,000 ETH.
Aave DAO’s proposal to contribute 25,000 ETH represents the cornerstone of this recovery package. Notably, the contribution is “locked,” meaning it will not be reduced by future donations. Instead, any additional funds raised will be used to repay the borrowed capital, thus reducing Aave’s long-term exposure.
The plan requires approximately 120,015 ETH (excluding 43,168 ETH immediately frozen by Kelp DAO) to be reintroduced into the LayerZero lockup fund to fully restore the integrity of the system. However, part of the expected recovery remains illiquid, prompting the need for short-term loan financing from ecosystem partners.
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