A coordinated DeFi recovery effort has raised $160 million to cover bad debt linked to an exploit involving Aave, after attackers deposited unbacked collateral into its V3 markets.
The attack involved roughly $221 million in rsETH used as collateral, allowing the borrower to extract around $191 million in ETH and related assets, leaving positions unlikely to be repaid.
Importantly, Aave’s core smart contracts were not exploited, with losses stemming from external collateral tied to KelpDAO.
The fallout led to sharp declines in Aave’s total value locked and token price, with broader DeFi markets also seeing significant capital outflows.
To stabilise the system, DeFi United was formed, pooling funds from major ecosystem players including Aave DAO, Mantle, and other contributors.
Key backers include Aave founder Stani Kulechov, alongside protocols such as Lido and Ether.fi, contributing ETH and staked assets to cover the shortfall.
The initiative represents one of the largest coordinated recovery efforts in DeFi, with ongoing governance votes and contributions aimed at restoring full backing and market confidence.
At the time of reporting, Aave price was $98.48.