Aave DAO has unveiled a proposal to stake 25,000 ETH from its treasury to support a coordinated recovery effort following the recent Kelp DAO exploit. The move is part of a broader “DeFi United” initiative aimed at restoring user funds and stabilizing affected credit markets.
On April 18, KelpDAO suffered a major attack on its rsETH Ethereum LayerZero adapter, allowing a hacker to siphon assets and disrupt the collateral relationship between locked ETH collateral and minted tokens across chains. The breach triggered a cascading liquidity and solvency challenge across all DeFi platforms that integrated rsETH and its wrapped variant.
As exploit recovery efforts gain momentum, an ETH gap of over $160,000 remains
According to Aave DAO Governance proposalThe attacker stole 152,577 rsETH, which is equivalent to approximately 163,183 ETH based on prevailing exchange rates. Since then, coordinated intervention by ecosystem participants has significantly narrowed the gap. Kelp DAO managed to freeze 40,373 rsETH, which is approximately 43,168 ETH. Additionally, the Arbitrum Security Council recovered 30,766 ETH that the attacker still held on its platform.
In particular, further recoveries are expected through liquidation processes on credit platforms. The attacker’s positions on Aave could yield up to 12,323 ETH, while another 1,845 ETH could be recovered from positions on Compound. In total, these efforts amount to about 87,955 ETH, just over half of the original deficit. Despite this progress, a funding gap of around 75,081 ETH remains, prompting another coordinated capital injection to fully restore support.
Aave DAO steps in with 25,000 ETH stakes as the coalition mobilizes
To bridge the remaining deficit, the DeFi United coalition is pooling donations, credit facilities and support from the state treasury. So far, ecosystem lenders including EtherFi, Lido and Ethena have pledged 14,570 ETH, while Mantle has extended a credit facility of up to 30,000 ETH.
Aave DAO’s proposal to contribute 25,000 ETH represents a cornerstone of this recovery stack. Notably, the contribution is “anchored,” meaning it will not be diminished by future donations. Instead, any additional funds raised will be used to repay debt capital, limiting Aave’s long-term risk.
The plan requires approximately 120,015 ETH (excluding 43,168 ETH, which will be immediately frozen by Kelp DAO) to be reintroduced into the LayerZero lockbox to fully restore system integrity. However, part of the expected recoveries remains illiquid, requiring short-term debt financing from ecosystem partners.
Featured image from Vecteezy, chart from Tradingview
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