Aave DAO has unveiled a proposal to deploy 25,000 ETH from its treasury to support a coordinated recovery effort following the recent Kelp DAO exploit. The move forms part of a broader “DeFi United” initiative aimed at restoring user funds and stabilizing affected lending markets.
On April 18, KelpDAO suffered a major attack targeted at its rsETH Ethereum LayerZero adapter, allowing a hacker to drain assets and break the backing relationship between locked ETH collateral and minted tokens across chains. The breach triggered a cascading liquidity and solvency challenge across DeFi platforms that integrated rsETH and its wrapped variant.
Over $160,000 ETH Gap Remains As Exploit Recovery Efforts Gain Traction
According to the Aave DAO governance proposal, the attacker stole 152,577 rsETH, which is approximately 163,183 ETH based on prevailing conversion rates. Since then, coordinated intervention by ecosystem participants has substantially reduced the gap. Kelp DAO managed to freeze 40,373 rsETH, equivalent to roughly 43,168 ETH. Additionally, the Arbitrum Security Council recovered 30,766 ETH that the attacker still held on its platform.
Notably, further recoveries are expected through liquidation processes on lending platforms. The attacker’s positions on Aave could yield up to 12,323 ETH, while an additional 1,845 ETH may be recovered from positions on Compound. In total, these efforts account for approximately 87,955 ETH, i.e, just over half of the original deficit. Despite this progress, a funding gap of roughly 75,081 ETH remains, resulting in a further coordinated capital injection to fully restore backing.
Aave DAO Steps In With 25,000 ETH Commitment As Coalition Mobilizes
To bridge the remaining deficit, 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 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 reduced by future donations. Instead, any additional funds raised will be used to repay borrowed capital, thereby limiting 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 lockbox to fully restore system integrity. However, a portion of expected recoveries remains illiquid, prompting the need for short-term loan financing from ecosystem partners.
Featured image from Vecteezy, chart from Tradingview
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