Aave rallies DeFi partners to contain fallout from $292 million KelpDAO hack
Aave coordinated a $292 million recovery effort with Lido, EtherFi, and founder Stani Kulechov after a KelpDAO exploit left the protocol with impaired rsETH collateral. The "DeFi United" initiative aims to prevent bad debt and forced liquidations across lending markets. Attackers minted unbacked tokens, borrowed $190 million in assets, and triggered a $10 billion deposit withdrawal.
Key takeaways
- 1A $292 million KelpDAO exploit left Aave with impaired rsETH collateral, triggering a $10 billion deposit withdrawal.
- 2Lido, EtherFi, and Aave founder Stani Kulechov committed over 12,500 ETH (~$28+ million) to stabilize DeFi markets.
- 3Attacker minted 116,500 unbacked rsETH tokens and borrowed $190 million across Ethereum and Arbitrum before funds were bridged to Bitcoin.
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Why it matters
This is India's largest DeFi crisis, exposing systemic risks in yield-bearing derivatives and cross-chain bridges that retail investors use for staking. The coordinated bailout signals DeFi's vulnerability and regulatory scrutiny ahead, directly impacting Indian crypto investors' collateral safety in lending protocols.
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