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Aave Labs has proposed that the decentralized autonomous organization behind Arbitrum unfreeze $73.5 million in Ether linked to the Kelp DAO attack and redirect the funds to “DeFi United,” a remediation effort intended to restore rsETH and compensate its holders.
Last week, the Arbitrum Security Council moved to freeze 30,765 Ether (ETH) held in a wallet connected to the $293 million Kelp exploit.
In a proposal posted Saturday on the Arbitrum governance forum, Aave Labs said directing those funds to a planned remediation effort would “restore normal conditions for Arbitrum users” and the wider ecosystem. It added that the Ether on Arbitrum “represents a material contribution” toward restoring the Kelp DAO restaked ETH token, rsETH.
The submission was made with support from Kelp DAO, LayerZero, Ether.fi and Compound, four of several crypto protocols affected by the hack.
Days after Aave Labs and others set up DeFi United on Friday to fully restore rsETH backing, Dune Analytics data cited in the proposal indicates that about $21 million in contributions has already been made.
Reported contributions include those from:
In addition, the proposal says $215 million has been pledged by Arbitrum, Mantle, Ether.fi and Lido to assist the recovery effort, with the pledges subject to governance votes.
It also notes that LayerZero, Ethena, Ink Foundation and Frax Finance have signaled their intention to help.
Aave was among the hardest-hit protocols following the Kelp DAO exploit. The article says Aave’s total value locked fell nearly $12 billion in a week after the hacker used stolen rsETH tokens as collateral on its lending platform to borrow wrapped Ether.
As a result, the article states Aave recorded more than $190 million in bad debt and saw a wave of withdrawals.
In the Arbitrum proposal, Aave Labs said a full recovery would restore rsETH’s backing and normalize conditions for rsETH holders, liquidity providers and borrowers on Arbitrum and across the broader DeFi ecosystem.
It added that even a “partial recovery” would still meaningfully reduce the shortfall.
Aave Labs specifically requested that the 30,765 ETH be sent to a recovery address controlled by Aave, Kelp DAO and Certora, a blockchain security platform.
The proposal says Aave Labs expects the effort to restore rsETH and compensate its holders to take about 49 days and that it would return the funds if the recovery effort fails.
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