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Aave and several leading crypto firms have launched a coordinated recovery initiative, “DeFi United,” to stabilize decentralized finance (DeFi) markets after a reported $292 million exploit disrupted the sector. The effort is focused on restoring the collateral backing of rsETH, a yield-bearing Ethereum (ETH) derivative token at the center of the incident.
The exploit severely impacted Aave, the largest DeFi lending platform, creating a significant gap in its collateral reserves. Aave said on X (formerly Twitter) that multiple organizations have already committed funds to the initiative.
The incident originated from a vulnerability in KelpDAO’s integration with LayerZero. According to the report, the attacker was able to mint 116,500 unbacked rsETH tokens. Rather than selling the tokens, the attacker used nearly 90,000 rsETH as collateral on Aave, borrowing around $190 million in ETH and other assets across Ethereum and Arbitrum networks.
This activity triggered a liquidity crisis, including a sharp decline in Aave’s total value locked (TVL), with a reported $10 billion drop as users rushed to withdraw funds.
DeFi United is designed to reduce the rsETH collateral shortfall and prevent widespread liquidations across DeFi lending markets. Early contributions highlighted in the report include:
The report states that Arbitrum’s security council managed to freeze over 30,000 ETH linked to the attack. However, much of the stolen funds were moved through Thorchain and converted into bitcoin, which the report says complicates recovery efforts.
With DeFi United underway, the initiative prioritizes recapitalization and market stabilization rather than direct asset recovery. The stated goal is to rebuild confidence across the DeFi ecosystem by restoring collateral conditions tied to rsETH.
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