Aave and DeFi coalition launch multi-ETH rescue to recapitalize rsETH and contain KelpDAO exploit fallout

Aave and a coalition of major DeFi protocols launched a coordinated recovery effort after an April exploit of KelpDAO’s LayerZero-powered bridge that allowed an attacker to mint 116,500 unbacked rsETH. The attacker deposited nearly 90,000 rsETH into Aave across Ethereum and Arbitrum and borrowed roughly $190 million, creating a collateral shortfall that threatened systemic bad debt on the lending platform ^[1].

The industry initiative, branded “DeFi United,” aims to shore up rsETH backing and prevent contagion; Aave’s governance has proposed contributing roughly 25,000 ETH to the joint recovery effort, according to reports, as protocols coordinate to restore market conditions. Separately, Mantle’s core contributors have floated a draft proposal to loan up to 30,000 ETH from the Mantle treasury to Aave as a potential credit facility to remediate rsETH-related exposure ^{[2] [3] [4]}.

Proposals and discussions are ongoing as stakeholders work to recapitalize rsETH and contain spillover risk; the coordinated response focuses on stabilizing collateral and preventing systemic bad debt rather than solely recovering bridged or swapped stolen funds ^{[1] [4]}.