Aave DAO Considers 25,000 ETH Commitment to ‘DeFi United’ Kelp Recovery Fund

TokenLogic has proposed that the Aave DAO commit 25,000 ETH from its treasury to the “DeFi United” recovery fund. The coalition aims to restore rsETH backing after an April 18 exploit on Kelp DAO’s bridge left Aave with nearly $200 million in bad debt. The effort has already secured approximately 73,700 ETH in commitments from Mantle, Ether.fi, Lido, and Aave founder Stani Kulechov.

The industry-wide response to the April 18 Kelp bridge exploit is coalescing under the “DeFi United” banner, with a significant new proposal from TokenLogic calling on the Aave DAO to lead the charge. The proposal suggests a 25,000 ETH allocation from the Aave treasury, which would make the protocol the largest single donor to the coalition tasked with restoring rsETH’s 1:1 backing and stabilizing the broader DeFi ecosystem. The crisis began when attackers exploited Kelp DAO’s LayerZero-based bridge, using forged cross-chain messages to mint 116,500 rsETH (worth roughly $292 million) without collateral. These unbacked tokens were subsequently deposited into Aave V3 to borrow approximately $190 million in real assets. Because the rsETH collateral effectively had no underlying value, the protocol was unable to liquidate the positions, resulting in a massive liquidity crunch and sparking billions in panicked withdrawals. Recovery efforts have gained rapid momentum, with 73,700 ETH of the required 163,200 ETH already accounted for through a mix of donations and credit facilities. Mantle has proposed a 30,000 ETH credit facility (MIP-34) to help Aave clear problematic positions, while Ether.fi and Lido DAO have pledged 5,000 ETH and 2,500 stETH, respectively. Aave founder Stani Kulechov also personally committed 5,000 ETH to the fund, emphasizing the protocol’s resilience. “Aave is my life’s work and we’re working nonstop to find the best possible outcome for users. I’m personally contributing 5,000 ETH to DeFi United as we continue working together with partners on formalizing more commitments,” Kulechov stated. The TokenLogic proposal is viewed as a strategic move to internalize the costs of the bad debt while maintaining market confidence. If approved, the funds will be directed to a recovery vehicle designed to enable an orderly resolution for affected stakeholders. While Arbitrum’s Security Council has already frozen 30,000 ETH of the attacker’s funds, the DeFi United initiative remains the primary path for immediate restoration of the rsETH peg and protocol solvency. Disclaimer: This article is for informational purposes only and does not constitute advice of any kind. Readers should conduct their own research before making any decisions.

The post Aave DAO Considers 25,000 ETH Commitment to ‘DeFi United’ Kelp Recovery Fund appeared first on Cryptopress.