Aave Proposes 25,000 ETH to Cover Kelp DAO Exploit Shortfall

TLDR

• Aave proposes contributing 25,000 ETH (~$58M) to DeFi United to cover the Kelp DAO exploit shortfall
• An attacker minted unbacked rsETH via a compromised LayerZero bridge and used it as collateral on Aave
• Lido DAO, Ether.fi, Golem, and individual contributors have also pledged ETH to the recovery fund
• The DeFi United fund now stands at ~69,534 ETH (~$161M), with estimates suggesting the gap is filled
• DeFi total value locked has dropped over 27% year to date to just above $80 billion

Aave’s service providers submitted a governance proposal on Friday to contribute 25,000 ETH, worth close to $58 million, from the protocol’s treasury to DeFi United. The goal is to restore full backing for rsETH after last week’s Kelp DAO exploit.

The attack happened on April 18. An attacker exploited a vulnerability in the Ethereum LayerZero bridge adapter used by Kelp, extracting 152,577 rsETH and creating an original shortfall of roughly 163,183 ETH. The attacker used the unbacked rsETH as collateral on Aave to borrow real assets, leaving the protocol with bad debt.

The proposal is still subject to a governance vote, but it has drawn wide support from within the DeFi community.

Aave founder and CEO Stani Kulechov pledged 5,000 ETH of his own funds, describing Aave as his “life’s work.” The protocol’s Senior VP of Engineering, Emilio Frangella, committed an additional 500 ETH.

Other protocols have joined the effort. Lido DAO proposed contributing up to 2,500 ETH, and Ether.fi offered up to 5,000 ETH. Golem pledged 1,000 ETH, and BGD Labs also contributed to the fund.

How the Gap Gets Filled

Mantle proposed a separate low-interest credit facility of up to 30,000 ETH to help Aave absorb any remaining bad debt not covered by the donations.

Roughly 30,700 ETH was also frozen on Arbitrum following the attack, which factors into the recovery math.

A tracker shared on X estimated the actual rsETH shortfall at 112,204 rsETH, or about 118,400 ETH. When all proposed contributions, the Mantle facility, the frozen Arbitrum funds, and expected recoveries from Aave and Compound are added together, the gap appears to be covered.

X user DCF GOD estimated the hole has been filled, assuming all governance proposals pass. If that holds, Aave may not need to draw the full amount from Mantle’s credit line.

DeFi TVL Drops as Exploits Mount

The DeFi United fund now totals roughly 69,534 ETH, or close to $161 million, based on all pledged and proposed contributions.

Total value locked across DeFi protocols now sits just above $80 billion, according to The Block. That is down more than 27% from the roughly $110 billion recorded at the start of 2026.

JPMorgan analysts noted that repeated exploits are weighing on institutional interest in DeFi, with some users moving funds into stablecoins.

The Aave governance vote on the 25,000 ETH contribution is pending. All other proposed contributions are also awaiting final approval from their respective protocols.

The post Aave Proposes 25,000 ETH to Cover Kelp DAO Exploit Shortfall appeared first on CoinCentral.