The KelpDAO exploit has rattled confidence in decentralized finance (DeFi) and sparked a capital exodus, dragging total value locked across the sector from $99.5 billion to $83.7 billion since April 18.
Aave is now spearheading a “DeFi United” effort, with support from major protocols, to restore the backing of rsETH, the liquid restaking token at the center of the crisis.
On April 18, attackers drained 116,500 rsETH, worth roughly $292 million, from KelpDAO's cross-chain bridge. The stolen tokens were then deposited as collateral on Aave V3, where the hacker borrowed large volumes of Wrapped Ether (WETH) against them.
Because the rsETH became unbacked, the positions are effectively unliquidatable, leaving Aave with bad debt.
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Panic withdrawals followed. Aave's total deposits dropped from $45.8 billion to $28.6 billion, marking a $17.2 billion decline. According to LayerZero, early data points to the Lazarus Group's TraderTraitor as the likely party responsible for the biggest DeFi hack of 2026.
In an X post, Aave said several firm indicative commitments have been lined up from participants willing to help restore rsETH's backing. Lido Finance has submitted a proposal to contribute up to 2,500 staked ether (stETH) to a dedicated relief vehicle.
Mantle Treasury followed with its own proposal to lend up to 30,000 ETH to Aave DAO. Aave founder Stani Kulechov personally committed 5,000 ETH.
“Aave is my life's work and we're working nonstop to find the best possible outcome for users. I’m personally contributing 5000 ETH to DeFi United as we continue working together with partners on formalizing more commitments. I’m working to see this resolved and market conditions normalized as soon as possible,” Kulechov wrote.
EtherFi Foundation proposed another 5,000 ETH, and Golem contributed 1,000 ETH. The initiative has also received support from Ethena, LayerZero, Tydro, the Ink Foundation, Frax Finance, and more.
Aave also paused rsETH reserves across Ethereum Core, Arbitrum, Base, Mantle, and Linea to support recovery.