Aave Suggests Donating 25,000 ETH to Address Kelp DAO Exploit Gap

TLDR

• Aave is proposing to donate 25,000 ETH (~$58M) to DeFi United to cover the shortfall from the Kelp DAO exploit
• 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 currently stands at ~69,534 ETH (~$161M), with estimates indicating the gap is fully covered
• DeFi total value locked has fallen over 27% year-to-date to just above $80 billion

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(SeaPRwire) –   Aave’s service providers submitted a governance proposal last Friday to allocate 25,000 ETH—valued at nearly $58 million—from the protocol’s treasury to DeFi United. The aim is to restore full backing for rsETH following last week’s Kelp DAO exploit.

Aave DAO Proposes 25,000 ETH Contribution to rsETH Recovery Effort

Aave DAO has published an ARFC proposal to join the DeFi United recovery effort following the April 18, 2026 Kelp rsETH bridge incident. The initial shortfall was about 163,183 ETH, reduced to approximately… pic.twitter.com/lMUSWZcRln

— Wu Blockchain (@WuBlockchain) April 24, 2026

The exploit occurred on April 18. An attacker took advantage of a vulnerability in the Ethereum LayerZero bridge adapter used by Kelp, siphoning off 152,577 rsETH and creating an initial shortfall of roughly 163,183 ETH. The attacker then used the unbacked rsETH as collateral on Aave to borrow real assets, leaving the protocol with bad debt.

The proposal is still pending a governance vote but has gained broad support within the DeFi community.

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

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

How the Shortfall Is Being Covered

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 donations.

Roughly 30,700 ETH was also frozen on Arbitrum after the attack, which is factored into recovery calculations.

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

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

DeFi TVL Declines Amid Rising Exploits

The DeFi United fund now totals roughly 69,534 ETH (~$161M) based on all pledged and proposed contributions.

Total value locked across DeFi protocols now sits just above $80 billion, per The Block. This is a drop of over 27% from the ~$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.