Aave Seeks Transfer of Frozen ETH to Fund Kelp DAO Recovery Effort

Aave Labs is pushing for the release of 30,765 Ether (ETH) currently frozen by the Arbitrum Security Council to support the 'DeFi United' recovery fund. The funds, which are linked to a $293 million exploit of Kelp DAO, are intended to stabilize the rsETH token and remediate losses for holders. The proposal has garnered support from several major protocols, including Compound, LayerZero, and Ether.fi. The 'DeFi United' fund was established to address the systemic fallout from the Kelp exploit, which severely impacted Aave's lending platform and the wider Arbitrum ecosystem. To date, $21 million has been contributed to the relief effort by various entities, including Aave Labs CEO Stani Kulechov and the Golem Foundation. An additional $215 million has been pledged by Lido, Mantle, Arbitrum, and Ether.fi, though these funds remain subject to governance approval. The original exploit caused Aave's total value locked (TVL) to plummet by nearly $12 billion within a single week. The attacker used stolen rsETH as collateral to borrow wrapped Ether, resulting in over $190 million in bad debt. Aave Labs asserts that recovering the frozen ETH would normalize conditions for liquidity providers and borrowers. The recovery process is expected to take approximately 49 days. Aave Labs has committed to returning the funds if the remediation effort is unsuccessful.