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Aave spearheads DeFi "hole-filling" push after $292M KelpDAO exploit

Aave and several institutions have launched a rescue effort dubbed "DeFi United" to address roughly $292 million in losses tied to the KelpDAO exploit and to contain the risk of bad debt spilling across DeFi lending markets, according to Huoxing Finance. The incident traced back to a flaw in KelpDAO's LayerZero integration. Hackers were able to mint uncollateralized rsETH and use it to borrow about $190 million of assets on Aave. The resulting distortion in collateral ratios sparked a bank-run dynamic, sending the platform's total value locked briefly down by around $10 billion. Capital backstop plans have been floated by Lido Finance, EtherFi and Aave founder Stani Kulechov. Arbitrum has frozen some funds, but the remainder has already been routed through THORChain, complicating recovery. The immediate priority has shifted to coordinated capital injections aimed at "plugging the gap" and stabilizing the DeFi lending ecosystem.
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