DeFi United Raises $302M to Cover Kelp DAO Hack After North Korean Exploit

The Kelp DAO/LayerZero hack on April 18 left a trail of financial devastation, but a new initiative called DeFi United is offering a path to recovery. Led by Aave, the crowdsourced fund has tentatively raised over $302 million to cover the losses incurred in the exploit.

Hackers affiliated with North Korea targeted Kelp DAO’s faulty implementation of a LayerZero-provided bridge, stealing approximately $293 million in rsETH. The hackers then deposited $200 million of the stolen assets as collateral on Aave, borrowing large amounts of Ether in the process. This left Aave with at least $177 million in unrecoverable bad debt.

Aave itself was not hacked, but it emerged as the primary victim. The exploit triggered a nearly 50% drop in Aave’s deposit base as investors withdrew their crypto in response to the crisis.

Major Contributions to DeFi United Fund

Several prominent entities have pledged significant contributions to the DeFi United fund:

• Arbitrum DAO, Mantle, and Consensys have each pledged at least 30,000 Ether.
• Ether.Fi and Lido DAO have pledged 5,000 Ether and 2,500 Ether, respectively.
• Kelp DAO and LayerZero have also committed to contributing to the fund.
• Aave Labs CEO Stani Kulechov announced a personal contribution of 5,000 Ether, valued at approximately $11 million.

Even entities largely unaffected by the hack have stepped up to support the recovery effort. The Solana Foundation and Tron founder Justin Sun plan to deposit stablecoins in Aave, a move aimed at stabilizing lending markets.

Community Reaction: Hope and Controversy

The DeFi United initiative has sparked a mix of optimism and debate within the crypto community. Prominent figures like count crypto VC Haseeb Qureshi praised the collaborative effort, calling it a rare moment of unity in the industry.

"I might have to take back everything I said criticizing Ethereum rainbows and unicorns," Qureshi said. "Sometimes rainbows and unicorns are exactly what a community needs. Very surprised this all came together through donations."

However, not everyone is convinced. Michael Bentley, former CEO of Aave competitor Euler Labs, criticized the initiative as "good marketing."

"'DeFi United' has a much nicer ring to it than 'bailout,'" Bentley wrote on X.

The initiative has also sparked controversy within the Aave governance forum. TokenLogic, an Aave DAO service provider, proposed contributing 25,000 Ether—worth approximately $57 million—from the cooperative’s treasury.

Some members, including Tokédex founder Robby Greenfield, raised concerns. Greenfield argued that the proposal asks too much of the DAO without requiring systemic reforms to prevent future failures of the same nature.

Other members shared similar concerns, but TokenLogic defended its proposal, stating that changes to Aave’s risk management practices should be addressed separately. The proposal has advanced to the voting stage, with voting beginning today.

Broader Impact and Future Steps

The Kelp DAO hack has underscored the vulnerabilities in cross-chain bridges and the broader risks facing decentralized finance. The DeFi United fund represents a concerted effort to restore confidence in the sector, even as debates over systemic risks and governance continue.

As the crypto community rallies to address the fallout, the initiative highlights both the challenges and the resilience of the DeFi ecosystem.