Aave’s DeFi United to absorb $292M KelpDAO loss

Aave and a cross-protocol coalition dubbed “DeFi United” are coordinating a recovery plan to contain bad debt from the April 18 KelpDAO exploit. The bridge attack drained about $292M from KelpDAO’s cross-chain bridge and left Aave facing an estimated $123.7M–$230.1M liquidity shortfall. Aave founder Stani Kulechov kicked off the effort with a personal pledge of 5,000 ETH. Mantle drafted MIP-34 for a credit facility of up to 30,000 ETH to Aave DAO, structured with interest at Lido’s rate plus 1%, repayable over as long as 36 months. Bybit co-founder Ben Zhou said Bybit, as the largest Mantle stakeholder, will vote yes. Other contributors announced support: Lido’s contributors proposed a one-time contribution of up to 2,500 stETH (conditional on full funding); Golem Foundation and Golem Factory pledged 1,000 ETH combined; Ether.fi proposed a governance vote to deploy 5,000 ETH from its DAO treasury. Ethena confirmed participation, Frax signaled a governance vote to support Aave markets, and LayerZero published a recovery framework proposal with early voting incentives. Meanwhile, Circle’s chief economist Gordon Liao proposed raising Aave’s USDC borrowing cap to 50% from 14% to unfreeze liquidity, a move that some governance participants criticized as it could trigger liquidations. For traders, the immediate focus is whether the funding and borrowing-cap change restores Aave market depth and reduces liquidation risk after the KelpDAO-linked liquidity crunch.