Aave DAO Offers To Contribute 25,000 ETH To DeFi United
The Aave DAO offers a 25,000 ETH contribution to the DeFi United Relief Vehicle for KelpDAO's rsETH following a 75,081 ETH residual shortfall.
Aave service provider TokenLogic published a governance proposal to allocate a 25,000 ETH contribution from the Aave DAO treasury toward DeFi United, a coordinated recovery effort aimed at fully restoring the backing of KelpDAO's rsETH. Aave calculates a residual funding gap of approximately 75,081 ETH, after accounting for 30,766 ETH frozen by the Arbitrum Security Council and expected liquidation recoveries from the attacker's positions on Aave and Compound.
DeFi United is led by Aave service providers and includes contributions from Lido, EtherFi, Ethena, Ink, BGD Labs, Stani Kulechov, Emilio, Ernesto, and the Golem Foundation, with additional pledges expected. Mantle has separately committed a 30,000 ETH credit facility to the coalition. With Aave's 25,000 ETH contribution added, approximately 5,511 ETH of the residual gap remains, which the coalition expects will be covered.
Any additional public donations received after the proposal is approved will not reduce Aave's treasury commitment, instead it will be directed toward repaying Mantle's credit facility. Once gathered in full, the coalition will place the full 120,015 ETH into the LayerZero lockbox to execute the recovery. The proposal will advance to a Snapshot vote by AAVE token holders.
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Circle Pushes USDC Rate Hike On Aave
Circle Chief Economist Gordon Liao proposes raising the USDC interest rate slope on Aave v3 Ethereum Core from 10% to 40% to attract liquidity after the KelpDAO exploit.
Circle's Chief Economist Gordon Liao has published an Aave governance proposal to raise the interest rate slope on the USDC market on Aave v3 Ethereum Core from 10% to 40% initially, with a target of 50%. He believes that higher rates will attract new USDC liquidity providers in an effort to bring utilization back down. The proposal comes in response to the KelpDAO exploit, which has driven the USDC lending market on Aave to 100% utilization for the last four days, leaving lenders unable to withdraw their funds due to insufficient liquidity.
As the proposal notes, debt repayments are being immediately absorbed by a queued withdrawal backlog. The proposal faced community pushback as raising the rate slope can accelerate harm. Higher rates risk triggering liquidations for borrowers who are already trapped. Liquidity providers are reluctant to deposit due to the current uncertainty around a potential lender haircut.
Circle has also faced broader criticism for not offering to inject liquidity directly into its own asset pool as the issuer of USDC. Earlier this month, Circle failed to freeze USDC connected to the DPRK in the Drift Protocol exploit.
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Arbitrum Freezes 30,766 ETH From KelpDAO Exploiter
The Arbitrum Security Council executed an emergency upgrade to freeze $71M in ETH tied to the KelpDAO exploit, briefly modifying an inbox contract to impersonate the exploiter.
The Arbitrum Security Council executed an emergency upgrade to freeze 30,766 ETH from an address involved in the KelpDAO exploit. As part of the recovery effort, $71 million in ETH was moved from the exploiter's wallet into a frozen intermediary address. The funds will remain frozen until an Arbitrum DAO vote approves further action.
Council member Patrick McCorry explained that the council briefly modified the chain's inbox contract on L1 to include a function enabling cross-chain messages that could impersonate any sender. Using this capability, a single transaction impersonated the exploiter's address to transfer the funds. Immediately afterward, the inbox contract was restored to its original state.
The Arbitrum DAO will need to decide how to allocate the recovered funds. It will need to determine whether to use them to compensate Aave users for losses or return them to KelpDAO to help restore rsETH backing.
Update (May 4, 2026): A U.S. law firm has filed a restraining notice in SDNY seeking to claim the frozen 30,766 ETH for its own clients, citing the exploit's attribution to North Korea's Lazarus Group. Aave LLC has filed an emergency motion to vacate the notice and is requesting a $300M bond if it stands. The DAO transfer vote remains legally blocked pending the court's decision.
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Disclaimer: Content is for informational purposes only, not endorsement or investment advice. The accuracy of information is not guaranteed.