Aave Labs has formally asked the Arbitrum decentralized autonomous organization to release 30,765 Ether (ETH) frozen after the Kelp DAO exploit and redirect those funds to a relief effort called DeFi United. The proposal, posted April 25 on the Arbitrum governance forum, targets approximately $73.5 million in ETH currently held by the Arbitrum Security Council.
Aave asks Arbitrum to send 30K ETH from Kelp exploiter to DeFi United
The Arbitrum Security Council froze the ETH on April 18, 2026, after identifying a wallet connected to the Kelp DAO exploit. The attack, which occurred in mid-April, drained approximately $293 million in assets from several protocols.
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Aave Labs argues that sending the frozen Ether to DeFi United would help restore the rsETH token’s backing. The proposal states this move would “restore normal conditions for Arbitrum users” and the wider decentralized finance ecosystem.
Kelp DAO, LayerZero, Ether.fi, and Compound support the submission. These four protocols suffered losses during the hack.
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The stolen rsETH tokens were used as collateral on Aave’s lending platform. The hacker borrowed wrapped Ether against them. This left Aave with over $190 million in bad debt.
Aave’s total value locked fell nearly $12 billion within a week after the exploit. Many users withdrew funds in response to the uncertainty.
DeFi United relief fund reaches $21 million in contributions
DeFi United launched on April 24, 2026, as a coordinated effort to fully restore rsETH’s backing. Dune Analytics data shows approximately $21 million in contributions already received.
Contributors include:
- Aave Labs CEO Stani Kulechov – personal donation
- Aave Labs head of contracts Emilio Frangella – personal donation
- Kelp DAO – protocol contribution
- Golem Foundation – institutional support
- BGD Labs – Web3 development platform
- Babylon – Bitcoin-native DeFi protocol
An additional $215 million has been pledged by Arbitrum, Mantle, Ether.fi, and Lido. These pledges remain subject to governance votes.
LayerZero, Ethena, Ink Foundation, and Frax Finance have also signaled their intention to help.
Industry watchers note that the speed of contributions reflects the interconnected nature of DeFi protocols. When one platform suffers, the effects ripple across the ecosystem.
Timeline of the Kelp DAO exploit and its aftermath
The Kelp DAO exploit occurred on April 15, 2026. The hacker stole approximately $293 million in assets, including a large amount of rsETH tokens.
Within hours, the stolen rsETH appeared on Aave’s lending platform. The hacker used them as collateral to borrow wrapped Ether. This created a massive shortfall.
By April 17, Aave’s total value locked had dropped by nearly $12 billion. Users rushed to withdraw their deposits, fearing further losses.
The Arbitrum Security Council froze 30,765 ETH on April 18. This action prevented the hacker from moving those funds.
On April 24, DeFi United launched. The relief effort aims to restore rsETH’s backing and compensate holders.
Aave Labs submitted the Arbitrum proposal on April 25. The proposal seeks to redirect the frozen ETH to DeFi United.
Aave sets a seven-week timeline for recovery plan
Aave Labs expects the recovery effort to take approximately 49 days. The proposal outlines a clear timeline for restoring rsETH and compensating holders.
The frozen Ether would be sent to a recovery address controlled by Aave, Kelp DAO, and blockchain security platform Certora. This multi-signature arrangement provides oversight.
Aave Labs stated that even a “partial recovery would still meaningfully reduce the shortfall.” This suggests the team has realistic expectations about the outcome.
The proposal includes a safeguard: if the recovery effort fails, the funds would be returned. This protects the Arbitrum community from potential misuse.
What this means for investors is that the DeFi ecosystem is actively working to contain damage from the exploit. The coordinated response could help restore confidence in affected protocols.
Broader implications for DeFi security and governance
The Kelp DAO exploit highlights persistent security risks in decentralized finance. Despite advances in auditing and monitoring, attackers continue to find vulnerabilities.
The Arbitrum Security Council’s decision to freeze funds raises questions about governance and decentralization. Some critics argue that such actions contradict the ethos of permissionless finance.
Supporters counter that emergency measures protect users and maintain trust in the ecosystem. The proposal’s multi-protocol support suggests broad consensus on this approach.
Data from DeFiLlama shows that total value locked across all DeFi protocols fell by approximately 8% in the week following the exploit. This indicates market-wide impact.
The implication is that DeFi protocols must balance security with decentralization. Governance mechanisms that allow rapid responses to emergencies may become more common.
Expert perspectives on the recovery effort
Analysts following the situation note that the DeFi United model could set a precedent for future exploit responses. Coordinated relief funds may become standard practice.
One industry observer commented that the involvement of multiple protocols demonstrates the ecosystem’s maturity. Protocols are willing to cooperate even when they compete.
The use of blockchain security platform Certora as a signatory on the recovery address adds credibility. Certora’s formal verification tools are widely respected in the industry.
Aave Labs’ decision to include a return clause in the proposal shows careful risk management. This could help win support from Arbitrum token holders.
What this signals for the broader market is that DeFi protocols are developing more sophisticated crisis management strategies. This could reduce the long-term impact of future exploits.
Conclusion
Aave’s proposal to send 30K ETH from the Kelp exploiter to DeFi United represents a significant step in the recovery effort. The coordinated response from multiple protocols shows the DeFi ecosystem’s resilience.
The success of this proposal depends on Arbitrum governance votes. If approved, the funds could help restore rsETH’s backing and compensate affected holders.
Industry watchers will monitor the outcome closely. The precedent set here could influence how future exploits are handled across the decentralized finance environment.
FAQs
Q1: What is DeFi United?
DeFi United is a relief fund launched on April 24, 2026, by Aave Labs and other protocols. It aims to restore the backing of rsETH tokens and compensate holders affected by the Kelp DAO exploit.
Q2: How much ETH did the Arbitrum Security Council freeze?
The council froze 30,765 Ether (ETH), worth approximately $73.5 million at current prices. This ETH is linked to the Kelp DAO exploiter.
Q3: Which protocols support Aave’s proposal?
Kelp DAO, LayerZero, Ether.fi, and Compound support the proposal. LayerZero, Ethena, Ink Foundation, and Frax Finance have also signaled their intention to help.
Q4: What happens if the recovery effort fails?
Aave Labs has stated it would return the funds if the recovery effort falls through. This safeguard protects the Arbitrum community.
Q5: How long will the recovery take?
Aave Labs expects the effort to restore rsETH and compensate holders to take approximately 49 days. The timeline includes governance votes and technical implementation.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
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