- Solana Foundation provides USDT liquidity to Aave, aiming to stabilize DeFi markets after major exploit losses.
- Exploit involving unbacked collateral led to up to $190M in withdrawals, exposing protocol to significant bad debt risk.
- DeFi players coordinate recovery, raising funds and pledging assets to compensate affected users and restore stability.
Solana Foundation Chair Lily Liu said the foundation lent USDT to Aave to support recovery efforts after the April 18 exploit, which exposed the protocol to major losses. The move follows a cross-ecosystem response involving Aave, Arbitrum, and Mantle contributors. Liu confirmed the action aims to stabilize DeFi conditions while broader recovery plans continue.
Solana Deploys Treasury to Support Aave
According to Lily Liu, the Solana Foundation used its treasury to provide USDT liquidity to Aave. She said the foundation has long deployed capital within Solana DeFi systems. However, she added that broader ecosystem stability remains essential.
Liu stated that economies do not operate in isolation, highlighting shared dependencies across DeFi platforms. She noted that the foundation supported Tether’s recovery plan for Drift before this move. In addition, she confirmed plans to bring AAVE to the Solana network this weekend.
Exploit Triggered Large-Scale Losses
The intervention follows the April 18 exploit linked to KelpDAO infrastructure. Attackers minted unbacked rsETH tokens by exploiting a misconfiguration in LayerZero’s verification system. They then deposited these tokens into Aave as collateral.
This process enabled withdrawals of nearly $190 million in real assets. Although Aave operated as designed, the invalid collateral created systemic exposure. Estimates place bad debt at around $124 million if losses spread across participants.
However, worst-case scenarios suggest losses could exceed $230 million. These figures depend on how recovery mechanisms distribute liabilities across affected users.
Recovery Efforts Expand Across DeFi
In response, DeFi participants launched a coordinated recovery initiative. More than $230 million has been raised through DeFi United to compensate affected rsETH holders. This effort involves several major contributors.
Arbitrum DAO, Mantle, and Aave DAO pledged over 85,000 ETH, pending governance approvals. Additionally, Aave founder Stani Kulechov committed 5,000 ETH personally. Meanwhile, the Solana Foundation’s USDT loan adds liquidity support during ongoing recovery measures. Notably, the loan terms and exact amount remain undisclosed.
