Aave Labs, the core development team behind the Aave lending protocol, is embarking on a coordinated recovery effort after the Kelp DAO exploit, enlisting the help of ecosystem partners to set up the DeFi United industry-backed fund and bring the market back to normal.
Aave Pushes DeFi United Recovery as Fresh Capital Signals Post-Exploit Stabilization
27 April 2026 - 14:05 CEST
By Sandmark staff
The recovery initiative is designed to rebuild the backing of restaked ETH (rsETH) and compensate affected users, while advancing governance steps, including a proposal to unlock frozen Ether via Arbitrum DAO.
Execution is under way
In a post on X, Aave said execution work with KelpDAO and LayerZero_Core is already underway. Users can see the amount of compensation to which they are entitled, it said.
Babylon Foundation commits to investment
Babylon Foundation, which has a strategic collaboration with Aave Labs on Bitcoin-backed lending, said it will deposit $3mn in USDT into Aave's V3 and V4 pools, with yield recycled into ecosystem incentives, adding fresh liquidity as recovery efforts take shape.
The developments follow last week's exploit, which saw unbacked rsETH used as collateral on Aave, pushing utilization to 100% and effectively turning pools into exit queues, as reported on 23 Apr.
