AVALANCHE FOUNDATION JOINS DEFI UNITED BACKING AAVE AFTER RECENT RSETH HACK

Avalanche Foundation Backs DeFi United as Coalition Tops $160M

The @AvalancheFDN has publicly aligned with DeFi United, the coordinated industry effort rallying support for Aave in the wake of the April 18 $rsETH bridge exploit. The foundation framed the moment as DeFi's first transparent stress test of traditional-finance-scale capital flows — a signal of institutional confidence in the sector's ability to self-organise through a crisis.

DeFi United had raised more than $160 million as of April 25, with over 100,360 $ETH committed across the broader coalition. Key contributors include Mantle, which pledged up to 30,000 ETH structured as a three-year credit facility, and Aave DAO, which is voting on a 25,000 ETH contribution from its own treasury. Aave founder Stani Kulechov added 5,000 ETH from personal funds, describing Aave as his "life's work."

How the rsETH Exploit Unfolded

The incident traces back to a vulnerability in KelpDAO's LayerZero V2 Unichain-to-Ethereum bridge, which was configured as a 1-of-1 DVN — meaning a single verifier stood between the attacker and the funds. By submitting a forged inbound packet, the attacker minted 116,500 unbacked $rsETH tokens worth roughly $292 million without burning any corresponding collateral on the source chain.

Rather than selling on the open market, the attacker deposited approximately 89,567 rsETH into Aave V3 across Ethereum and Arbitrum as collateral and borrowed roughly 82,650 WETH, leaving Aave exposed to collateral with no real backing. Aave's own smart contracts were never compromised. Within hours, the Aave Guardian froze rsETH and wrsETH markets across all deployments and set loan-to-value ratios to zero to contain further damage.

The fallout was swift. Aave's total value locked plunged by approximately $6.6 billion in the immediate aftermath, with panic withdrawals accelerating the exodus. Potential bad debt was modelled at between $123 million and $230 million depending on how KelpDAO socialises the shortfall across chains.

Recovery efforts are partial. Arbitrum's Security Council froze 30,766 ETH linked to the exploit, worth roughly $71 million at the time of the freeze. The hacker bridged the remainder into $BTC via Thorchain, complicating further recovery. Consensys and Ethereum co-founder Joseph Lubin have since joined DeFi United with up to 30,000 ETH in additional financial support, reinforcing the breadth of the coalition.

The Avalanche Foundation's endorsement adds a significant Layer-1 voice to the initiative. Together, the coalition's response represents what many in the industry are calling the closest thing DeFi has built to a lender of last resort — assembled without a regulator, a central bank, or a formal mandate.

Sources:
Aave Governance – rsETH Incident Report (April 20, 2026)
CoinDesk – Aave Rallies DeFi Partners After $292M KelpDAO Hack
CoinDesk – Aave Records $6 Billion TVL Drop After Kelp Hack