Aave seeks Arbitrum's help to release stolen Kelp DAO funds

Aave Labs has proposed that Arbitrum’s decentralized autonomous organization unfreeze 30,765 Ether — roughly $73.5 million in value at current prices — tied to the Kelp DAO attack and redirect those funds to a remediation vehicle named DeFi United. The Ether in question sits in a wallet linked to the exploited Kelp platform, and last week the Arbitrum Security Council moved to freeze the asset as investigators assessed the breach.

In a governance proposal posted on Saturday, Aave Labs argued that releasing the frozen Ether to DeFi United would “restore normal conditions for Arbitrum users” and the broader ecosystem, noting that rsETH’s backing represents a meaningful contribution toward stabilizing the stablecoin’s value after the incident.

The submission is supported by Kelp DAO, LayerZero, Ether.fi and Compound, among other protocols affected by the hack.

DeFi United contributions reach $21 million

Days after DeFi United’s launch, data from Dune Analytics shows roughly $21 million in commitments has already been pledged. Among the early contributors are Aave Labs chief executive Stani Kulechov, Aave Labs head of contracts Emilio Frangella, Kelp DAO, the Golem Foundation, Web3 development outfit BGD Labs, and Babylon, a Bitcoin-native DeFi project.

The effort to pool resources for rsETH restoration has drawn broad participation from across the DeFi and Layer-2 ecosystems, signaling a coordinated response to the incident that dented trust in the Arbitrum environment.

Broad pledge wave extends beyond DeFi United

In parallel with DeFi United’s fundraising, Arbitrum, Mantle, Ether.fi and Lido have committed an additional $215 million to support the rsETH recovery effort. These pledges are counted as contingent on governance approvals, underscoring the role of token holders in determining how resources are allocated in response to the attack.

Support has continued to surface from other major players in the ecosystem, including LayerZero, Ethena, Ink Foundation and Frax Finance, all signaling willingness to contribute to the remediation push as governance votes move forward.

Overall, the coordinated response reflects a broader industry push to stabilize rsETH and reassure users after the vulnerability was exploited and collateral was rehypothecated across DeFi protocols.

Recovery plan timeline and governance safeguards

Aave Labs frames the proposal as a path to not only restore rsETH’s backing but also to normalize conditions for rsETH holders, liquidity providers and borrowers on Arbitrum and across the DeFi stack. The team describes a recovery window of about 49 days (roughly seven weeks) and notes that even a partial recovery would meaningfully reduce the shortfall.

Crucially, the plan calls for the 30,765 Ether to be transmitted to a recovery address controlled by a coalition of actors—Aave, Kelp DAO and the Certora security platform—to manage the process and oversee the restoration work. Aave also indicated that funds would be returned if the remediation effort does not materialize as planned, placing governance safeguards at the center of the operation.

The governance process surrounding these proposals remains pivotal. While DeFi United and the broader pledges push toward an accelerated remediation, final approvals hinge on Arbitrum’s community votes, which will determine whether the funds flow into the recovery pipeline and how oversight is structured during the process.

The unfolding efforts come amid a difficult period for Arbitrum’s ecosystem, with the Kelp incident highlighting the fragility of cross-chain finance and the interdependence of DeFi protocols. As the community weighs the proposal and the wider commitments, observers will be watching not only for the timeline's adherence but also for how effectively the recovery architecture can restore confidence in rsETH and the health of Arbitrum’s DeFi liquidity.

Watch next as Arbitrum’s governance process progresses, and as DeFi United’s fundraising translates into operational steps for rsETH restoration. The outcome will influence expectations for coordinated, multi-party responses to security incidents and may set a precedent for how similar crises are handled across Layer-2 ecosystems.

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