The lending protocol Aave came under pressure following a massive hack of the staking project KelpDAO, which resulted in a loss of $293 million. This event triggered significant changes in Aave’s operations and a series of large transactions involving the well-known crypto entrepreneur Justin Sun.
This is reported by Finway
KelpDAO Hack and Its Impact on Aave
Following the attack on KelpDAO, which led to the formation of substantial hopeless debt within the protocol, the Aave team was forced to freeze the rsETH and wrsETH markets in versions V3 and V4. The total value locked (TVL) in Aave plummeted as users rushed to withdraw their assets amid rising uncertainty.
At the same time, according to research platform Arkham Intelligence, within 21 minutes of the market freeze, over $276.8 million was withdrawn from Aave in the stablecoin USDT through a wallet labeled as HTX Recovery Hot Wallet. This address is likely controlled by Justin Sun himself.
Additionally, Justin Sun also withdrew 53,665 ETH (equivalent to approximately $126 million) from his personal wallet and deposited these funds into the Spark protocol. The total amount of assets moved by Sun from Aave reached $402.8 million.
Market and User Reactions
According to EmberCN analysts, Justin Sun was able to swiftly transfer his funds, while other users were forced to sell aEthWETH (Aave deposit tokens that represent a claim to WETH) at a significant discount. For instance, one user lost 310 ETH while exchanging aEthWETH for ETH via Swap, which represents a 1.8% discount.
“During an attempt to withdraw 17,400 ETH from Aave, a user sold deposit tokens (aEthWETH) via Swap, losing 310 ETH ($720,000), which is a 1.8% discount. After that, the received ETH was transferred to Spark.”
This situation simultaneously created new opportunities for larger players. Some whales profited from speculating on aEthWETH by buying them at a discount. One of them quickly made a profit of 143 ETH.
In response to the KelpDAO hack, Justin Sun reached out to the hacker through his X page, suggesting negotiating the return of the stolen funds, as he claimed that these $300 million would be impossible to use fully.
- The KelpDAO hack resulted in a loss of $293 million and affected Aave’s liquidity.
- Justin Sun reportedly withdrew over $400 million from Aave during the crisis.
- Some users lost funds due to forced sales of aEthWETH at a discount, while certain whales managed to profit from the situation.