The Babylon Foundation has allocated $3 million worth of USDT tokens into the Aave protocol as decentralized finance (DeFi) initiatives work to recover from the disruptions caused by the April 18 Kelp DAO rsETH exploit. This capital injection aims to strengthen liquidity and reinforce ecosystem trust during a highly fragile period for decentralized lending markets.
Babylon split the deposit between Aave versions, allocating $2 million to V3 and $1 million to V4. The foundation said, “Babylon Foundation will deposit $3M USDT into Aave… as a show of support and confidence in aave and DeFi.”
‘DeFi United’ coordination expands across the ecosystem
Babylon’s deposit aligns with the rapidly growing “DeFi United” recovery framework led by Aave and ecosystem partners. Aave Founder Stani Kulechov previously opened contributions under defiunited.eth, directing funds toward rsETH restoration. Additionally, contributors created a dashboard to track incoming support and donations.
Aave service providers confirmed that a recovery fund already exists. They said it includes pending governance votes, including Arbitrum DAO participation. The protocol stated, “We are DeFi United, and resolving this… is our top priority.” As a result, governance decisions now play a key role in unlocking further recovery capital.
On-chain data from Lookonchain shows the initiative has raised 69,642 ETH, worth about $161 million. The inflows have increased as participation from major protocols continues to scale.
Cross-chain support strengthens recovery efforts
Because Aave serves as the underlying interest rate anchor for dozens of protocols, the crisis has prompted an unprecedented cross-chain response.
Solana Foundation’s President Lily Liu said the organization is lending USDT to Aave for the first time, adding that DeFi stability requires cooperation across networks.
In parallel, Arbitrum DAO proposals seek to unlock frozen ETH linked to the April 18 incident. EtherFi, KelpDAO, Compound, and LayerZero are among the stakeholders backing the proposal. In case of approval, this proposal would lead to more recovery fund availability associated with the impacted roles.
Furthermore, protocols without direct exposure to the rsETH tokens—including Frax Finance, Lido, and Mantle—have officially joined the DeFi United coalition, highlighting a shared understanding that an Aave insolvency event represents a systemic risk to the entire Web3 financial stack.
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