Cryptocurrency exchange Kraken is in talks to acquire a 15% stake in decentralized finance protocol Aave, according to sources close to the matter. The potential investment prices Aave at a valuation of $385 million. Kraken, operating under Payward Inc., aims to take a more active role in DeFi and other investment opportunities with this move. Aave is one of the largest decentralized lending protocols, allowing users to borrow and lend crypto assets without intermediaries, though it was at the center of a major DeFi crisis in April when attackers exploited a vulnerability resulting in an estimated $190 million to $230 million in bad debt on the protocol.
Kraken Plans 35,000 ETH Investment for 250,000 AAVE Tokens
According to CoinDesk, Kraken plans to invest 35,000 Ethereum (ETH) as part of the deal, receiving 250,000 AAVE tokens and a 15% stake in Aave Group common shares. Two sources close to the transaction said Kraken is considering sharing this approximately $71 million deal with different investors through syndication. The sources requested anonymity because the discussions are private.
According to a third source close to the company's plans, this investment could be one of the first deals planned as part of Payward Asset Management's expansion.
Aave Protocol Enables Decentralized Lending Without Intermediaries
Aave is known as one of the largest decentralized lending protocols, allowing users to borrow and lend crypto assets without needing intermediaries. Users earn returns by providing assets to liquidity pools, while those wishing to borrow can use crypto collateral to obtain a loan.
April Security Incident Resulted in $190M–$230M Bad Debt
Aave was at the center of one of the biggest crises in the DeFi ecosystem in April. Attackers linked to the North Korea-linked Lazarus Group exploited a vulnerability in KelpDAO's cross-chain bridge to mint approximately $292 million worth of rsETH without any backing.
The attackers used these tokens as collateral on Aave to borrow real assets. After the collateral became worthless, it was estimated that between $190 million and $230 million in bad debt accumulated on the protocol.
Although Aave's own smart contracts didn't have a direct vulnerability, the incident prompted users to quickly exit the protocol to mitigate their risks. This resulted in an outflow of over $8 billion, once again highlighting the contagion risk inherent in interconnected structures within the DeFi ecosystem.
FAQ
What is Kraken investing in Aave?
Kraken is in talks to invest 35,000 Ethereum (ETH) to acquire 250,000 AAVE tokens and a 15% stake in Aave Group common shares, according to sources close to the matter. The potential investment prices Aave at a valuation of $385 million.
What happened to Aave in April?
In April, attackers linked to the North Korea-linked Lazarus Group exploited a vulnerability in KelpDAO's cross-chain bridge to mint approximately $292 million worth of rsETH without backing. The attackers used these tokens as collateral on Aave to borrow real assets, resulting in an estimated $190 million to $230 million in bad debt on the protocol after the collateral became worthless.
