$290m crypto hack sparks panic as investors rush to withdraw from Aave

A MAJOR crypto security breach has drained about $300 million from a decentralised finance (DeFi) project, causing panic across the market and triggering large withdrawals from Aave, one of the biggest crypto lending platforms.

The attackers stole a special type of Ether and then used about $200 million of it as collateral on Aave to borrow other cryptocurrencies. This unusual move raised fears that the collateral supporting loans on the platform might not be safe.

As panic spread, many users quickly pulled out their funds, worried about possible losses. This led to a sharp drop in deposits, with billions of dollars leaving Aave within days.

Data shows Aave lost about $9 billion in net deposits, and its total assets fell by more than one-third to around $17.5 billion.

The hack has been linked to weaknesses in cross-chain bridge systems, which help transfer assets between different blockchains but are known to be vulnerable.

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The affected project, Kelp DAO, has paused operations while investigating. Cybersecurity firms say the attackers may have borrowed large sums across several platforms using the stolen tokens.

In response, Aave has frozen trading of the affected asset but says it is still fully backed.

The incident adds to growing concerns about security in DeFi, where there is no central authority to protect users or cover losses when things go wrong.