Kraken, the cryptocurrency exchange, is said to be negotiating for a 15% equity share in the decentralized finance platform Aave. Insider reports indicate that this potential investment values Aave at $385 million.
As reported by CoinDesk, Kraken, which operates under the name Payward Inc., intends to invest 35,000 Ethereum (ETH) in this transaction, which would yield 250,000 $AAVE tokens along with the 15% ownership in Aave Group’s common stock.
Two insiders revealed that Kraken might also look to distribute this deal, estimated at roughly $71 million, among several investors via syndication. They chose to remain anonymous due to the confidential nature of the discussions.
Moreover, a third source familiar with the company’s strategy suggested that this investment could serve as one of the initial steps in Payward Asset Management’s growth initiative. Kraken is seeking to become more actively involved in the decentralized finance space and explore other investment avenues through this initiative.
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Aave is recognized as one of the foremost decentralized lending platforms, enabling users to lend and borrow cryptocurrency assets without the need for intermediaries. Participants can earn returns by contributing assets to liquidity pools, while borrowers can secure loans using crypto collateral.
However, Aave experienced a significant crisis within the DeFi sector back in April. The Lazarus Group, allegedly associated with North Korea, took advantage of a flaw in KelpDAO’s cross-chain bridge, creating around $292 million worth of rsETH without proper backing.
The criminals utilized these tokens as collateral on Aave to borrow genuine assets. Once the collateral lost its value, projections indicated that the protocol accumulated between $190 million and $230 million in harmful debt.
Even though Aave’s own smart contracts weren’t directly compromised, the incident prompted a rapid withdrawal of users to minimize their exposure. This led to an outflow exceeding $8 billion, further illustrating the interconnected risk within the DeFi landscape.
*This is not financial advice.