Aave Reopens Lending Markets After Binance-Linked Borrowing

Decentralized finance lending protocol Aave has reopened its V3 and V4 lending markets following emergency restrictions implemented after a Binance-linked attacker borrowed wrapped Ether against stolen USDT. According to CryptoNews, a wallet linked to the Binance attacker deposited 60 million USDT into Aave and borrowed 19,762 WETH, worth approximately $44.6 million, before emergency controls took effect.

Emergency Controls and Market Restrictions

In response to the incident, Aave’s guardians froze new deposits and borrowing across 175 V3 reserves and 117 V4 reserves, while withdrawals, repayments, and liquidations remained available. Risk stewards removed approximately $3.83 billion in unused borrowing capacity to limit the size of new positions. Furthermore, nine assets, including USDT and USDC, remained unable to provide new borrowing power as collateral.

Aave announced on October 30 that all V3 and V4 markets had reopened, stating that its contracts were unaffected and existing positions remained fully collateralised throughout the incident. The protocol's intervention was precautionary, as the attacker had already taken out the loan before guardians froze new activity.

Impact on Borrowers and Rates

The restrictions stopped new supply and borrowing across affected reserves while keeping existing debts and liquidations running. Lenders could still withdraw available funds, and borrowers could repay to reduce their debt, but new deposits were blocked. As lenders withdrew available funds, utilisation pushed higher and borrowing costs increased.

Risk provider LlamaRisk responded with temporary rate changes and tighter borrowing limits before the reopening. The incident sparked a debate over how much disruption emergency safeguards should impose on other users, drawing in rival lending protocol Morpho and protocol supporters.

Key facts

• A Binance-linked attacker deposited 60 million USDT and borrowed 19,762 WETH worth approximately $44.6 million.
• Aave guardians froze new deposits and borrowing across 175 V3 reserves and 117 V4 reserves.
• Risk stewards removed approximately $3.83 billion in unused borrowing capacity.
• Aave reopened all V3 and V4 markets on October 30, confirming contracts were unaffected.
• Nine assets, including USDT and USDC, remained unable to provide new borrowing power as collateral.