coindesk.com
Crypto exchange Kraken, part of Payward Inc., is in talks to acquire a 15% stake in decentralized finance (DeFi) protocol Aave at a $385 million valuation, according to three people with knowledge of the matter.
A potential deal would see Kraken investing 35,000 ether (ETH) in return for 250,000 AAVE tokens and a 15% common equity stake in Aave Group, according to a document seen by CoinDesk.
Two sources with knowledge of the transaction said that Kraken is also looking to syndicate the deal which is worth around $71 million, the people said, who spoke on condition of anonymity as the matter is private.
According to a third source familiar with the company's plans, the investment would be the first in a series of deals aimed at building out Payward Asset Management, with the firm taking a more active role in DeFi and other investment opportunities. They have the capital to backstop it and partners around the table that want to fund these types of opportunities, the person said.
A Kraken spokesperson declined to comment. Aave didn't respond to a request for comment by publication time.
Aave is the largest decentralized lending protocol, allowing users to lend and borrow crypto assets without intermediaries. Depositors earn yield by supplying tokens to liquidity pools, while borrowers post crypto collateral to take out loans, with smart contracts automatically managing the process.
The protocol was thrust into the center of one of DeFi's biggest crises in April after attackers tied to North Korea's Lazarus Group exploited KelpDAO's cross-chain bridge to mint roughly $292 million of unbacked rsETH.
The hackers deposited the tokens as collateral on Aave and borrowed real assets against them, leaving the protocol with an estimated $190 million to $230 million in bad debt when the collateral became worthless.
Although Aave's own smart contracts were never compromised, the exploit triggered more than $8 billion in withdrawals as users rushed to reduce their exposure, highlighting the contagion risks of DeFi's interconnected ecosystem.
Kraken has stepped up acquisitions as parent company Payward prepares for a potential public listing, targeting businesses that expand its regulated trading infrastructure.
In April, Payward agreed to acquire crypto derivatives exchange Bitnomial for up to $550 million, adding a full suite of U.S. CFTC licenses covering brokerage, clearing and exchange operations. The deal follows Kraken's broader push beyond spot crypto trading as it builds a multi-asset platform ahead of a widely anticipated IPO.