Aave Liquidates Kelp DAO Exploiter rsETH Positions

Aave, a leading decentralized lending protocol, has liquidated the remaining rsETH collateral positions linked to the Kelp DAO exploiter on Ethereum and Arbitrum networks. The recovered assets were transferred to Recovery Guardian, a multisignature wallet managed by DeFi United, as announced by Aave on Wednesday. The process affected no user deposits and did not activate the protocol's Umbrella debt protection system.

The liquidation clears outstanding positions from an April 18 exploit, in which attackers exploited vulnerabilities in Kelp DAO's LayerZero-based bridge to mint 116,500 unbacked rsETH tokens. The fraudulent tokens were deposited as collateral on Aave and Compound to borrow wrapped Ether, generating more than 190 million dollars in bad debt and prompting billions in withdrawals from lending markets.

DeFi United, a coalition coordinating recovery, now holds over 320 million dollars in contributions toward restoring rsETH backing and compensating users. Galaxy Digital research vice president Thaddeus Pinakiewicz stated the fund is approximately 10 Ether short of full recapitalization. "These commitments are needed to get it over the line and plug the hole," he said,...