DeFi Protocols Commit 43,500 ETH to Rebuild rsETH Backing After $293M Kelp Exploit
CoinDesk reported that decentralized finance protocols are coordinating to restore rsETH backing after a $293 million exploit of the Kelp restaking platform on Saturday sparked a liquidity shock. Total commitments have surpassed 43,500 ETH, worth more than $101 million.
Aave has branded the effort "DeFi United," with participants including Lido DAO and the Golem Foundation. At the time of publication, the largest commitments were attributed to the EtherFi Foundation and Mantle.
"We believe that ecosystem collaboration is most important at times like these, and our top priority is to deliver the strongest possible outcomes for users," Aave said on Thursday, adding that multiple letters of intent have already been pledged to help restore rsETH reserves.
The incident traces back to April 18, when hackers stole 116,500 Kelp DAO Restaked ETH tokens from Kelp DAO's LayerZero-based bridge. The attacker then used the assets as collateral to borrow wrapped ether on Aave v3, leaving Aave with about $195 million in bad debt and sending stress through interconnected crypto lending markets.
DeFi United remains in progress. Mantle has submitted a proposal to lend up to 30,000 ETH to the Aave DAO in exchange for yield to help address the bad debt. EtherFi Foundation has proposed donating 5,000 ETH. Golem Foundation and Golem Factory are jointly contributing 1,000 ETH.
Lido DAO proposed a one-time, capped contribution of up to 2,500 stETH to a dedicated rescue facility, conditional on other parties fully funding the recovery plan and covering any shortfall. The group said the proposal is intended to limit broader spillover effects and support affected users through an orderly resolution.
Other protocols, including cross-chain messaging protocol LayerZero, the Layer 2 blockchain Ink Foundation, and lending platforms Tyrdo and Frax Finance, have also pledged undisclosed amounts of ETH.
Aave founder and CEO Stani Kulechov said he has personally pledged 5,000 ETH and that the platform is working with partners to formalize additional commitments.
Some assets have been frozen as part of the response. Earlier on Thursday, Aave said it paused rsETH reserves on Ethereum, Arbitrum, Base, Mantle, and Linea to maximize recovery of the stolen tokens. "The goal of this action is to recover more funds during the progress of the recovery plan. As efforts continue, we will update the community on the next steps," the platform said.
On the Monday after the exploit, the Arbitrum Security Council took emergency steps to freeze 30,766 ETH held in a wallet linked to the Kelp attack. Blockchain analysts said 75,700 tokens had already been laundered by the attacker.
