LayerZero deposits 10,000+ ETH to shore up Aave liquidity after KelpDAO exploit

LayerZero Labs said April 28 it will commit 10,000 ETH to the DeFi United recovery effort after the KelpDAO rsETH exploit strained liquidity on Aave. (theblock.co) The commitment is split in two: 5,000 ETH goes to DeFi United, and another 5,000 ETH will be deposited into Aave to strengthen liquidity. LayerZero also said it will take additional steps to deepen liquidity for GHO, Aave’s native stablecoin. (theblock.co) The crisis started on April 18, when an attacker exploited KelpDAO’s LayerZero V2 Unichain-to-Ethereum rsETH route, which Aave’s incident report said was configured as a 1-of-1 Decentralized Verifier Network path. A forged inbound packet released 116,500 rsETH on Ethereum without a matching burn on the source chain. (governance.aave.com) Aave said the attacker spread the rsETH across seven addresses and used it as collateral in Aave V3 positions on Ethereum and Arbitrum. Aave froze rsETH and wrapped rsETH markets across all listed deployments starting at 18:52 UTC on April 18. (governance.aave.com 1) (governance.aave.com 2) Aave’s forum said the incident was scoped to the rsETH asset and did not come from a vulnerability in the Aave protocol itself. The protocol’s pools remained operational while the guardian disabled new supply and new borrowing against rsETH collateral. (governance.aave.com) The Block reported that about 107,000 rsETH ended up in lending positions across Aave, leaving unified actors trying to unwind substantial bad debt. The same report said DeFi United has now raised more than $300 million in ETH and stablecoins. (theblock.co) The rescue pool has widened beyond LayerZero. Lido contributors proposed a one-time allocation of up to 2,500 stETH to a dedicated relief vehicle to reduce the rsETH deficit and limit disorderly liquidations. (research.lido.fi) The same Aave-linked recovery push has drawn other large commitments, including a pending Arbitrum DAO vote for 30,765 ETH, a 30,000 ETH contribution from Consensys and Joseph Lubin, and a matching low-interest loan from Mantle, according to The Block. (theblock.co) The dispute over responsibility is still open. The Block reported that some market participants blame LayerZero because KelpDAO used a single-verifier setup, while LayerZero says it recommended multi-DVN redundancy and Kelp says it used the default configuration. (theblock.co) For now, the immediate goal is narrower: replace missing rsETH backing and keep Aave liquid while governance votes and recovery plans move on-chain. (governance.aave.com) (theblock.co)