LayerZero Attributes $290 Million Kelp Exploit to Inadequate Security Setup and North Korea's Lazarus Group

LayerZero has attributed the $290 million exploit of Kelp DAO to the protocol's own security configuration, specifically its use of a single-verifier setup, which LayerZero had previously advised against. The attack, attributed with preliminary confidence to North Korea's Lazarus Group and its TraderTraitor subunit, involved compromising two remote procedure call (RPC) nodes used by LayerZero's verifier to confirm cross-chain transactions. The attackers replaced the binary software on these nodes with malicious versions that reported fraudulent transactions to LayerZero's verifier while providing accurate data to other systems. To ensure the attack went undetected, the attackers launched a distributed denial-of-service (DDoS) attack on uncompromised external RPC nodes, forcing failover to the compromised nodes. The DDoS, which occurred between 10:20 a.m. and 11:40 a.m. Pacific Time on Saturday, allowed the attackers to release 116,500 rsETH. The attack's success was contingent upon Kelp's 1-of-1 verifier configuration, which meant LayerZero Labs was the sole entity verifying messages to and from the rsETH bridge. LayerZero had recommended a multi-verifier setup with redundancy, which would have required consensus across several independent verifiers to confirm a message, thereby preventing the attack. The company has confirmed that there was no contagion to other applications on the protocol and has resumed verifier operations, stating it will no longer sign messages for applications with single-verifier configurations. This architectural distinction is significant for how DeFi prices LayerZero risk going forward, as it indicates the protocol functioned as designed, and the exploit was a result of Kelp's security choices rather than a protocol-level bug. The exploit is the second major attack attributed to the Lazarus Group in 18 days, following the Drift Protocol exploit on April 1, resulting in over $575 million drained from DeFi through two distinct attack vectors.