Major Crypto Heist: $292 Million Stolen from Kelp DAO, Leaving 20 Blockchains Vulnerable

In a devastating blow to the DeFi sector, an attacker successfully exploited Kelp DAO's LayerZero-powered bridge, draining 116,500 rsETH, equivalent to roughly 18% of the token's circulating supply. This significant breach occurred on Saturday at 17:35 UTC and has triggered a wave of emergency responses across the industry. The attacker manipulated LayerZero's cross-chain messaging system, deceiving it into releasing the substantial amount of rsETH to an attacker-controlled address. The stolen funds were part of the reserve backing wrapped versions of the token on over 20 blockchains, including Base, Arbitrum, and Scroll. As a result, holders of rsETH on non-Ethereum deployments are now faced with uncertainty regarding the value of their tokens. This has created a ripple effect, with panic redemptions on layer 2 blockchains potentially pressuring the unaffected Ethereum supply and forcing Kelp to unwind restaking positions to honor withdrawals. The fallout from this incident has been widespread, with Aave, SparkLend, and Fluid freezing their rsETH markets, and Lido Finance pausing further deposits into its earnETH product. The AAVE token has also experienced a decline of approximately 10% as the market reacts to the potential for bad debt. Ethena has temporarily paused its LayerZero OFT bridges from Ethereum mainnet as a precautionary measure. Kelp DAO has acknowledged the incident and is currently investigating the exploit with LayerZero, Unichain, its auditors, and outside security specialists. The ability of rsETH to maintain its peg over the weekend will depend on the extent of cross-chain redemptions into ETH on Ethereum and Kelp's capacity to recover any portion of the stolen funds.