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

A significant attack has been carried out on a cross-chain bridge holding nearly 18% of the circulating supply of restaked ether tokens, resulting in a substantial loss of $292 million. The incident occurred on Saturday at 17:35 UTC, when an attacker successfully drained 116,500 rsETH from Kelp DAO's LayerZero-powered bridge. This bridge is part of a liquid restaking protocol that allows users to earn additional yield on top of standard Ethereum staking rewards. The stolen tokens were part of a reserve backing wrapped versions of the token deployed across more than 20 other blockchains, including Base, Arbitrum, and Scroll. The attacker exploited LayerZero's cross-chain messaging layer, tricking it into releasing the tokens to an attacker-controlled address. In response, Kelp's emergency pauser multisig froze the protocol's core contracts, but not before two follow-up attempts were made to drain an additional 40,000 rsETH. The incident has raised concerns among holders of wrapped tokens on non-Ethereum deployments, as the drained reserve may leave their tokens without backing. This has created a potential feedback loop, where panic redemptions could pressure the unaffected Ethereum supply, forcing Kelp to unwind restaking positions to honor withdrawals. The incident has already had a ripple effect, with Aave, SparkLend, and Fluid freezing their rsETH markets, and AAVE's price falling by around 10%. Lido Finance has also paused further deposits into its earnETH product due to its exposure to rsETH. The stablecoin issuer Ethena has temporarily paused its LayerZero OFT bridges as a precautionary measure. Kelp has acknowledged the incident and is investigating with LayerZero, Unichain, its auditors, and outside security specialists. The outcome of the incident remains uncertain, with the potential for further losses depending on how much of the cross-chain float tries to redeem into ETH on Ethereum and whether Kelp can recover any portion of the stolen funds.