Kelp DAO Disputes LayerZero's Claim of Responsibility for $290 Million Loss

A recent cryptocurrency exploit has sparked a heated debate between Kelp DAO and LayerZero, with each side assigning blame for the $290 million loss. According to a source familiar with the matter, Kelp DAO is set to challenge LayerZero's post-mortem analysis, which essentially holds Kelp responsible for ignoring warnings about its single-verifier setup. The liquid restaking protocol claims that the compromised verifier was actually part of LayerZero's own infrastructure and that the setup in question was the default configuration provided by LayerZero. The incident occurred when attackers drained 116,500 rsETH, worth approximately $290 million, from Kelp's LayerZero-powered bridge by compromising the servers that LayerZero's verifier relied on. Kelp argues that the compromised servers were built and run by LayerZero, not by Kelp, and that the configuration used was the same as the one recommended by LayerZero in its quickstart guide and default GitHub configuration. In fact, 40% of protocols on LayerZero are currently using the same 1/1 DVN setup, according to the source. Security researchers have also questioned LayerZero's framing of the incident, with some accusing the company of deflecting responsibility for its own compromised infrastructure. Yearn Finance core team developer Artem K, also known as @banteg, posted a technical review of LayerZero's public deployment code, noting that the reference setup ships with single-source verification defaults across every major chain. Chainlink community manager Zach Rynes alleged that LayerZero was 'deflecting responsibility' for its own compromised infrastructure and accused the company of throwing Kelp under the bus for trusting a setup that LayerZero itself supported. In response to the incident, LayerZero has announced that it will no longer sign messages for any application running a single-verifier setup, forcing a protocol-wide migration. Kelp DAO has confirmed that the 1-of-1 DVN setup at the center of the incident reflects LayerZero's documented default configuration and has called for a shared and accurate account of what happened to be established in order to make the necessary fixes.