Coalition Unveils Plan to Mitigate $300 Million Crypto Exploit

A $300 million deficit typically doesn’t come with a straightforward repair guide. However, the group leading the Kelp DAO recovery effort is attempting to create one. DeFi United, a coalition of multiple blockchain projects and crypto ecosystem individuals, has outlined a detailed, step-by-step plan to restore the backing of rsETH after this month’s hack, which released over 116,000 unaccounted tokens. The proposal, shared on Aave’s official X account, resembles a coordinated cleanup operation that relies heavily on Aave’s infrastructure to rectify the damage and stabilize markets. The incident originated on April 18 when an attacker exploited a vulnerability in rsETH’s bridge, tricking the Ethereum side into releasing 116,500 rsETH without proper backing. These tokens were dispersed across multiple wallets and utilized across DeFi, with a significant portion used as collateral on Aave and other lending platforms, causing protocols like Aave to hold collateral that wasn’t fully backed. According to the proposal, most of the exploited funds remain active, with roughly 107,000 of the original 116,500 rsETH still tied up in positions across Aave and Compound. DeFi United’s proposal aims to address both the restoration of rsETH’s backing and the unwinding of loans created using those tokens. The group claims to have secured enough ETH commitments to fully re-collateralize rsETH, planning to feed this ETH back into the system in stages. Simultaneously, the proposal focuses on the lending markets where the damage is most visible, seeking to carefully unwind the mess rather than letting it play out chaotically. This involves dealing with the positions the attacker opened on Aave, which are essentially loans backed by rsETH that shouldn’t have existed. The plan suggests temporarily adjusting rsETH’s valuation to enable these bad positions to be liquidated or closed more smoothly, potentially freeing up around 13,000 ETH from Aave alone. Once the collateral is recovered, it will be converted into ETH and used to cover the shortfall created by the exploit. Although the process carries risks, including governance approvals and the successful deployment of committed funds, the plan represents a more coordinated response than DeFi has often managed previously. If executed as intended, the goal is to fully restore rsETH’s backing and stabilize all affected markets.