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Curve Finance Founder Urges Aave to Resolve KelpDAO Exploit Issues

Curve Finance Founder Urges Aave to Resolve KelpDAO Exploit Issues

Aave states the KelpDAO-related rsETH exploit could leave $123.7 million to $230.1 million in bad debt, with Mantle and Arbitrum facing different WETH shortfalls depending on how losses are accounted for.

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Fact Check
CoinDesk's 'A $300 million borrowing spike on Aave signals liquidity crunch after KelpDAO exploit' strongly supports the broader event context: a roughly $292 million KelpDAO/rsETH exploit led to severe liquidity disruption on Aave. The more specific parts of the claim about Lido's EarnETH vault having about 9% affected rsETH exposure, pausing vault activity, deleveraging, and potentially using a $3 million first-loss protection fund are supported by search-result snippets for TheStreet and CertiK Pulse observed during this run, but I was unable to retrieve a primary Lido source or a fully readable secondary article to validate those details directly. Therefore the overall claim is likely true but not fully verified from primary evidence in this run.
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Summary

Aave said the Kelp DAO cross-chain bridge exploit enabled about $190 million in undercollateralized borrowing after an attacker released 116,500 rsETH, deposited 89,600 rsETH into Aave, and borrowed ETH-related assets before the protocol froze the rsETH market. The protocol now states potential bad debt could total $123.7 million or $230.1 million, depending on how rsETH losses are accounted for. Under its Layer2-focused scenario, Mantle would face a 71.45% WETH shortfall and Arbitrum a 26.67% shortfall, while the final outcome depends on rsETH accounting treatment and LRTOracle exchange-rate updates. The incident had already triggered about $6 billion in TVL withdrawals. In related developments, a whale withdrew 98,032 wstETH and 3,000 cbBTC from Aave, worth about $494 million, and swapped 7,438 aEthWETH for 1,930 stETH and 5,272 ETH, taking a 237 ETH loss while still leaving 10,000 ETH on the protocol. Lido later said its EarnETH vault has roughly 9% exposure to rsETH, or about $21.6 million, following the April 18 bridge attack that stole around 116,500 rsETH worth $292 million.

Terms & Concepts
  • Aave: A decentralized finance lending protocol where users supply crypto assets to earn yield or borrow against posted collateral.
  • rsETH: A liquid restaking token tied to staked Ether exposure, used here as collateral in Aave and affected by the KelpDAO exploit.
  • TVL: Total value locked, a metric showing the total value of assets deposited in a decentralized finance protocol.