Here's what happened, what it means, and what to do if you're exposed.
First: how it happened:
KelpDAO's rsETH runs on a LayerZero cross-chain bridge. The bridge had a critical weakness a single verifier setup instead of multiple.
The attacker found it and exploited it.
• Minted 116,500 fake unbacked $rsETH, about 18% of total supply out of thin air • Deposited that fake rsETH as collateral into $Aave, Compound, Euler and others • Borrowed real $ETH against fake collateral • Swapped everything through $UNI and disappeared across 20 chains • Left $292M in bad debt behind
Two follow-up attempts of $100M each were blocked after KelpDAO hit the emergency pause.
What it means for Aave:
Aave is the biggest casualty here. Around $177-200M in bad debt sitting in WETH pools on V3 and V4.
Aave's own contracts are fine. This is not an Aave exploit. But Aave accepted rsETH as collateral and now holds the bag.
Token is down 16% as markets price in the Safety Module risk. If bad debt cannot be recovered, staked AAVE in the Safety Module could get slashed to cover it.
If you are exposed right now:
• Monitor closely, some analysts are recommending withdrawal before any settlement kicks in • Holding rsETH anywhere, your positions are frozen, check official KelpDAO channels • Using rsETH as collateral, frozen, do not ignore this • stETH or wstETH, $Lido confirmed unaffected • Aave on Base or isolated pools generally safe
This is the largest DeFi exploit of 2026. It follows the $285M Drift hack just 18 days ago.
The pattern is the same every time, bridges are the weakest link. Not the smart contracts. Not the protocols. The bridges connecting them.
A single verifier. That is all it took to drain $292M. 💀#
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