Lido and Multiple DeFi Protocols Pledge Up to $43,000 ETH to Restore Kelp DAO Backing

Following a $292 million exploit of Kelp DAO that created 116,500 unbacked rsETH tokens, eight major DeFi protocols pledged a combined 43,000 ETH to a coordinated recovery effort called DeFi United. The attacker exploited a LayerZero integration vulnerability, deposited nearly 90,000 rsETH into Aave as collateral, and borrowed approximately $190 million in assets, leaving a 112,000 rsETH backing shortfall and triggering a $10 billion plunge in Aave's total value. Aave service providers organized the bailout initiative to recapitalize rsETH and prevent forced liquidations, with contributions including 5,000 ETH from EtherFi and 2,500 stETH from Lido Labs Foundation. While Arbitrum's security council froze roughly $71 million in stolen funds, the remaining assets were converted to bitcoin via Thorchain, making full recovery unlikely and necessitating the coordinated stabilization approach.

DeFi United Recovery Initiative and Pledged Contributions

• ▪Stani Kulechov, founder of Aave, offered a 5,000 ETH contribution to the recovery effort
• ▪EtherFi proposed a 5,000 ETH plan to protect users and prevent bad debt across DeFi
• ▪Aave service providers led an initiative called DeFi United to stabilize decentralized finance markets after a $292 million exploit
• ▪Lido Labs Foundation proposed allocating up to 2,500 stETH, worth roughly $5.7 million, into a dedicated relief vehicle
• ▪The DeFi United funds would be used to reduce the shortfall in rsETH backing and help prevent forced liquidations across lending markets

KelpDAO Exploit Mechanics and Impact on Aave

• ▪The KelpDAO exploit was the biggest crypto exploit of the year as of April 23, 2026
• ▪The total value of assets on Aave plunged by $10 billion following the KelpDAO exploit incident
• ▪The attacker deposited nearly 90,000 rsETH into Aave as collateral and borrowed about $190 million in ETH and other assets across Ethereum and Arbitrum
• ▪The total hole in rsETH backing is estimated to be more than 112,000 rsETH according to Aave's incident report
• ▪An attacker minted 116,500 unbacked rsETH tokens by exploiting a vulnerability in KelpDAO's integration with LayerZero

Containment Efforts and Fund Recovery Challenges

• ▪Arbitrum's security council froze 30,766 ETH, worth roughly $71 million, tied to the KelpDAO exploit earlier in the week of April 23, 2026
• ▪The DeFi United effort focuses on stabilizing the system with a coordinated bailout to recapitalize rsETH and mitigate losses rather than clawing back funds

Perspective of Contributing protocols (Lido, EtherFi, Mantle, Ethena, LayerZero, Ink, Golem, Tyrdo)

• ▪EtherFi's 5,000 ETH contribution is framed as protecting users and preventing bad debt accumulation across DeFi protocols
• ▪Lido Labs Foundation's allocation of up to 2,500 stETH demonstrates commitment to stabilizing the liquid staking ecosystem

Perspective of Kelp DAO and rsETH holders

• ▪Kelp DAO's integration vulnerability with LayerZero enabled the minting of 116,500 unbacked rsETH tokens