Kelp DAO Exploit Drains ₱17.45 billion ($291 million), Triggers ₱371.71 billion ($6.2 billion) Aave Withdrawal Crisis
A phantom message exploited LayerZero infrastructure to release 116,500 rsETH without removing corresponding tokens from Unichain, according to blockchain researcher Stacy Muur. The stolen tokens were dumped on Aave, where attackers borrowed regular funds against the fake collateral, creating massive bad debt and sparking panic withdrawals.
Key Takeaway
Single point of failure in bridge design turned $291 million hack into $6.2 billion liquidity crisis.
The exploit relied on a single point of failure in the bridge's verification system. Aave froze rsETH markets immediately, but the damage spread fast. Consensys and MetaMask Head of Developer Relations Francesco Andreoli said attackers used Aave to borrow regular funds against the fake collateral, creating massive bad debt. Less than 24 hours after the hack, Aave users struggled to withdraw funds as utilization rates spiked to 100% on core lending pools.
DefiLlama co-founder 0xngmi posted that Aave faced ₱371.71 billion ($6.2 billion) in net withdrawals by early Sunday. Multiple other pools hit 100% utilization, leaving lenders stuck and the protocol at risk of further bad debt. The AAVE governance token fell 16% to $90.13 as Ethereum dropped 2% to $2,300 over the same period.
Kelp DAO paused rsETH contracts across mainnet and several layer-2 networks while investigating with LayerZero, Unichain, auditors and security experts. Aave said its contracts were not attacked and confirmed the protocol holds no rsETH itself. Spark Head of Strategy monetsupply.eth pointed to negative secondary effects as users borrowed against stablecoin deposits, straining liquidity further.
Plume General Counsel Salman Banei said the exploit gives critics ammunition against systems that replace traditional financial intermediaries with code. Tron founder Justin Sun tried negotiating with attackers on X, asking how much they wanted and warning it's not worth sacrificing both Aave and Kelp DAO. Lending rates across Aave increased to 10-15% by April 20 as the liquidity crunch deepened.
This article was written based on reporting from Decrypt.
