Aave Under Strain as KelpDAO Exploit Disrupts DeFi Lending Markets

• KelpDAO exploit moved 116,500 rsETH, enabling over $200M in ETH borrowing on Aave.
• Liquidity dropped as users withdrew funds and stablecoin supply caps were reached.
• Recovery plans may split losses between Ethereum holders or Layer 2 users.

A large-scale exploit involving KelpDAO’s rsETH bridge has placed pressure on decentralized lending markets, with activity on Aave and Compound drawing attention to liquidity conditions and potential exposure.

Data shared by Arkham shows that the incident enabled an attacker identified as Lazarus Group to access and redeploy a large portion of rsETH, triggering withdrawals and disrupting normal market operations.

Exploit Triggered Through LayerZero Verification Flow

According to on-chain data, the attacker extracted 116,500 rsETH from KelpDAO’s bridge adapter by submitting a forged message to LayerZero verifiers. As a …

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