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Crypto Score 68 Neutral

DeFi United Proposes Recovery Plan to Address $300 Million Kelp DAO Exploit

Apr 28, 2026 15:43 UTC
AAVE, ETH
Short term

A coalition of blockchain projects has unveiled a technical strategy to restore backing for rsETH and stabilize lending markets. The plan focuses on re-collateralizing the asset and unwinding fraudulent positions on the Aave protocol.

  • Exploit originated from a bridge vulnerability on April 18
  • 116,500 rsETH were created without proper backing
  • 107,000 tokens remain tied up in Aave and Compound positions
  • Recovery plan involves staged ETH re-collateralization
  • Controlled liquidations could recover 13,000 ETH from Aave
  • Execution depends on multi-chain governance approvals

DeFi United, a coalition of industry stakeholders, has released a comprehensive proposal to mitigate the fallout from a massive exploit targeting Kelp DAO. The plan aims to repair a $300 million shortfall caused by a bridge vulnerability that allowed the creation of unbacked rsETH tokens. The exploit occurred on April 18, when an attacker forged messages to trick the system into releasing 116,500 rsETH without corresponding backing. These tokens were subsequently deployed as collateral across various DeFi platforms, creating systemic risk for lenders who held assets that were not fully collateralized. Currently, approximately 107,000 of the exploited rsETH remain in active positions on Aave and Compound. DeFi United intends to use ETH commitments to re-collateralize the token in stages, converting ETH back into rsETH to restore the asset's backing. Simultaneously, the group proposes adjusting the valuation of rsETH within Aave to facilitate the controlled liquidation of fraudulent positions. This targeted approach is designed to prevent a chaotic market collapse and is estimated to recover roughly 13,000 ETH from Aave alone. While the plan reflects a high level of coordination, its success hinges on cross-chain governance approvals and the successful deployment of committed funds. If executed, the operation will stabilize affected markets and restore the integrity of the rsETH asset.

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