Overview
- Aave reinstated loan-to-value limits for wrapped Ether across Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea, restoring borrowing and collateral or debt swaps as part of its rsETH recovery plan.
- The restrictions followed an April exploit of Kelp DAO’s LayerZero bridge that let attackers mint unbacked rsETH and use it as collateral to draw WETH from Aave.
- A court allowed a proposed transfer of 30,765 ETH linked to the exploit to an Aave-controlled address, though disputes over alleged North Korea ties remain unresolved before the judge.
- The incident left about $195 million in bad debt on Aave and reduced its total value locked by more than $8 billion, pressuring liquidity for borrowers and lenders on the protocol.
- Kelp DAO is tightening security by ending rsETH bridging on several networks after June 15 and migrating price feeds to Chainlink, with a 100 USDC fee per address for late fund recoveries.