Overview
- An attacker spoofed LayerZero’s cross‑chain message on Saturday to release 116,500 rsETH worth about $292 million, and Kelp paused core contracts 46 minutes later to block further drains.
- Using the unbacked rsETH as collateral, the attacker borrowed large sums on Aave, Compound and Euler, leaving those markets with positions that cannot be liquidated.
- Aave is reviewing roughly $177–$236 million in potential bad debt and may need to use its Umbrella backstop, so WETH lenders now face uncertainty about how losses will be covered.
- Aave froze rsETH markets on V3 and V4 as deposits fell by about $6 billion and the AAVE token slid double digits, while ETH also dipped as traders pulled funds and reassessed risk.
- The drained bridge held reserves that backed wrapped rsETH on more than 20 networks, which has raised questions about backing for L2 holders and stressed liquidity across DeFi.