Aave, Kelp, LayerZero Propose Releasing $71M Frozen ETH to Restore rsETH

Gate News message, April 26 — Aave Labs, joined by Kelp DAO, LayerZero, EtherFi, and Compound, filed a Constitutional AIP on Saturday morning asking Arbitrum DAO to release roughly $71 million in frozen ETH into DeFi United, a cross-protocol relief effort following last week’s $292 million Kelp DAO exploit. The proposal seeks to unlock 30,765.67 ETH that the Arbitrum Security Council froze and moved on April 21 after tracing it to addresses controlled by the exploiter. At the time of writing, ETH was trading near $2,317, putting the frozen balance at just over $71.3 million.

Under the proposal, the funds would be transferred to a 2-of-3 Gnosis Safe co-signed by Aave, Kelp DAO, and Certora, designated solely to receive recovered ETH and restore rsETH’s economic backing. The governance process for Constitutional AIPs carries a lengthy timeline: approximately 49 days including a week of forum discussion, an optional temperature check, a three-day voting delay, a 14- to 16-day onchain vote, an eight-day L2 waiting period, L2-to-L1 message finalization, and a final three-day L1 wait before execution. Community members and Arbitrum Security Council delegates have already pushed for expediting the process to avoid prolonged delays.

The 30,766 ETH would be the largest single contribution to the DeFi United recovery tally. Other pledged contributions include Aave’s own 25,000 ETH DAO commitment, Lido’s 2,500 stETH, 5,000 ETH each from EtherFi and Aave founder Stani Kulechov, and Mantle’s proposed 30,000 ETH credit facility to absorb residual bad debt. The proposal also reiterates that the exploiter’s position on Aave comprised 89,567 rsETH supplied as collateral against 82,650 WETH and 821 wstETH borrowed, while confirming that Aave’s smart contracts were not compromised and the incident originated outside the protocol.