Aave, DeFi United Release rsETH Recovery Plan After April 18 Exploit

Opening

Aave and DeFi United released a detailed recovery plan on April 28 to restore KelpDAO rsETH backing following an April 18 bridge exploit that released 116,500 unbacked rsETH from the Ethereum-side adapter, according to Wu Blockchain. The plan focuses on two key steps: refilling the missing backing and liquidating positions linked to the attacker.

The April 18 Incident

A bridge exploit tied to KelpDAO released 116,500 rsETH on Ethereum without proper backing. The exploiter used some rsETH as collateral on Aave and moved others across chains like Arbitrum, exposing lending markets to risk from unbacked assets. In response, platforms froze key markets, with WETH and rsETH pools remaining paused across multiple chains to limit further damage.

Restoring rsETH Backing

The first phase of the recovery plan involves rebuilding trust in rsETH itself. DeFi United has secured committed ETH from multiple contributors to refill the bridge lockbox. The committed ETH will be converted into rsETH and deposited back into the system in stages to restore the correct exchange ratio. According to the plan, rsETH should reflect approximately 1.07 ETH in value once fully backed.

LayerZero and KelpDAO have added new security measures to prevent similar issues in the future. Funds will be deployed in tranches to reduce risk during the restoration process.

Clearing Attacker Positions

The second phase addresses damage inside lending markets. Several wallets linked to the attacker hold large positions using rsETH as collateral. Governance proposals will adjust liquidation mechanics, including a temporary change to the rsETH price oracle to enable controlled liquidations of those positions.

Once liquidated, recovered collateral will move to a secure multisig wallet managed by the recovery group. The recovered rsETH will then be redeemed back into ETH to cover losses across affected markets. Compound will follow a similar approach for its exposure. All parameter changes are temporary and will return to normal after the process completes.

Execution and Next Steps

The recovery plan depends on governance approvals and coordination across protocols. Once backing is restored and positions are cleared, markets will reopen and loan settings will return to normal. The focus remains on stability during execution.