Lido Reports Contained Exposure to KelpDAO rsETH Exploit

Lido, a leading liquid staking platform, has outlined the aftermath of the KelpDAO rsETH exploit. The incident occurred on April 18 and saw approximately 116,500 rsETH ($292 million) drained from multiple DeFi protocols, including Lido's EarnETH product.

According to Lido, only its EarnETH vault has direct exposure to the hacked rsETH, which accounts for around 9% of its total value locked (TVL). This is estimated at approximately $21.6 million via a leveraged rsETH/ETH position on Aave. Deposits and withdrawals for EarnETH have been paused while Lido works with Kelp, LayerZero, and lending protocols to determine how any losses or bad debt will be allocated.

Lido has emphasized that its core staking protocol remains unaffected by the incident. In addition, the platform has recovered around $70 million in ETH linked to the broader exploit, with further recovery efforts and loss-distribution talks still ongoing. If a residual loss is incurred, EarnETH can tap into a $3 million 'first-loss protection mechanism' funded by the Lido DAO treasury.

Lido's other vaults appear to be operating normally, with the exception of one sub-vault (GGV) which is experiencing negative returns due to circular staking strategies and rising on-chain lending rates. Managers are actively rebalancing GGV's positions and adjusting strategy parameters to mitigate losses.