Aave Completes Liquidation of Kelp DAO Attacker's rsETH Collateral

Aave has completed the liquidation of the Kelp DAO attacker's remaining rsETH collateral on Ethereum and Arbitrum, a significant step in the recovery plan for affected users.

The process involved transferring the collateral to Recovery Guardian, a multisignature wallet overseen by DeFi United. This move aims to create a more predictable path for restitution to affected users and reestablish the integrity of rsETH's staking framework.

Despite this progress, DeFi United is still roughly 10% short of the ETH needed to restore full rsETH backing, according to Thaddeus Pinakiewicz, vice president of Galaxy Digital's research team. The recovery plan hinges on securing additional ETH commitments and governance decisions that can unlock remaining liquidity for rsETH holders.

The Kelp DAO attack in mid-April exploited about $293 million, causing a ripple effect through the DeFi lending sector and raising questions about cross-chain recovery efforts. Aave stressed that the liquidation reduces liquidity risk without endangering user funds, reiterating that its automated protection for bad debt, Umbrella, was not invoked in this step.

The next steps involve the release of frozen ETH from Arbitrum DAO, which is currently in a governance vote. With over 90% of participating voters supporting the release to the DeFi United fund, the outcome will test the DAO's ability to balance fiduciary duty with the broader goal of DeFi resilience.