Hacker Exploits Kelp DAO Bridge, Laundering $175M in Stolen Ether

A recent cryptocurrency hack has left a trail of financial destruction in its wake. A hacker exploited the Kelp DAO's LayerZero-powered rsETH bridge on April 18, draining $290 million worth of Ether (ETH). The breach leveraged a vulnerability in the bridge's configuration, allowing the attacker to mint unbacked rsETH and deploy it as collateral on platforms like Aave and Compound.

The incident has had far-reaching consequences for the DeFi ecosystem. Aave is grappling with bad debt, with estimated losses ranging from $123.7 million to $230.1 million. The platform unfroze Wrapped Ether reserves on its Ethereum Core V3 market on Tuesday, but other reserves across networks like Arbitrum and Base remain locked.

The exploit has also impacted Arbitrum, whose security council froze 30,766 ETH ($65 million) connected to the hack. The frozen assets now reside in an intermediary wallet accessible only via governance.