Aave DAO has introduced a governance proposal to allocate 25,000 ETH from its treasury toward closing the rsETH backing shortfall caused by an April 18, 2026, bridge exploit on Kelp DAO's Ethereum LayerZero adapter. The proposal, submitted by service provider TokenLogic, is part of the broader DeFi United recovery coalition that brings together major ecosystem players including Lido, EtherFi, Ethena, Ink Foundation, BGD Labs, and Mantle.
The incident occurred when an attacker exploited a vulnerability in Kelp DAO's LayerZero adapter, allowing unauthorized release of rsETH tokens and severing the cross-chain link between locked Ethereum collateral and minted tokens on remote chains. At the prevailing exchange ratio of 1.0696, the original backing shortfall reached approximately 163,183 ETH.
Recovery efforts have already reduced the deficit by about 54%. Kelp DAO recovered and froze 40,373 rsETH (roughly 43,168 ETH), while the Arbitrum Security Council froze 30,766 ETH still held by the attacker. Liquidation of the hacker's remaining positions on Aave and Compound is expected to recover an additional 14,168 WETH, bringing the total recovered to approximately 87,955 ETH. Despite these recoveries, a residual gap of roughly 75,081 ETH remains.
The DeFi United coalition has assembled pledges totaling 14,570 ETH from EtherFi, Lido, Ethena, Ink Foundation, BGD Labs, and individual contributors. Mantle has committed a credit facility of up to 30,000 ETH. With the DAO's proposed 25,000 ETH injection, the remaining gap narrows to approximately 30,000 ETH.
The proposal authorizes Aave Labs or a designated affiliate to act as legal counterparty on loans and settlements tied to the recovery plan. Any additional ecosystem donations received after approval will repay Mantle's credit facility before reducing the DAO's commitment. Aave has pledged transparent reporting as recovery tranches materialize, with a follow-up governance process if the recovery plan's structure evolves.
