Lending protocol Aave has fully restored wrapped ether (WETH) loan-to-value (LTV) ratios across six major networks, reversing the emergency restrictions imposed after an April exploit that drained over $230 million in tokens. The recovery, announced via Aave’s governance on May 17, normalizes WETH collateral usage on Aave V3 deployments including Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea.
The incident originated from a bridge exploit tied to Kelp DAO’s rsETH, a yield-bearing restaked ether token. Attackers minted roughly $292 million in unbacked rsETH, then used them as collateral to borrow approximately $230 million in ETH from Aave. In response, Aave slashed WETH LTV to 0% across affected markets, effectively disabling any borrowing against wrapped ether positions.
According to governance documents, pre-incident LTVs have now been reinstated: 80.5% on Ethereum Core, 84% on Ethereum Prime, 80% on Arbitrum and Base, 80.5% on Mantle, and 80% on Linea. The restoration follows a coordinated recovery that liquidated about 106,993 of the 112,103 unbacked rsETH—89,567 through Aave liquidations and 17,426 through Compound. A residual shortfall of roughly 5,200 rsETH is expected to be covered by the DeFi United industry coalition.
For DeFi markets, the move is a significant normalization signal. WETH is a foundational collateral asset used for borrowing, leverage, and liquidity strategies. Re‑enabling its borrowing capacity frees trapped capital and restores liquidity efficiency across multiple ecosystems, indicating that Aave believes the immediate systemic risk has been contained.
