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The lending protocol Aave has liquidated all remaining rsETH collateral positions connected to the Kelp DAO exploiter across both the Ethereum mainnet and Arbitrum. The move marks a milestone for the DeFi United community-led initiative focused on restoring rsETH’s proper backing and compensating affected users.
According to the technical plan, the attacker’s rsETH positions on Aave were liquidated on both Ethereum and Arbitrum. The liquidated collateral has been placed with the Recovery Guardian as specified in the AIP.
Aave said no other users were affected and that Umbrella was not activated. The protocol also emphasized that the liquidation process did not impact any user deposits and was completed without triggering its Umbrella insurance protection.
The exploitation occurred on April 18. An attacker—believed to have connections to North Korean threat actors—exploited vulnerabilities in Kelp DAO’s LayerZero-based bridge infrastructure. This enabled the malicious actor to create 116,500 rsETH tokens on Ethereum without proper backing.
Those fraudulent tokens were then used as collateral on decentralized lending protocols, including Aave and Compound, to extract wrapped Ether.
The breach left Aave with more than $190 million in uncollateralized debt and contributed to significant capital flight from the platform. In the seven days following the incident, Aave’s total value locked fell by approximately $12 billion.
To facilitate the liquidations, Aave’s governance community approved a temporary modification to the rsETH price oracle. The adjustment created an undercollateralized state in the attacker’s borrowed positions, triggering the liquidation mechanism. Aave said the oracle configuration has since returned to standard operating parameters.
All liquidated assets have been routed to the Recovery Guardian wallet, a multisignature address under DeFi United’s control. DeFi United’s recovery fund has accumulated more than $320 million in contributions.
Galaxy Digital vice president of research Thaddeus Pinakiewicz said the fund requires approximately 10% additional ETH to fully resolve the backing deficit.
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