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Aave Labs and risk management firm LlamaRisk published an incident report on April 20 quantifying the lending protocol’s exposure to the April 18 Kelp DAO rsETH bridge exploit. The report outlines two potential bad-debt scenarios ranging from $123.7 million to $230.1 million, depending on how Kelp socializes losses.
According to the report, the attacker deposited 89,567 rsETH across seven wallets on Aave as collateral. The attacker then borrowed roughly $190 million in wrapped ETH and wstETH before markets were frozen.
The final damage estimate depends on Kelp’s approach to loss socialization.
Under Scenario 1, losses are spread across all rsETH holders via an approximately 15% haircut on the token’s backing ratio. This produces an estimated $123.7 million in bad debt across Aave’s affected markets.
Under Scenario 2, losses are isolated to rsETH on layer 2 networks. This raises the bad-debt estimate to $230.1 million, concentrated on Mantle and Arbitrum, while Ethereum mainnet rsETH remains unaffected. The report cites a 71.45% WETH shortfall on Mantle and a 26.67% shortfall on Arbitrum.
The report states that the Aave DAO treasury held $181 million as of April 20, including $62 million in Ethereum-correlated holdings, $54 million in AAVE tokens, and $52 million in stablecoins. It also reports that the DAO generated $145 million in revenue in 2025 and $38 million year-to-date in 2026.
Service providers have made several indicative recovery commitments, the report said.
The report also links Aave’s bad-debt concerns to broader withdrawals and liquidity stress. Users have withdrawn $6.6 billion from the protocol, pushing WETH pools to 100% utilization. The report says this has frozen liquidity across major chains, leaving remaining depositors unable to exit and contributing to a $300 million surge in stablecoin borrowing by users attempting to unlock positions.
Founder Stani Kulechov said Aave’s own contracts were not compromised. The protocol continues to work through its options for covering the shortfall without triggering its Umbrella safety module.
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