TLDR
- Arbitrum froze 30,766 ETH worth about $71.1 million tied to the Kelp DAO exploit.
- The frozen funds were moved to an intermediary wallet on Arbitrum One.
- Kelp DAO lost 116,500 rsETH worth about $292 million in the weekend attack.
- Arbitrum said any next step for the funds needs approval through governance.
- LayerZero said the bridge used a 1-of-1 DVN setup during the exploit.
Arbitrum has frozen $71.1 million in ETH tied to the Kelp DAO exploit. The move followed a weekend attack that drained about $292 million in rsETH. The network said the action did not affect users or apps on Arbitrum One.
The frozen amount totals 30,766 ETH. Arbitrum said the funds were moved into an intermediary wallet. It added that any further movement will require governance approval.
Arbitrum moves stolen ETH into a frozen wallet
Arbitrum’s Security Council took control of the ETH held in an address linked to the exploit. The funds were then transferred to a frozen intermediary wallet on Arbitrum One. The network said normal chain activity continued during the action.
Arbitrum said the freeze did not change other parts of the chain state. It also said no users or applications were disrupted. That helped contain part of the stolen funds without a wider shutdown.
The team said the council acted with law enforcement input. It also said the decision balanced security needs with user protection. In a statement, Arbitrum said, “The Security Council acted with input from law enforcement as to the exploiter’s identity.”
Arbitrum added that the frozen ETH will stay in place for now. Any next step must go through governance. That means the funds cannot be moved without further approval.
Kelp DAO exploit led to losses of about $292 million
The attack took place on Saturday and targeted Kelp DAO’s LayerZero-powered bridge. The exploiter drained 116,500 rsETH worth about $292 million. The breach became one of the largest DeFi attacks of the year.
Part of the stolen assets later appeared on Aave V3. The exploiter deposited rsETH as collateral and borrowed wrapped ETH. That raised concerns about losses spreading across connected protocols.
Kelp DAO said it paused contracts and blacklisted linked wallets soon after the exploit. The project said those steps blocked another 40,000 rsETH from being drained. That amount was worth about $95 million.
As of publication, Kelp DAO said it was still reviewing the incident. It also said it was working with LayerZero, Aave, and other parties. The goal is to support recovery and restore operations safely.
Security dispute grows around LayerZero bridge setup
LayerZero said early findings pointed to North Korea’s Lazarus Group. It said the attacker likely compromised RPC nodes used by the decentralized verified network. Two nodes were poisoned, while a third faced a DDoS attack.
According to LayerZero, that let a fake cross-chain message pass verification. The message then minted rsETH without proper backing. That created the opening for the exploit.
LayerZero also criticized Kelp DAO’s 1-of-1 DVN setup. It said the model created a single point of failure and lacked independent checks. The company said it had shared best practices on DVN diversification earlier.
Kelp DAO rejected that claim and said the setup was the default option. The project said, “The 1-of-1 DVN setup is the configuration documented in LayerZero’s documentation.” The dispute continues as Aave and other partners assess the remaining losses.
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