Kelp DAO exploited for $292 million with wrapped ether stranded across 20 chains
The recent exploit of a cross-chain bridge has sent shockwaves through the DeFi community, with Kelp DAO losing nearly a fifth of its circulating supply of restaked ether tokens. The attacker managed to drain 116,500 rsETH (restaked ether) from Kelp DAO’s LayerZero-powered bridge, amounting to approximately $292 million. This represents a significant portion of rsETH’s total circulating supply of 630,000 tokens.
LayerZero, the cross-chain messaging layer that facilitates communication between different blockchains, was tricked by the attacker into releasing the rsETH to an address controlled by the attacker. Kelp DAO’s emergency pauser multisig quickly froze the protocol’s core contracts after the exploit was detected, but not before two additional attempts were made to drain another 40,000 rsETH.
The fallout from the exploit has spread rapidly throughout the DeFi ecosystem. Platforms such as Aave, SparkLend, and Fluid have frozen their rsETH markets, causing AAVE to drop by 10% as the market reacted to the potential bad debt. Lido Finance has paused further deposits into its earnETH product, while Ethena has temporarily halted its LayerZero OFT bridges as a precaution.
Kelp DAO, a product under the KernelDAO umbrella, has been working with LayerZero, Unichain, auditors, and security specialists to investigate the exploit. The protocol has not disclosed how the attacker managed to bypass the bridge’s validation logic.
The incident comes at a time of increased vulnerability in the DeFi space, with several protocols falling victim to exploits in recent weeks. Kelp’s $292 million loss now stands as the largest DeFi exploit of 2026, surpassing the previous record held by the Solana-based perpetuals protocol Drift.
The DeFi community is now closely watching to see how rsETH’s peg holds up over the weekend and whether Kelp can recover any of the stolen funds. The exploit serves as a stark reminder of the risks associated with decentralized finance and the importance of robust security measures in the space.
