Aave Nears Full rsETH Recovery Following Successful Liquidation of Kelp DAO Attacker

• Aave Labs has completed the liquidation of the Kelp DAO attacker’s remaining rsETH positions on both Ethereum and Arbitrum.
• The recovery effort, led by the DeFi United initiative, has now secured approximately 90% of the assets needed to restore full backing for the restaked token.
• Over 90% of Arbitrum DAO voters support the release of 30,765 ETH currently held in a legal dispute involving a U.S. law firm.

Aave Labs announced on Wednesday that it has successfully cleared the final rsETH-backed positions belonging to the exploiter behind the April 18 Kelp DAO attack. The liquidated collateral has been transferred to the Recovery Guardian, a multisignature wallet managed by the DeFi United relief fund. This move marks a pivotal milestone in the community-led effort to resolve the $293 million shortfall caused by the exploit, which briefly destabilized several major DeFi lending markets.

To facilitate the liquidation, the Aave DAO approved a temporary technical adjustment to the rsETH oracle price. This maneuver allowed the protocol to force liquidations on the attacker’s fraudulent collateral without impacting other users. According to data from Galaxy Digital, the protocol is now only missing roughly 10% of the capital required to fully recapitalize rsETH and make all affected holders whole. Aave’s Total Value Locked (TVL) has shown signs of stabilization, rebounding to over $15 billion after an initial post-hack dip to $14.2 billion.

While the technical recovery is progressing, a significant portion of the missing funds remains caught in a legal battle. Approximately 30,765 ETH—worth roughly $71 million—was frozen by the Arbitrum Security Council shortly after the hack. However, a U.S. law firm, Gerstein Harrow LLP, recently filed a restraining notice claiming the funds as restitution for unrelated historical cases. Aave has since filed an emergency motion in a New York federal court to vacate the notice, arguing the freeze is legally unsound and threatens broader ecosystem stability.

The Arbitrum DAO vote to release the frozen Ether to the recovery fund is currently seeing overwhelming support, with more than 90% of participants in favor. Beyond the frozen Arbitrum assets, the DeFi United fund is awaiting finalized commitments from major industry players including Circle, Ethena, and Frax. Once these final pieces of the capital stack are secured, Aave intends to fully restore rsETH collateralization and end the freeze on the remaining affected markets.

Disclaimer: This article is for informational purposes only and does not constitute advice of any kind. Readers should conduct their own research before making any decisions.

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