DeFi | Liquid Restaking Protocol, Kelp DAO, Compromised Loosing ~$300 Million

A hacker has exploited liquid restaking protocol Kelp DAO, draining roughly $293 million in one of the largest DeFi attacks of 2026 and triggering disruptions across multiple platforms, according to industry reports.

The attacker manipulated the protocol’s cross-chain infrastructure, specifically its LayerZero-powered bridge, to authorize fraudulent transfers, siphoning about 116,500 rsETH tokens – nearly 18% of the token’s circulating supply.

Kelp DAO said it paused contracts across Ethereum and several layer-2 networks following the incident as it investigates the breach with partners and security firms.

The exploit has had ripple effects across the DeFi ecosystem. Lending platform AAVE froze markets tied to rsETH, while other protocols also halted related activity to limit exposure.

Blockchain security firms said the attacker has already converted a significant portion of the stolen funds into Ether, raising concerns about potential losses and bad debt across integrated platforms.

The incident highlights growing systemic risks in DeFi where deeply interconnected protocols can amplify the impact of a single exploit across the broader ecosystem.

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