Aave, Kelp seek $71M ETH release for rsETH rescue

Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound have asked the Arbitrum DAO to release 30,765.67 ETH tied to the Kelp DAO exploit recovery plan. 

The assets were frozen by the Arbitrum Security Council after being linked to the exploiter.

The frozen ETH is worth about $71 million, based on Ethereum trading near $2,317 at the time of writing. The proposal would direct the funds to DeFi United, a cross-protocol recovery effort formed after the $292 million Kelp DAO exploit.

Funds would support rsETH backing

The proposal says the recovered ETH would move to a 2-of-3 Gnosis Safe controlled by Aave, Kelp DAO, and Certora. The wallet would only receive recovered funds and use them to help restore rsETH’s economic backing.

If the recovery plan does not continue as expected, the authors said they would return to Arbitrum governance for further direction. Kelp DAO wrote on X, “Every ETH released moves rsETH holders closer to whole.”

Moreover, the filing also details the exploiter’s position on Aave. It says the attacker supplied 89,567 rsETH as collateral and borrowed 82,650 WETH and 821 wstETH across Aave’s Ethereum Core and Arbitrum V3 markets.

Aave said its smart contracts were not compromised. The proposal presents the incident as an external exploit that affected assets used across DeFi markets, rather than a direct failure in Aave’s lending system.

Governance timeline draws questions

The release request may face timing pressure because Arbitrum’s Constitutional AIP process can take about 49 days. That process includes forum review, possible temperature checks, voting delays, onchain voting, and cross-chain execution steps.

Some delegates have questioned whether that timeline is too long for users with active Aave positions. Delegate Nicksta wrote that “many parties have open positions on AAVE that might run into problem if they have to wait 49 days.”

Arbitrum Security Council member Griff Green also backed a faster community signal. Speaking as a delegate, he said the DAO should move to Snapshot “as soon as possible” to confirm community intent before final execution.

Green also asked for clearer details on how rsETH holders and Aave users would be treated under full or partial recovery plans. The proposal includes an indemnification clause from Aave Labs covering the Arbitrum Foundation, Offchain Labs, and Security Council members.