LayerZero V2 exploit mints 116,500 rsETH, risks $230M for Aave

On April 18, 2026 at 17:35 UTC, a forged inbound packet on a KelpDAO LayerZero V2 route released 116,500 rsETH from an Ethereum OFT adapter without any corresponding burn on the source chain. The event occurred in Ethereum block 24,908,285 and affected the Unichain‑to‑Ethereum route, which was configured as a 1‑of‑1 DVN path that allowed a single verifier to confirm and deliver the packet.

The rsETH OFT adapter balance fell from 116,723 rsETH to 223 rsETH in one block. The attacker moved the released tokens from a single intake wallet into seven branch addresses. Of the 116,500 rsETH created, 89,567 rsETH was supplied as collateral to Aave V3 markets on Ethereum and Arbitrum.

Those collateral positions were used to borrow about 82,650 WETH and 821 wstETH. The borrowed positions left attacker accounts with health factors between roughly 1.01 and 1.03. All seven attacker addresses remained active on Aave at the time of the report. Aave service providers and Llamarisk confirmed that Aave’s smart contracts were not altered and that supply, repayment and liquidation mechanics continued to function.

Aave’s Protocol Guardian froze rsETH and wrsETH reserves across all V3 deployments at about 19:00 UTC on April 18. The freeze set loan‑to‑value to zero, blocked new supply and borrowing, and allowed existing positions to be repaid or liquidated. Eleven markets were affected, including deployments on Ethereum, Arbitrum, Avalanche, Base, Ink, Linea, Mantle, MegaETH, Plasma and Zksync. WETH was also frozen on Core, Prime, Arbitrum, Base, Mantle and Linea around 02:00 UTC on April 20 to limit contagion to stablecoin reserves.

Risk managers adjusted interest rate parameters for WETH. On April 19 the Risk Steward reduced Slope 2 to 1.50 percent on Arbitrum, Base, Mantle and Linea, cutting the borrow rate at full utilization to about 3.0 percent APR from prior levels between 8.5 and 10.5 percent. On April 20 corresponding changes were applied to Core: Slope 1 was set to 2 percent, Slope 2 to 3 percent and optimal utilization to 94 percent.

Llamarisk modeled two loss‑allocation scenarios. Scenario 1 assumes the 112,204 unbacked rsETH is socialized across the full rsETH supply, producing a 15.12 percent depeg and an estimated $123.7 million in bad debt, with Ethereum Core absorbing about $91.8 million and Mantle facing a 9.54 percent WETH reserve shortfall. Scenario 2 treats the loss as isolated to layer‑2 rsETH, applying a 73.54 percent haircut to remote‑chain collateral and leaving Ethereum mainnet rsETH intact; that produces an estimated $230.1 million in bad debt concentrated on Mantle, with a 71.45 percent WETH shortfall and Arbitrum at 26.67 percent. The report shows the current adapter balance at 40,373 rsETH against total remote claims of 152,577 rsETH. Kelp had not confirmed how recovered funds would be allocated.

Aave’s DAO treasury held about $181 million in assets as of April 20, including $62 million in Ethereum‑correlated holdings, $54 million in AAVE and $52 million in stablecoins. The DAO generated $145 million in revenue in 2025 and $38 million year‑to‑date in 2026. Llamarisk noted that several indicative recovery commitments from ecosystem participants were being secured by service providers.

The report flagged liquidity and liquidation risks. WETH reserves on Ethereum, Arbitrum, Base, Linea and Mantle were at full utilization with idle balances below $20 on each chain. At full utilization liquidators receive aWETH rather than underlying WETH, which reduces liquidation throughput. Base and Arbitrum were noted as the least buffered markets, with first liquidations triggered by WETH price drops of about 0.77 percent and 1.77 percent respectively because many attacker positions ran with health factors near 1.03. Llamarisk recommended pausing the WETH Umbrella staking module in the socialized scenario; at the time of the report 18,922 of 23,507 staked aWETH had entered an unstaking cooldown. The remaining rsETH‑listed markets — Ethereum Lido, MegaETH, Plasma and Zksync — carried trivial balances and showed no bad debt. Twelve other Aave V3 markets that do not list rsETH were reported as unaffected.