Aave freezes rsETH on V3 and V4 after KelpDAO exploit drains ~$290M and saddles WETH reserve with bad debt

Aave's multisig guardian froze rsETH markets on V3 and V4 after attackers exploited a flaw in KelpDAO's liquid restaking infrastructure, minting roughly 116,500 rsETH (~$290M) without new collateral and using it on Aave to borrow ETH and other assets. Aave's own contracts weren't touched, but the V3 WETH reserve now carries bad debt and aWETH stakers in the Umbrella vault face automatic slashing to cover the deficit. AAVE dropped 10-13% on the news, and full recovery for WETH suppliers isn't guaranteed once the slashing cycle completes.

TLDR by @Benthic

More coverage

• Aave Guardian: The rsETH theft incident is not due to a vulnerability ... (binance.com)
• The rsETH markets on Aave V3 and Aave V4 have been frozen ... (x.com)
• Aave - Update on rsETH incident (x.com)
• rsETH incident — 2026-04-18 - Risk - Aave - Governance Forum (governance.aave.com)
• Kelp DAO Loses $293M in Bridge Exploit, Leaving Aave With Over ... (thedefiant.io)

Explore the topic

• rsETH
• Exploit
• WETH
• Bad Debt