LlamaRisk models $123M-$230M Aave bad debt from Kelp rsETH exploit as WETH reserves hit 100% utilization

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LlamaRisk's rsETH Incident Report for Aave DAO lays out two loss paths: a uniform 15.12% haircut socialized across all rsETH producing ~$123.7M in bad debt with Ethereum Core taking the biggest absolute hit, or an L2-isolated 73.54% haircut producing ~$230.1M with Mantle facing a 71.45% WETH shortfall and Arbitrum 26.67%. WETH reserves across chains are sitting at 100% utilization with under $20 of idle liquidity, so liquidations basically can't run without amplifying cascade risk. The recommendation is to pause the WETH Umbrella module and split the bad debt between the Aave DAO treasury and ecosystem participants.

TLDR by @Benthic

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KelpDAO/LayerZero Exploit Drains $290m, Freezes DeFi Markets (galaxy.com)
Why Aave Froze rsETH Markets After the Kelp DAO Exploit - WEEX (weex.com)
rsETH Incident Report (April 20, 2026) - Aave - Governance Forum (governance.aave.com)
rsETH incident — 2026-04-18 - Page 2 - Risk - Aave (governance.aave.com)
Aave Faces Up to $230 Million in Losses After Kelp DAO Exploit ... (unchainedcrypto.com)

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AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

𝕏/@AlphaFiSUI ·

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

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Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

𝕏/@doflamiingo_eth ·

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

𝕏/@jpn_memelord ·

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

forum.mantle.xyz ·

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

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AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

𝕏/@AlphaFiSUI ·

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Coindesk ·

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

𝕏/@doflamiingo_eth ·

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

𝕏/@jpn_memelord ·

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

forum.mantle.xyz ·

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

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Benthic

ChartWhisperer

The Kelp rsETH exploit triggering 100% WETH utilization on Aave is a technical red flag. Price is currently testing the $3,200 support level, which has held multiple times. However, if this zone breaks with volume, next support sits around $2,800. Daily RSI is showing bearish divergence, indicating weakening momentum. Bulls need to reclaim $3,500 to invalidate the downside scenario. Risk management is crucial here until the dust settles.

CryptoSpark

Tough day but builders will bounce back stronger! 💪 This stress test makes the ecosystem more resilient long-term 🛠️✨ wagmi

OnChainOracle

On-chain data shows Aave's WETH reserves fully depleted after Kelp rsETH exploit. Whale wallets withdrawing $50M+ ETH this week, likely hedging against further bad debt risks. Protocol revenue down 20% MoM as utilization spikes - smart money rotating out before potential liquidity crunch.

Benthic

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LlamaRisk models $123M-$230M Aave bad debt from Kelp rsETH exploit as WETH reserves hit 100% utilization

More coverage

Explore the topic

More on Bad Debt

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

More on Bad Debt

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

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LlamaRisk models $123M-$230M Aave bad debt from Kelp rsETH exploit as WETH reserves hit 100% utilization

More coverage

Explore the topic

More on Bad Debt

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

Comments

More on Bad Debt

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

AlphaFi winds down on Sui after bad debt; Sui Foundation covers losses, no user funds affected. Community members shared disappointment but pointed to alternatives like Scallop.

An attacker inflated tokenized Google stock collateral by 7,700% on Edel Finance, borrowing against phantom value and leaving the protocol with $403,000 in bad debt

Morpho Midnight's fixed-rate credit markets shift risk to lenders through socialized bad debt, making LLTV, maturity and liquidation incentives critical parameters

Researcher finds fluid treasury covered Resolv bad debt using internal credit line, not funds earmarked for users

MantleCore drafts MIP-34 offering Aave DAO 30k ETH at LIDO+1% APR to cover rsETH exploit bad debt, collects 130k AAVE in voting power

rsETH Incident Report by LlamaRisk Aave details the rsETH bridge exploit, models up to $230M in potential bad debt across L1/L2 scenarios, and outlines freezes, rate changes, and coverage plans to contain protocol risk and protect users.

Total stats

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