KelpDAO sues LayerZero over $292 million bridge exploit fallout

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KelpDAO sues LayerZero bridge exploit

Highlights

KelpDAO filed a civil lawsuit in British Columbia against LayerZero and co-founder Bryan Pellegrino over the $292 million exploit of their bridge protocol.
The April 22 attack by a North Korean hacking group drained 116,500 rsETH, nearly a fifth of rsETH's circulating supply, with fallout disrupting stablecoin markets.
Aave was forced to borrow $300 million to meet withdrawal demand and $20 billion in total value locked was wiped out days after the exploit, per JPMorgan.

Lawsuit targets bridge security failures

According to CoinDesk, KelpDAO said in a post on X on Thursday that it has filed a civil lawsuit against LayerZero and co-founder Bryan Pellegrino, alleging the bridge protocol's infrastructure caused the biggest exploit of the year. The liquid restaking protocol said LayerZero failed to disclose weaknesses and risks in its technology and also failed to prevent infiltration of its security infrastructure, which it claims allowed attackers to exploit the bridge's vulnerabilities.

KelpDAO said LayerZero and Pellegrino spent the past several months publicly blaming KelpDAO instead of accepting responsibility. Pellegrino responded that Evercrest, identified as KelpDAO, filed a notice of civil claim in British Columbia, Canada, against him and LayerZero, and said the claim is meritless and will be defended in Vancouver.

DeFi market impact and KelpDAO response

A North Korean hacking group allegedly attacked KelpDAO's cross-chain bridge on April 22, when the bridge held nearly a fifth of rsETH's circulating supply. The attack drained 116,500 rsETH, worth about $292 million, and the fallout spread into stablecoin markets.

Aave, the largest DeFi lending pool, was forced to borrow $300 million to meet rising user demand for withdrawals, while the exploit wiped out $20 billion in total value locked days later, according to experts including JPMorgan. KelpDAO said it has since moved rsETH's bridge to a more secure cross-chain security standard and is seeking to hold LayerZero and Pellegrino accountable for damage to both the protocol and the wider DeFi ecosystem.

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