$21M at Risk in Lido EarnETH After Kelp DAO Exploit Drains $292M

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$21 Million on Lido EarnETH At Risk in Kelp DAO Exploit

Key Highlights

  • Approximately $21.6 million, or about 9% of assets in Lido’s EarnETH vault, is at risk following the Kelp DAO exploit.
  • The exposure stems from a leveraged rsETH/ETH position on Aave, making it sensitive to market stress.
  • The attack involved exploiting a LayerZero bridge vulnerability and draining 116,500 rsETH, valued at around $292 million.

Lido Finance, a platform for liquid staking, announced on Monday that about $21.6 million of assets – almost 9% of its EarnETH vault – were impacted by a security issue related to the Kelp DAO bridge. This follows an attack on Kelp DAO reported on April 18th, which the protocol is still dealing with.

On April 18th, Kelp DAO, a bridge that uses LayerZero technology, was attacked and lost around $292 million worth of rsETH. The attacker successfully stole 116,500 rsETH, according to a post on X.

EarnETH holds around $21.6 million worth of rsETH – about 9% of the vault’s total value – through a leveraged position on Aave. Additionally, high demand in lending markets is increasing costs for the vault’s other leveraged investments.

— Lido (@LidoFinance) April 20, 2026

Further updates

Lido explained that its EarnETH feature, which aims to maximize rewards by using borrowed funds, is linked to rsETH through a loan on Aave. This means its returns are directly affected by the performance of rsETH.

Because more of Aave’s lending pools are being used, borrowing costs for other investments within the vault have increased, which raises the overall risk. The teams behind Lido EarnETH and related subvaults are working to reduce their risky investments to lessen these risks. However, the outcome for investments in rsETH remains unclear, as it relies on actions taken by Kelp DAO, LayerZero, and Aave.

To protect people’s deposits, the EarnETH protocol’s safety net is now in effect. This includes $3 million from the Lido DAO treasury, which can cover any losses by reducing the amount of vault shares held by the DAO.

The growth committee will decide how to use the first loss protection system once they receive a final report from everyone involved. Until then, the vault curator has paused all deposits and withdrawals to avoid any issues until a decision is reached.

Lido explained that if this issue isn’t fixed soon, people might be able to withdraw their rsETH, but it could be worth less than it was originally.

Kelp DAO attack 

As a crypto investor, I was pretty shaken up to learn about the Kelp DAO bridge getting hacked on April 18th, 2026, around 5:35 PM UTC. Apparently, there was a weakness in how their cross-chain system was built, and someone took advantage of it.

Hackers successfully tricked the LayerZero bridge by creating a fake message. This allowed them to withdraw 116,500 rsETH – a type of digital token worth around $292 million, or 18% of all rsETH in circulation – even though they didn’t actually have the funds. The chain where the tokens were taken from didn’t have enough reserves to cover the loss.

The attacker then used these stolen tokens as security to borrow more than $236 million from various lending services like Aave V3, Compound V3, and Euler. This activity caused a significant decrease in the total value held within those affected platforms over the next two days.

Complex risks in DeFi

This event shows the dangers of using borrowed funds for restaking and how connected DeFi platforms can create wider problems.

Even though this issue only affects a small part of Lido’s work, the potential loss of $21.6 million highlights how quickly problems with blockchain bridges can become serious for those using leveraged strategies in decentralized finance. The Lido team says they will share more information as the situation develops.

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2026-04-20 22:14