Behind the scenes of the attack on Kelp DAO
Saturday’s incident focused on the rsETH token, which is a key product offered by the Kelp DAO. It is a liquid retaking token that allows users to optimize profits from their Ether. The attackers exploited a vulnerability in the verifier infrastructure of a bridge powered by LayerZero technology. According to preliminary technical analyses, hackers managed to take control of the authorization processes, which allowed them to make an unauthorized withdrawal of 116,500 rsETH units. Experts from LayerZero indicate that the attack may be behind the well-known Lazarus group, linked to North Korea, which has specialized in this type of operations targeting DeFi platforms for years. The scale of the theft put Kelp in an extremely difficult operational and image situation.
Arbitrum intervention and securing funds
The Arbitrum Security Council’s response was swift and precise. Using its extraordinary powers, the decision was made to transfer 30,766 Ether to a special frozen intermediary wallet. This operation was carried out in close cooperation with law enforcement authorities, which provided key information on the identity of the perpetrator and the flow paths of the stolen funds. Network representatives emphasized that the entire procedure had no impact on other users or the operation of other decentralized applications. While the $71 million recovered represents only a quarter of the total loss, it is an important step in the recovery process. These funds will remain blocked until further decisions are made through the crowd management processes.
Kelp@KelpDAOWe appreciate the recent decision by the @arbitrum Security Council to take action in response to the LayerZero-DVN/rsETH incident of April 18. Over the past two days, the KelpDAO team has worked closely and constructively with members of the security council and broader
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Dispute over liability and the future of the Kelp DAO
Arbitrum’s securing of some of the capital has intensified the ongoing conflict between Kelp and technology provider LayerZero. Both sides are arguing about who was at fault in the process of securing the bridge infrastructure and who should bear financial responsibility for the remaining part of the debt. Kelp has already announced the start of work on a special rescue fund and is analyzing various scenarios for socializing losses to minimize negative effects on its clients. Currently, intensive consultations are underway with ecosystem partners and companies dealing with on-chain data analysis. The ultimate success of the asset recovery process depends on whether other networks decide to take similar blocking steps and whether the remaining token derivatives can be seized before they are liquidated by hackers. This situation has resulted in increased discussions about centralization in blockchain networks.
