Aave Completes Kelp DAO Hacker rsETH Liquidation, Funds to DeFi United
Aave has completed the liquidation of the Kelp DAO hacker’s remaining rsETH collateral. The seized assets were moved to DeFi United’s multisig wallet, “Recovery Guardian,” a relief fund aimed at compensating victims of major DeFi exploits and coordinating recovery.
According to The Block, the liquidation targeted the hacker’s remaining rsETH position on Aave. The process helps restore collateral linked to the theft and funds compensation for affected users after the exploit earlier this year.
The Kelp DAO attack exploited a vulnerability in a LayerZero-based bridge. The attacker minted 116,500 uncollateralized rsETH tokens and swapped them for ETH across venues including Aave and Compound, contributing to total losses estimated at about $292 million.
For traders, the event reduces overhang from the stolen rsETH exposure and signals that coordinated incident response can still work in cross-chain risk-heavy DeFi. Near term, recovered flows and clearer custody may support sentiment around Aave and the broader lending market. Longer term, it highlights persistent cross-chain security weaknesses, which can continue to drive risk premiums and affect how liquidity is priced across DeFi protocols.
Bullish
This is likely **bullish** for trading sentiment because Aave has fully completed the liquidation of the hacker’s remaining rsETH exposure. Recovering and moving stolen collateral to a controlled multisig (DeFi United’s “Recovery Guardian”) reduces uncertainty and potential sell pressure tied to the compromised position.
In similar past DeFi exploit cases, once assets are liquidated and custody is clarified, markets often see less FUD and narrower risk spreads for the affected protocol and for lending markets broadly. The article also reinforces that coordinated recovery mechanisms can work, which can improve confidence in Aave’s operational risk management.
**Short-term:** improved sentiment and reduced “overhang” may support relative strength in Aave-linked activity and DeFi lending volumes.
**Long-term:** the underlying issue—cross-chain bridge vulnerabilities (here, LayerZero-based)—remains. That means the bullish effect is tempered by persistent security risk, and traders may still price higher volatility/risk premiums across cross-chain DeFi assets.