Kelp DAO Sues LayerZero and Co-Founder Over $292 Million rsETH Exploit

Kelp DAO has sued LayerZero and its co-founder Bryan Pellegrino, blaming the cross-chain protocol for the $292 million rsETH bridge exploit in April.

The restaking protocol argues LayerZero hid flaws in its own technology. It also claims LayerZero failed to stop attackers from infiltrating its security systems.

Inside the $292 Million rsETH Exploit

On April 18, attackers drained about 116,500 rsETH, Kelp DAO’s liquid restaking token, through its LayerZero bridge. The theft became the largest DeFi exploit of 2026. LayerZero later tied the attack to Lazarus subgroup TraderTraitor.

LayerZero said the attackers took over enough remote procedure call (RPC) nodes to feed false data to the bridge’s verifier. These servers relay blockchain data to applications.

As a result, the verifier approved an rsETH burn that never happened. The Ethereum contract then released funds against it.

LayerZero, however, pointed at Kelp’s setup. The bridge relied on a single verifier operated by LayerZero Labs, a 1-of-1 configuration.

The damage spread quickly. Aave’s total value locked (TVL) fell $8.45 billion within two days, and DeFi TVL dropped broadly across major chains.

Kelp DAO Sues LayerZero After Months of Blame

Kelp now says LayerZero and Pellegrino spent months publicly blaming the protocol. In contrast, the team says LayerZero reviewed and endorsed its deployment and configuration in writing.

The protocol has published the complaint and wants LayerZero and Pellegrino held accountable for harm to Kelp and the wider DeFi ecosystem.

The team adds that user security remains its top priority. Since the hack, Kelp says it has been moving rsETH’s bridge to a more secure cross-chain standard. The protocol previously named Chainlink CCIP as replacement, a rival cross-chain messaging system.

https://t.co/D17UbUbixh

— Kelp (@KelpDAO) September 25, 2026

Meanwhile, recovering the stolen funds has also landed in court. In May, a US court order blocked Arbitrum DAO from moving 30,766 ETH it had frozen from the hacker.

Kelp says it looks forward to a day in court. Therefore, by suing LayerZero, Kelp DAO could turn the case into an early test of how far infrastructure providers answer for exploits on client deployments.