Kelp Blames LayerZero for $292 Million Hack, Plans Switch to Chainlink

KelpDAO blames LayerZero for a $292 million exploit and plans to relaunch with a redesigned cross-chain system on Chainlink, the group announced on X on Tuesday.

“From the April 18 incident, it is clear that LayerZero’s proprietary infrastructure was exploited, resulting in $300 million in losses in DeFi,” Kelp DAO wrote about X. “Independent reports from SEAL 911, Chainalysis and other major leading security researchers all point to the same origin.”

In April, an attack took approximately 116,500 rsETH (an Ethereum-based staking token) from a cross-chain bridge used by Kelp, a protocol that allows users to stake Ethereum and move tokens between blockchains. The exploit has been linked to North Korea’s Lazarus Group.

In a separate one after on The setup, known as a 1-to-1 verifier, relies on a single entity to validate cross-chain transactions.

Kelp said the attack stemmed from a breach of LayerZero’s infrastructure, in which attackers compromised the authentication network’s RPC nodes and forced the system to rely on manipulated data, allowing fake transactions to be approved.

“Following the exploit, LayerZero announced that it would no longer sign or attest messages for applications using a 1-1 DVN configuration,” Kelp wrote. “This policy change, which was implemented after hundreds of millions of dollars had been exploited, confirms that this was a widely used LayerZero configuration that LayerZero Labs only changed after it failed.”

In an April statementLayerZero disputed that account, saying the exploit was isolated from Kelp’s rsETH application and was the result of using a single-verifier setup that conflicted with the company’s recommended multi-verifier model.

“This wording does not match the facts,” Kelp DAO wrote. “It is a matter of public domain that this 1-1 setup was not unique to Kelp.”

According to Kelp, it followed LayerZero’s documentation and standard configurations. The company also said the setup was widely used across the ecosystem, pointing to data showing a large portion of applications rely on similar configurations.

Kelp said it is moving its rsETH system to Chainlink’s cross-chain interoperability protocol, which requires transactions to be approved by multiple independent validators instead of a single verifier.

“We are eager to work with the KelpDAO team to improve the cross-chain security of rsETH and support their migration to Chainlink CCIP,” said Chainlink Chief Business Officer Johann Eid. Declutter. “We have long believed that for DeFi to reach its full potential to bring trillions on-chain, the ecosystem must be supported by highly secure infrastructure.”

The impact of Kelp’s operation extends beyond the technical dispute. About $71 million in crypto linked to the exploit was frozen on the Arbitrum network, leading to a legal battle in a federal court in New York.

“There are questions the ecosystem deserves answers to,” wrote Kelp DAO. “And we ensure that rETH is secured by an infrastructure that does not leave these questions open.”

LayerZero did not immediately respond to a request for comment from Declutter.