KelpDAO has sued LayerZero, claiming negligence led to a $292 million hack that severely impacted the DeFi sector.
KelpDAO has filed a lawsuit against LayerZero and its co-founder Brian Pellegrino, asserting that undisclosed flaws in LayerZero's cross-chain lending protocol led to a massive hack resulting in losses of $292 million.
KelpDAO claims negligence by LayerZero resulted in major exploit
The lawsuit stems from an exploit that occurred on April 22, which saw the theft of 116,500 rsETH and caused severe repercussions in the decentralized finance (DeFi) sector, contributing to a liquidity crisis that drained $20 billion from DeFi deposits.
KelpDAO's statement highlights that the vulnerabilities were a direct consequence of LayerZero's failure to disclose risks associated with its technology. They accused LayerZero of neglecting necessary security precautions, allowing attackers to exploit the universal bridge.
In response to the lawsuit, Pellegrino labeled the claims as unfounded, stating he would vigorously defend himself and LayerZero in a court in British Columbia. He remarked, "The claim continues to be meritless. I will meet them in Vancouver and defend myself accordingly."
The exploit is believed to have been carried out by a North Korean cyber group targeting KelpDAO's cross-chain bridge on the incident date. At that time, KelpDAO was managing nearly 20% of the circulating supply of the restaked token, which exacerbated the financial impact. Following the attack, the DeFi sector experienced a significant downturn, with Aave, a prominent DeFi lending platform, borrowing $300 million to address user withdrawal demands. This incident led to a total loss of $20 billion in total value locked (TVL) across DeFi platforms, underscoring persistent vulnerabilities in the sector.
In the wake of the attack, KelpDAO has taken steps to enhance the security of user assets, including transitioning its rsETH bridge to a more secure cross-chain standard. KelpDAO emphasizes the need to hold LayerZero and Pellegrino accountable for the damage inflicted on them and the broader DeFi ecosystem.
