Aave has announced the successful liquidation of the rsETH positions held by the Kelp DAO attacker on both Ethereum and Arbitrum. This marks a major step forward in the DeFi United rescue initiative, aimed at fully compensating users and restoring all lost rsETH collateral after the $293 million hack on April 18. The latest progress brings hope to affected users as one of the key milestones of the recovery plan has now been reached.
Aave’s recovery milestones
Founded in 2017, Aave is one of the world’s most recognized decentralized lending and borrowing protocols. According to the platform’s latest disclosure, all remaining rsETH collateral belonging to the hacker has been liquidated and transferred to a multisignature wallet controlled by the DeFi United consortium.
This transfer represents significant headway in recouping the Ether lost during the attack. Galaxy Digital’s Deputy Head of Research, Thaddeus Pinakiewicz, has reported that only about 10 percent of the targeted Ether remains to be recovered. Achieving this final target would mean that Kelp DAO’s stolen rsETH assets are almost fully restored.
In a statement, it was explained that the collateral liquidated after the April 18 hack was transferred to a multisignature wallet known as the “Recovery Guardian,” overseen by DeFi United.
Aave emphasized that these liquidations did not affect user funds. It also clarified that its automatic bad debt protection mechanism, Umbrella, was not triggered during this event.
Legal hurdles and community voting in Arbitrum DAO
While the liquidation of 13,000 ETH belonging to the hacker liberated approximately $30.2 million, the fate of another 30,765 ETH in Arbitrum DAO remains unresolved, as those assets are frozen due to a lawsuit filed by US-based Gerstein Harrow LLP. To address this, Aave has urgently requested the reversal of the court order preventing Arbitrum DAO from returning these funds.
Meanwhile, the Arbitrum DAO community is pushing for the frozen ETH to be transferred into the DeFi United fund. Over 90 percent of members who have already participated in the vote support this measure, and voting is expected to close by Friday.
Market impact and search for further support
The Kelp DAO exploit stands out as one of the biggest losses in the crypto sector for 2026 so far, shaking confidence and liquidity across the multi-billion-dollar DeFi market. The aftermath caused Aave’s total value locked to drop by $12 billion in just one week. Concurrently, bad debt on the platform soared past $190 million, sparking a wave of withdrawals.
Amid recovery efforts, Aave is seeking support from major stablecoin issuers Circle, Ethena, and Frax, as well as Ink, an Ethereum layer-two solution developed by Kraken. Pinakiewicz noted that securing additional backing from these entities could nearly eliminate the losses sustained in the attack.
Data from DefiLlama as of April 26 show that outflows from Aave’s lending markets have started to reverse, with total locked assets rebounding from a local low of $14.2 billion to over $15 billion.
Pinakiewicz stated, “Aave could close the recovery process completely if further support pledges come through.”
In the wake of the incident, DeFi projects have been focusing more attention on security risks linked to artificial intelligence, underlining the need for decentralized finance protocols to step up and guard against similar threats in the future.
