Kelp DAO Files Suit Against LayerZero and Co-Founder Over $292M Crypto Theft

A lawsuit has been filed by Kelp DAO against LayerZero and its co-founder Bryan Pellegrino, accusing the cross-chain protocol of responsibility for the $292 million rsETH bridge exploit that happened in April.

Kelp DAO contends that LayerZero concealed weaknesses in its technology. The protocol further asserts that LayerZero did not prevent attackers from breaching its security systems.

Behind the $292 Million rsETH Exploit

Approximately 116,500 rsETH, Kelp DAO's liquid restaking token, were drained by attackers on April 18 via the LayerZero bridge. The heist was the biggest DeFi exploit in 2026. LayerZero subsequently linked the incident to the Lazarus subgroup TraderTraitor.

According to LayerZero, the attackers gained control of sufficient remote procedure call (RPC) nodes to supply false data to the bridge's verifier. Those servers transmit blockchain data to applications.

Consequently, the verifier authorized an rsETH burn that did not actually occur. The Ethereum contract subsequently released funds in response.

LayerZero, though, directed blame at Kelp's configuration. The bridge used just one verifier managed by LayerZero Labs, a 1-of-1 arrangement.

The impact proliferated rapidly. Aave's total value locked (TVL) declined by $8.45 billion in two days, and DeFi TVL decreased widely on major blockchains.

Kelp DAO Takes Legal Action Against LayerZero Following Months of Blame

Kelp contends that LayerZero and Pellegrino spent months publicly attributing fault to the protocol. Conversely, the team asserts that LayerZero examined and approved its deployment and configuration in written form.

The protocol has made the complaint public and demands that LayerZero and Pellegrino be held responsible for damage to Kelp and the broader DeFi ecosystem.

Kelp's team says that user security is still its foremost concern. After the hack, Kelp states it has been transitioning rsETH's bridge to a safer cross-chain standard. The protocol earlier identified Chainlink CCIP, a competing cross-chain messaging system, as its replacement.

https://t.co/D17UbUbixh

— Kelp (@KelpDAO) September 25, 2026

The recovery of the stolen funds has also gone to court. In May, a US court order prevented Arbitrum DAO from transferring 30,766 ETH that it had frozen from the hacker.

Kelp states it anticipates a court hearing. Thus, through this lawsuit, Kelp DAO may make the case an early example of how much infrastructure providers are liable for exploits on client implementations.