Background
On Friday 18 April, an attacker exploited a vulnerability in Kelp DAO’s LayerZero V2 bridge route between Unichain and Ethereum, which allowed unbacked rsETH to be minted on Ethereum mainnet. The incident led to rsETH and WETH freezes on Aave, pushed borrow rates higher across multiple protocols, and caused a wider liquidity crunch in ETH-denominated markets.
At the time of the incident, the Balancer DAO Treasury had no direct rsETH exposure. That said, KPK identified contagion risks affecting the stkGHO and stkAAVE positions, as well as the USDC market on Compound, and took precautionary measures on the positions that were still actionable. This post provides a full account of the actions taken.
Actions taken
18 April: Mainnet precautionary exits
At 18:54 UTC on 18 April, KPK received an alert regarding suspicious rsETH transfers. By 19:07 UTC, before KPK was able to execute the precautionary exits, Compound had already paused the USDC, wstETH, and WETH markets, blocking any withdrawal from the Compound positions held by the Balancer DAO Treasury.
By 19:14 UTC, 20 minutes after the initial alert, the incident was confirmed and KPK began executing precautionary exits on the KPK-managed treasury on mainnet, after identifying contagion risks on stkGHO and stkAAVE:
- Activated the stkGHO cooldown and unstaked the position (tx:1, 2)
- Swapped GHO into USDC via CoW Swap (tx)
- Activated the stkAAVE cooldown (tx)
Impact on the Balancer DAO Treasury
The rsETH exploit had no material impact on the Balancer DAO Treasury. No funds were lost. The precautionary exit on stkGHO and the stkAAVE cooldown were completed successfully, and the Compound positions were protected by the market freeze.
Resolution and current status
All precautionary exits were completed successfully. Aside from the ongoing Compound market freezes, the Treasury continues to operate normally.
We continue monitoring the situation across all protocols and will post further updates if any developments affect the Treasury.
Update – 27 April 2026
Following the reactivation of the Compound USDC market, KPK exited the Balancer DAO Treasury’s allocation without incurring any loss.