Kelp DAO sues LayerZero in British Columbia over the $292M rsETH bridge exploit

The Ethereum escrow contract did what it was written to do. It received a message with a valid-looking attestation and released the rsETH, because there was no second, independent signer to check it ^[14]. The dev.to write-up of the case says the theft did not come from a smart contract bug. A forged cross-chain message got past the bridge's verification ^[9].

The forgery needed two failures upstream of the contract. One was inside LayerZero. According to the company's incident report, as the write-up relays it, attackers poisoned the memory of running RPC nodes. Internal monitoring kept showing normal traffic while the Decentralized Verifier Network received manipulated data ^[11]. The dashboards were green for the wrong reason. Then an external RPC provider went offline, and the DVN's signing service fell back automatically to two internal nodes. Both were compromised, and they produced the attestation ^[12]. That fallback is the detail I would stop on at review. A fallback exists to keep signing when a provider drops. Here it moved the signer onto exactly the machines the attackers held ^[12].

The other failure was the bridge's own configuration. Kelp's bridge trusted one verifier, operated by LayerZero Labs, in a 1-of-1 setup ^[13]. With one verifier, a single poisoned attestation is the whole quorum ^[13]. A second verifier reading from its own RPC sources would have given the forged data something to disagree with ^[14].

Kelp filed through its parent, Evercrest Technologies, in the Supreme Court of British Columbia in late September ^[1]. The loss was about $292 million, and the write-up calls it the largest single DeFi exploit of the year ^[7]. The claim pleads negligence, negligent misrepresentation and defamation ^[2]. Kelp argues that LayerZero concealed inherent flaws in its technology and failed to keep attackers out of its security systems ^[3]. Those allegations aim at the intrusion into LayerZero's systems. The write-up does not say who chose the single-verifier setup for Kelp's bridge, or whether it was a LayerZero default. I'd expect a negligence case to turn partly on that answer.

In my view the verifier count belongs to the integrating team whatever the Vancouver court decides, because the loss did not stay with the bridge. The attacker put about 89,567 rsETH, roughly 77% of the unbacked mint, into Aave V3 on Ethereum and Arbitrum ^[15][1]. It borrowed about $193 million in WETH and wstETH against that collateral ^[15]. Bad-debt estimates run from $123.7 million to $230.1 million, depending on how losses are socialized ^[16]. The top of that range is $37.1 million more than the attacker borrowed ^[2].