KelpDAO's developer sues LayerZero over the lone-verifier setup behind the $292 million rsETH exploit

Since April, Kelp has spent its money on repairs and replacement. Its damages list includes a 2,000 ETH contribution to restore rsETH's backing ^[11], about 1.7% of the unbacked tokens by count ^[4]. It has shut down its planned sbUSD stablecoin and picked Chainlink's CCIP to carry rsETH in LayerZero's place ^[12]. According to the filing, the fall in the KERNEL token drew warnings from regulators and exchanges ^[11].

Cointelegraph describes the months-long fight as a question of whether the loss came from LayerZero's compromised infrastructure, Kelp's bridge configuration, or both ^[22]. The filing starts with the first. On Evercrest's account, malware went onto a LayerZero developer's computer on March 6, and the attacker then tampered with LayerZero's nodes so they fed false readings to its verifier ^[9]. On April 18 the attacker disabled the third-party nodes the verifier also used, and the verifier was told 116,500 rsETH had been locked on Unichain when nothing had ^[9]. That puts 43 days between the malware and the mint ^[3]. The filing quotes LayerZero's January 2025 pitch, which said a compromised verifier could at most "fail to verify a message correctly" ^[7]. This one approved a false message, and tokens worth about $2,506 apiece at the time were minted against it ^[1].

LayerZero's final incident report accepts that its internal nodes were compromised. It argues the forged message cleared only because Kelp's bridge relied on a single DVN as its only verification path ^[13]. Pellegrino said in May that Kelp's account was "completely untrue," and that Kelp had launched on LayerZero's multi-DVN default and switched to 1-of-1 itself ^[16]. Kelp, for its part, wrote that it needs to "correct the record, and hold LayerZero and Mr. Pellegrino accountable for the harm they have caused us and the broader DeFi ecosystem" ^[20].

In my view the allegation with the most reach is a different one. According to the filing, LayerZero warned the developer of USDT0 about the risks of default verifier setups in late 2024 or early 2025, and that developer went on to run its own verifier ^[8]. Evercrest says Kelp got no comparable warning ^[8]. This allegation matters whichever side flipped Kelp's setting. It goes to what LayerZero knew before April and which customers it told.

If the court treats LayerZero's 2024 messages as advice Kelp was entitled to rely on, configuration risk moves toward the vendor. If it accepts Pellegrino's version ^[16], the risk stays with the customer, where LayerZero's report puts it ^[13]. A settlement would leave neither answer on the record. I'd expect the USDT0 allegation to decide how far the negligence count gets. That view fails if LayerZero produces a warning sent to Kelp like the one USDT0 received. None of the allegations has been tested in court, and no response has been filed ^[19]. So far, Kelp's own move to CCIP is the only change of vendor the record shows ^[12].