Aave announced that the recovery process regarding the rsETH crisis has entered its second phase. The protocol stated that the attacker positions opened after the April 18th vulnerability were completely liquidated on Aave V3 on May 6th.
According to the statement, a vote had previously been held to return approximately $71 million worth of ETH, previously recovered by Arbitrum DAO, to Aave users. However, these funds had been temporarily frozen by plaintiffs who held a decision in a lawsuit against North Korea.
Aave announced that the court’s latest decision allows the transfer of the assets in question to Aave LLC. However, it was stated that Aave will temporarily resort to borrowing to cover the shortfall until the funds are fully released at the conclusion of the legal process.
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As part of the second phase of the recovery plan, it was also announced that liquidated rsETH assets would be burned to balance the rsETH supply that was allegedly inflated by the attacker. This step was described as critical for the gradual reopening of the bridge withdrawal mechanism and the return of the system to normal operation.
As you may recall, the security breach in KelpDAO’s LayerZero-based rsETH bridge caused significant liquidity pressure and the risk of “uncollectible debt” in many DeFi protocols, including Aave.
*This is not investment advice.
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