The decentralized finance (DeFi) community is rallying to contain the fallout from one of the year’s most significant security breaches. Arbitrum DAO voters are currently weighing a proposal to release 30,765 ETH (approximately $71 million) to assist in the recovery of Kelp DAO’s liquid restaking token, rsETH.
The funds in question were frozen by the Arbitrum Security Council on April 21, shortly after an exploit on Kelp DAO drained roughly 116,500 rsETH. At the time of the incident, the loss was valued at nearly $293 million. Because the Security Council moved these assets to a protected address to prevent further loss, a formal governance vote is now required to put those funds back into the hands of the recovery team.
A Unified Front: Major DeFi Protocols Back the Proposal
This isn’t just a Kelp DAO initiative; it’s a cross-ecosystem rescue mission. The proposal was co-authored by some of the biggest names in the space, including Aave Labs, LayerZero, EtherFi, and Compound. This high-level collaboration highlights a growing trend in DeFi: “DeFi United.” The goal is simple—prevent a “contagion effect” where the collapse of one major token depegs others or drains liquidity from lending platforms.
Early signs suggest the Arbitrum community is overwhelmingly in favor of the move. As of the latest update, 100% of the 34.2 million ARB tokens cast have voted “yes.” If this momentum continues through the closing of the voting window next Thursday, the funds will be transferred to a 3-of-4 multisig wallet managed by representatives from Aave, Kelp, Certora, and EtherFi.
Closing the Gap on the rsETH Backing Shortfall
The exploit created a massive deficit in the rsETH ecosystem. Currently, the adapter contract holds only about 40,373 rsETH, while it should be backing over 152,000. This leaves a shortfall of roughly 76,127 rsETH, valued at approximately $174.5 million. While the $71 million held by Arbitrum won’t cover the entire loss, the proposal describes it as a “material contribution” toward making holders whole.
Fortunately, other protocols are also stepping up. Entities like Mantle, Lido DAO, and Ethena have already pledged a combined 43,000 ETH toward the broader recovery effort. By pooling these resources, the “DeFi United” coalition hopes to restore the 1:1 backing of rsETH, ensuring that users on Arbitrum and across the wider Ethereum network regain confidence in liquid restaking assets. If this initial “temperature check” passes, the proposal will move to an on-chain vote via Tally to become an official Arbitrum Improvement Proposal (AIP).
