Aave, Kelp, LayerZero Propose Releasing $71M in Frozen ETH for rsETH Recovery

Gate News message, April 27 — Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound filed a Constitutional AIP on the Arbitrum forum Saturday morning, requesting the release of approximately $71 million in frozen ETH to support DeFi United, a cross-protocol relief effort following last week’s $292 million Kelp DAO exploit. The proposal seeks to unlock 30,765.67 ETH that the Arbitrum Security Council froze and seized on April 21 after tracing it to addresses controlled by the exploiter.

Under the proposal, the funds would be transferred to a 2-of-3 Gnosis Safe co-signed by Aave, Kelp DAO, and Certora, designated solely to receive recovered ETH and restore rsETH’s economic backing. The proposal also includes an extensive indemnification clause under which Aave Labs would indemnify the Arbitrum Foundation, Offchain Labs, and Security Council members from any claims arising from the freeze or proposed release, with no cap or deductible.

The Constitutional AIP process carries a lengthy timeline of approximately 49 days, encompassing forum discussion, an optional temperature check, voting delays, an onchain vote of 14 to 16 days, L2-to-L1 message finalization, and final execution steps. Community members and Arbitrum Security Council member Griff Green have already called for expediting the process, citing concerns over open positions on Aave that could face liquidation during the extended waiting period.

Other major contributions to DeFi United to date include Aave’s own 25,000 ETH DAO commitment, Lido’s 2,500 stETH, 5,000 ETH each from EtherFi and Aave founder Stani Kulechov, and a proposed 30,000 ETH credit facility from Mantle to absorb residual bad debt.