Aave announced that the recovery process related to the rsETH crisis has entered the second phase. The protocol stated that the attacker positions opened after the April 18 vulnerability were completely liquidated on Aave V3 on May 6.
According to the statement, a vote was previously 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 deciding 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 loans to cover the shortfall until the funds are fully released at the end of the legal proceedings.
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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 crucial for the gradual reopening of the bridge retraction 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 “bad debt” in many DeFi protocols, including Aave.
*This is not investment advice.