Aave Restores WETH Borrowing After KelpDAO Exploit

Aave restored WETH Loan-to-Value (LTV) to pre-incident levels across multiple networks on May 17, 2026, following an exploit related to KelpDAO's rsETH in April. The recovery allows users to borrow against WETH again on Aave V3 deployments including Ethereum Core, Ethereum Prime, Arbitrum, Base, Mantle, and Linea. Aave CEO Stani Kulechov confirmed the completion of the next step in the rsETH technical recovery plan. The incident, which was not a direct hack on Aave, stemmed from an exploit on April 18 where an attacker used affected rsETH as collateral to borrow WETH/ETH, creating bad debt. Aave froze rsETH and wrsETH reserves and restricted WETH to contain risk. According to DefiLlama, Aave's TVL dropped sharply to around $14.4 billion from $23.5 billion in March. A total of 106,993 rsETH has been recovered from Aave V3 and Compound, with 89,567 from Aave and 17,426 from Compound, against an unbacked supply of approximately 112,103 rsETH on affected L2s. The remaining over 5,000 rsETH is expected to be covered by ETH funds from DeFi United. The AAVE token trades around $88, down 1.2% on the day, near multi-month lows compared to $170–$180 earlier this year. The event highlights risks in DeFi lending from external collateral assets losing backing.