Tornado Cash-funded Wallet Drains $292M From KelpDAO

On Saturday a wallet funded through Tornado Cash’s 1 ETH pool executed a transaction after roughly 10 hours that called lzReceive on LayerZero’s EndpointV2 contract. That call triggered KelpDAO’s OFT bridge to release 116,500 rsETH to an attacker address.

The stolen tokens were worth about $292 million at current prices and represented roughly 18% of rsETH’s circulating supply of about 630,000.

The attacker deposited the rsETH into Aave V3 as collateral and borrowed large amounts of Ether and Wrapped Ether. The borrower then routed funds back through Tornado Cash.

KelpDAO’s emergency pauser multisig executed a pauseAll call 46 minutes after the initial drain, freezing the LRT Deposit Pool, Withdrawal contract, LRT Oracle and the rsETH token across affected networks. Five minutes after the pause two LayerZero packets targeted 40,000 rsETH each-about $100 million combined-but both transactions reverted. If those attempts had succeeded KelpDAO’s total loss would have been near $391 million.

Blockchain investigator ZachXBT flagged the incident within an hour, writing: “KelpDAO appears to have had $280M+ stolen one hour ago on Ethereum and Arbitrum.” KelpDAO posted on X that it had identified “suspicious cross-chain activity involving rsETH” and that it paused rsETH contracts across mainnet and several layer-2 networks while investigating. The protocol said it is working with LayerZero, Unichain, auditors and outside security experts on a root-cause analysis.

Aave froze all rsETH markets on both Aave V3 and V4 and noted the vulnerability appears to be in rsETH, not in Aave’s own contracts. The platform wrote it is reviewing rsETH borrows on Aave that occurred after the exploit and is exploring ways to cover potential losses. Analysts estimate Aave V3 could face up to $177 million in bad debt exposure tied to the borrowed assets posted as collateral.

rsETH is a liquid restaking token built on EigenLayer and is deployed across more than 20 networks, including Base, Arbitrum, Linea, Blast, Mantle and Scroll. The attacker’s use of Tornado Cash’s 1 ETH pool to seed the wallet provided gas while obscuring the origin of funds.

Market reaction included a roughly 10.7% drop in Aave’s token to $103.86 and a roughly 3% decline in Ether to about $2,358.24. The KelpDAO exploit is the second-largest crypto theft of 2026 so far, following a $286 million breach of Drift Protocol less than two weeks earlier. Security teams continue to trace the funds and assess exposure across lending and bridge interfaces.