Lido: EarnETH Exposed to Approximately 9% Risk Due to KelpDAO Incident, stETH and wstETH Unaffected

On April 23, Lido provided an update regarding the KelpDAO security incident, stating that its Earn series vaults are working with management to address issues related to rsETH exposure and liquidity constraints in the lending market. The core staking protocol remains unaffected, with both stETH and wstETH not impacted. Currently, only the EarnETH vault has approximately 9% of its Total Value Locked (TVL) exposed to rsETH, and related deposits and withdrawals have been paused by management pending a resolution. Approximately $70 million worth of ETH has been recovered from the previous attack, and efforts to restore assets and allocate losses are ongoing. To address liquidity pressures, management has reduced leverage and optimized position structures, significantly decreasing wETH debt exposure. If losses do occur, EarnETH will activate a $3 million ‘first loss protection mechanism’ funded by the DAO. Other vaults, including DVV and EarnUSD, remain unaffected and are operating normally; however, the GGV sub-vault is currently experiencing negative yields due to the combination of circular staking strategies and rising lending rates, but adjustments are ongoing. Withdrawal requests submitted by users will be processed based on valuations prior to the incident.