# KelpDAO rsETH incident April 2026

> *Updated on April 21, 2026*

ETH is no longer frozen on Aave. However, its utilization is still at 100% - meaning there's no available ETH liquidity for users to withdraw.

As a result of that, positions are still stuck, since a key component of repaying or closing a position is being able to withdraw collateral.

To assist users looking to close their position - DeFi Saver has enabled the use of our Collateral Switch tool so you can move your aWETH collateral to a different collateral asset, and then withdraw, repay, or close your position.

<details>

<summary>How to use Collateral Switch:</summary>

Navigate to the Aave dashboard, and click on the "Shift" tab:

<figure><img src="https://2276946674-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fo1t7pGS5d15WeQzoQ3Fe%2Fuploads%2FoI7ItWSEVaHS0nj9GZDU%2FScreenshot%202025-10-31%20164246.png?alt=media&#x26;token=c8c56f16-a340-4356-a194-2ff562d16149" alt=""><figcaption></figcaption></figure>

It'll open the Collateral Switch tab by default, and from there, click "Open Collateral Switcher":

<figure><img src="https://2276946674-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fo1t7pGS5d15WeQzoQ3Fe%2Fuploads%2Fz7Yp5LHn5rRZcZmEl6gu%2FHGdiJkSa0AA1WfX.jpg?alt=media&#x26;token=d4b98114-a238-4d3e-aa73-a1383ef8b018" alt=""><figcaption></figcaption></figure>

You can input any amount of collateral to switch - but in this case you'd be looking to swap all of it.&#x20;

{% hint style="info" %}
*DeFi Saver has integrated Fluid and 1inch's solutions for swapping aWETH tokens, which are Aave collateral tokens into a different Aave collateral token.*&#x20;
{% endhint %}

We highly recommend having a look at the utilization percentage of the collateral asset you'd like to move into. For example, as of April 22, 2026, stablecoins have a utilization of 100%

This means that, even if you switch your ETH collateral to USDC or USDT, you'll also be unable to withdraw collateral, or use Repay/Close.

As such, please have a look at the Market section, and the asset you're interested in. Their utilization percentage will be in the "Market info" tab:

<figure><img src="https://2276946674-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fo1t7pGS5d15WeQzoQ3Fe%2Fuploads%2F9gZQ8nmIkQxCddf3AUD6%2FScreenshot%202026-04-22%20004435.png?alt=media&#x26;token=c00ff98c-5767-469f-8171-0083c76604ab" alt=""><figcaption></figcaption></figure>

{% hint style="success" %}
At the moment, wstETH has low utilization and the smaller Collateral Switch fee (0.1%) - so it's worth considering as the asset to switch to
{% endhint %}

</details>

Once you've switched, you'll be able to use either our Repay tool to clear part of your debt, or the Close tool to fully unwind your position:

* [How the Close tool works](https://help.defisaver.com/features/leveraged-create-and-close)
* [How Repay works](https://help.defisaver.com/features/boost-and-repay/use-case)

{% hint style="success" %}
*We've also made it possible to use the "Repay" tool with your ETH collateral (aWETH token), so that risky positions can repay debt and avoid liquidation.*\
\
*We'll soon make the "Close" tool available soon - so if you'd prefer to wait, you'll be able to fully unwind your ETH position once we release it.*
{% endhint %}

#### How the rsETH exploit worked:

On April 18th an exploiter managed to withdraw rsETH tokens worth \~$300m from the KelpDAO bridge smart contract on Ethereum mainnet.

This rsETH represented the backing of all rsETH and wrsETH on L2 networks, effectively meaning that it's no longer backed and that there's more rsETH in circulation than there is backing for it.

In order to gain maximum value from the stolen funds, they then used rsETH as collateral across multiple lending protocols, mostly to borrow ETH, since that's the highest value they could borrow thanks to special LTV conditions available for looping positions, made possible by e-modes or separate markets.

Affected lending protocols include Aave, Compound, Fluid, Morpho and Euler, with Aave receiving most of the influx of these tokens and subsequent outflow of ETH, followed by Compound.

The most affected users are ETH depositors and of course rsETH holders, with potential steps for resolvement currently being worked on by the relevant teams.

For the time being some protocols implemented security measures to prevent second-order effects, specifically:

#### Aave governance

* Froze ETH and (w)rsETH across Core, Prime, Arbitrum, Base, Plasma and Linea V3 markets
* Set LTVs at 0 for ETH and (w)rsETH across Core, Prime, Arbitrum, Base, Plasma and Linea V3 markets
* Disabled new supply and borrow activity against rsETH on Aave V4

This means that no new ETH can be borrowed, and also that new borrowings cannot be made using ETH or (w)rsETH as collateral. More information and further discussion can be found on the [Aave governance forum](https://governance.aave.com/t/rseth-incident-2026-04-18/).

#### Compound governance

* Paused the following V3 markets: WETH, USDC and wstETH on Ethereum mainnet; WETH on Optimism; WETH on Base; WETH on Arbitrum; and WETH on Linea.

This means that assets cannot be withdrawn or borrowed from these markets, though new deposits are possible. More information and further discussion be found on the [Compound governance forum](https://www.comp.xyz/t/kelp-daos-rseth-hack-response/).

### Impact on DeFi Saver features and services

These kinds of changes unfortunately also affect some of the options we provide, most notably Automation for users using ETH as collateral.

The following DFS Automation options are unable to run on Aave positions with collateral assets with LTV 0, as well as Compound positions in paused markets:

* Auto-repay and auto-boost (aka Automated leverage management)
* Boost on price and repay on price

The following DFS Automations can run on Aave positions with collateral assets with LTV 0, but only if there's sufficient liquidity:

* Stop loss
* Take profit
* Collateral switch

All manual actions can be applied regardless of LTV 0 status, however they can be limited by available liquidity. For example, you can apply a Repay (with collateral) on an ETH/USDC position, but only if ETH utilization is not at 100% because this process removes ETH from the Aave market.

In case of positions where the debt asset is the one with market utilization at 100%, this does not prevent you from unwinding your position, as this process returns debt asset liquidity to the pool. For example, our Repay (with collateral) will work for both ETH shorts or LST loops regardless of 100% utilization on ETH. &#x20;

For any additional information please feel free to reach out to our support team via the in-app chat or the DFS Discord.