On April 25, 2026, a coalition of five major DeFi protocols submitted a Constitutional AIP (Arbitrum Improvement Proposal) on the Arbitrum governance forum, requesting the Arbitrum DAO to release 30,765.67 ETH that had been frozen by the Arbitrum Security Council following the April 18 KelpDAO exploit. The proposal was co-authored by Aave Labs, KelpDAO, Layerzero, Etherfi, and Compound. It asks the DAO to send the frozen ETH to a designated 2-of-3 Gnosis Safe controlled by signers from Aave, KelpDAO, and Certora (address: 0xf228130ce4fAB082C7D5522c90833cec83A9C15e).
Background: The rsETH Bridge Bug and Its Fallout
The freeze originated from a vulnerability in the KelpDAO rsETH cross-chain bridge. According to a Llamarisk incident report, the KelpDAO rsETH Unichain-to-Ethereum bridge released 116,500 rsETH on Ethereum without a corresponding source-side burn, breaking the core bridge invariant that Ethereum-side locked rsETH should cover remote-chain minted supply. At the time of the report, only 40,373 rsETH remained in the adapter as confirmed backing for 152,577 rsETH in remote-chain claims, resulting in a backing shortfall of approximately 76,127 rsETH.
During the exploit, the attacker supplied 89,567 rsETH to Aave across its Ethereum Core and Arbitrum markets and borrowed 82,650 WETH plus 821 wstETH against those positions. The proposal authors were explicit that Aave's smart contracts were not compromised; the incident originated outside the protocol. The Arbitrum Security Council froze 30,765.667501709008927568 ETH on April 21, moving those funds to 0x0000000000000000000000000000000000000DA0 and making clear that a governance vote would be required before they could move again.
Governance Timeline and Fund Usage
The 30,765.67 ETH held on Arbitrum represents a material contribution toward closing the shortfall. Every unit of ETH returned to the recovery effort narrows the backing gap and moves rsETH closer to full collateralization. If governance approves the release, the funds will be used solely to remediate losses arising from the exploit. If the coordinated recovery does not proceed as planned, the parties have committed to return to Arbitrum Governance for further direction.
The proposal timeline estimates approximately 49 days from forum publication to execution, including a one-week forum discussion, a one-week temperature check, a three-day voting delay, a 14-day onchain vote, an eight-day L2 waiting period, a one-week L2-to-L1 message finalization window, and a final three-day L1 waiting period. A Snapshot temperature check may be conducted before the proposal moves onchain. If it advances, the onchain vote will be submitted through Tally and target the Arbitrum Core governor as a Constitutional AIP.
Financial and Legal Framework
No new treasury allocation is requested. The proposal asks only for the release of funds already frozen on Arbitrum One. The direct budgetary cost to the Arbitrum DAO is expected to be zero, outside of standard governance execution overhead. Aave Labs included a full indemnification commitment in the proposal, agreeing to indemnify the Arbitrum Foundation, Offchain Labs, the Arbitrum Security Council, and each of its members against any claims arising from the freeze, the release, or any related enforcement action.
The authors stated that the outcome for Arbitrum users is better than leaving the funds frozen, whether the recovery is full or partial. This proposal marks a significant instance of cross-protocol collaboration in the DeFi space to address post-exploit recovery through on-chain governance.