KelpDAO, a decentralized finance (DeFi) lending protocol, filed a lawsuit on Tuesday in a U.S. federal court accusing LayerZero Labs and its co‑founder Brian Pellegrino of negligence that enabled a $292 million exploit of KelpDAO’s rsETH cross‑chain bridge on April 18. The suit alleges that LayerZero not only failed to disclose known vulnerabilities in its messaging protocol but also endorsed the specific bridge configuration used by KelpDAO, despite internal warnings.
Background of the rsETH exploit
The attack targeted a bridge that moves rsETH—a token representing staked Ether—between Ethereum and other chains. Hackers exploited a single‑verifier setup, a design choice that allows a single node to validate cross‑chain messages, which security experts have long warned can be a single point of failure. According to CoinDesk, the breach resulted in the theft of $292 million worth of crypto assets, making it the largest exploit of the year.
Legal claims and alleged endorsements
KelpDAO’s complaint asserts that LayerZero approved the single‑verifier bridge configuration in writing on multiple occasions, a claim echoed by several outlets including The Block and Decrypt. The filing further alleges that LayerZero later warned a different developer about the same configuration, suggesting a contradictory stance within the company.
"LayerZero approved the single‑verifier configuration in writing multiple times," the lawsuit states.
In addition to the written endorsements, KelpDAO alleges that LayerZero’s co‑founder Brian Pellegrino personally assured the protocol’s developers that the bridge setup was secure. The complaint seeks compensatory damages for the full amount of the loss, as well as punitive damages and legal fees.
Industry reaction and defenses
LayerZero’s legal team dismissed the allegations as “without merit,” with CEO Bryan Pellegrino calling the lawsuit “unfounded” in a brief statement to Cointelegraph. The company maintains that it provided standard documentation and that KelpDAO bears responsibility for its own security architecture.
Market analysts note that the case could set a precedent for how cross‑chain infrastructure providers are held accountable. “If the court finds that LayerZero had a duty to disclose known risks, it could reshape risk‑allocation models across the DeFi ecosystem,” said a senior analyst at a crypto‑focused consultancy, speaking on condition of anonymity.
The incident also reignited broader concerns about the security of cross‑chain bridges, which have been frequent targets for hackers due to their complexity and the high value of assets they move. Following the exploit, several other DeFi platforms announced temporary suspensions of bridge functionalities while they reassessed security protocols.
Legal experts caution that lawsuits of this nature are still relatively rare in the crypto space, where jurisdictional ambiguities often complicate enforcement. Nevertheless, the filing underscores a growing willingness among decentralized projects to seek redress through traditional legal channels, a trend that could influence future regulatory approaches to blockchain interoperability services.
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Live data: CoinGecko — 2026-09-25 13:22 UTC
