Fluid Extends aWETH Redemption Protocol To L2
Aave users on Arbitrum and Base can now swap their frozen aWETH collateral for wstETH or weETH.
Fluid extended its aWETH Redemption Protocol to L2 networks, launching first on Arbitrum and Base. The solution allows Aave users to swap their frozen aWETH collateral for wstETH or weETH, for a fee of roughly 2%. On Ethereum mainnet alone, the protocol has already facilitated $400 million in aWETH redemptions.
The service helps protocols unwind looped Aave positions more efficiently. It works by pairing protocols running looping strategies with WETH lenders on Aave. Initial liquidity was absorbed within hours of launch, and the pool is expected to be replenished. EtherFi also launched an aWETH redemption tool for Ethereum mainnet.
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Arbitrum Freezes 30,766 ETH From KelpDAO Exploiter
The Arbitrum Security Council executed an emergency upgrade to freeze $71M in ETH tied to the KelpDAO exploit, briefly modifying an inbox contract to impersonate the exploiter.
The Arbitrum Security Council executed an emergency upgrade to freeze 30,766 ETH from an address involved in the KelpDAO exploit. As part of the recovery effort, $71 million in ETH was moved from the exploiter's wallet into a frozen intermediary address. The funds will remain frozen until an Arbitrum DAO vote approves further action.
Council member Patrick McCorry explained that the council briefly modified the chain's inbox contract on L1 to include a function enabling cross-chain messages that could impersonate any sender. Using this capability, a single transaction impersonated the exploiter's address to transfer the funds. Immediately afterward, the inbox contract was restored to its original state.
The Arbitrum DAO will need to decide how to allocate the recovered funds. It will need to determine whether to use them to compensate Aave users for losses or return them to KelpDAO to help restore rsETH backing.
Update (May 4, 2026): A U.S. law firm has filed a restraining notice in SDNY seeking to claim the frozen 30,766 ETH for its own clients, citing the exploit's attribution to North Korea's Lazarus Group. Aave LLC has filed an emergency motion to vacate the notice and is requesting a $300M bond if it stands. The DAO transfer vote remains legally blocked pending the court's decision.
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Disclaimer: Content is for informational purposes only, not endorsement or investment advice. The accuracy of information is not guaranteed.