The liquid restaking protocol KelpDAO has initiated legal proceedings against LayerZero Labs and its co-founder, Bryan Pellegrino, following a security breach earlier this year. The lawsuit centers on a compromise of the rsETH cross-chain bridge, which KelpDAO alleges was caused by professional negligence and a failure to disclose technical risks. This legal action marks a significant escalation in the dispute between the two entities regarding infrastructure security responsibilities within the interoperability sector.
Allegations of Negligence and Technical Failure
KelpDAO’s legal filing asserts that the attack on the rsETH bridge was a direct consequence of vulnerabilities within LayerZero's core technology. The protocol claims that LayerZero failed to maintain its own security infrastructure, which allowed attackers to exploit specific weaknesses. According to KelpDAO, records indicate that LayerZero had formally reviewed and approved the technical deployment and configuration of the bridge in writing prior to the incident.
The lawsuit highlights several key grievances:
- Failure to disclose inherent weaknesses and operational risks in the cross-chain architecture.
- Inability to prevent the compromise of LayerZero’s proprietary security components.
- Discrepancies between public statements and internal technical approvals.
Response to Security Breach and Asset Protection
In the aftermath of the exploit, KelpDAO has implemented several measures to mitigate risks to its user base. The protocol has migrated the rsETH bridge to a different infrastructure provider, seeking enhanced security protocols to prevent future unauthorized access. The rsETH token is a prominent Liquid Restaking Token (LRT) that allows users to earn rewards while maintaining liquidity on the Ethereum network.
"The incident stemmed directly from LayerZero's negligence, including its failure to disclose inherent weaknesses and risks in its technology", KelpDAO stated in a social media announcement regarding the lawsuit.
While LayerZero had previously addressed the incident publicly, KelpDAO maintains that the service provider bears legal responsibility for the financial and reputational damages incurred by the protocol and its stakeholders.
The outcome of this litigation could set a precedent for liability in the decentralized finance (DeFi) sector, particularly concerning the relationship between middleware infrastructure providers and the applications that rely on them. As of September 2026, the case continues to develop as both parties prepare their respective legal arguments regarding the standards of care expected in cross-chain interoperability deployments.
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