KelpDAO Sues LayerZero and Co-Founder Bryan Pellegrino in Vancouver
KelpDAO has filed a civil claim in British Columbia against LayerZero and its co-founder Bryan Pellegrino regarding the theft of rsETH from the cross-chain bridge earlier this year. Pellegrino claims the lawsuit is baseless and will respond in Vancouver. The complaint alleges that the infrastructure had inadequately disclosed vulnerabilities, failed to prevent the security system from being breached, and that the other party had reviewed and approved Kelp's deployment configuration in writing.
On April 18 at approximately 17:35 UTC, an attacker forged LayerZero cross-chain messages and released 116,500 rsETH from the Ethereum OFT adapter under a 1-of-1 validation configuration, amounting to about $292 million at the time. The token contract itself was not opened; rather, the bridge's validation layer was compromised: a single DVN signature was sufficient for release. Additionally, a forged package was signed out by the same validation network, which Kelp's multi-signature paused and intercepted. Chainalysis and others have linked the actor to North Korea's Lazarus group. The attack path included social engineering to access developer accounts, contaminating LayerZero's side RPC nodes, and coordinating traffic impacts on backup nodes.
After the incident, LayerZero attributed the root cause to Kelp violating its recommended multi-validation model by using only Labs as the sole validator. Kelp countered that 1-of-1 was the default in documentation, and after over two years of integrated communication, it had not received any warnings regarding reconfiguration for rsETH; public code quickly began to default to single-source validation across multiple chains; Dune statistics show that nearly half of the approximately 2,665 OApps operated under a 1-1 security floor. Subsequently, LayerZero ceased signing for 1-1 configurations. Kelp has migrated the rsETH bridge to Chainlink CCIP.
The lawsuit transforms the configuration dispute from April into a liability allocation in a Vancouver court. The legal subject of cross-chain messages—whether it is the protocol, the author of the default configuration, or the integrator who chose the default—will determine who bears the $292 million liability. Funds and market makers have already faced liquidity squeezes from the de-pegging of rsETH and pools like Aave since April.
In market mechanisms, the service sold is cross-chain validation, while the buyer is the integrator's configuration choice. After the incident, both sides are vying for the interpretation of "whose product is the default value." The benefiting party is the one that can write risks into the other party's contract, while the pressured party is the rsETH holders still locked on the paused bridge. Funds have already flowed from the adapter to the attack address; if the claim is established, it will then flow back from LayerZero to the protocol's compensation pool.
Source: Public Information
ABAB AI Insight
The insurance for cross-chain bridges does not lie in contract bytecode, but in the requirement that several independent individuals must simultaneously affirm "the source chain is really burned." The 1-of-1 configuration hands this affirmation to a single DVN, and once the DVN's RPC is replaced with a binary, the Ethereum adapter will release tokens based on a destruction that never occurred. Kelp needs to prove that the default value equals the recommended value, while LayerZero must prove that the default value is merely scaffolding and that the integrator has an obligation to switch to multi-signature. The Vancouver proceedings turn the technical default into a standard of negligence.
The capital path is the cross-chain premium for re-staking tokens. The convenience value of rsETH on L2 is $292 million due to validation laziness. Migrating to Chainlink is about changing validation alliances, not eliminating the bridge. Pellegrino is personally named as a defendant, expanding the company's infringement to include the founder's duty of care, increasing the stakes for settlement while also raising litigation costs.
Similar arguments can be seen in the liability division following the Ronin validator theft, as well as in traditional SWIFT member banks' contractual battles over interface configurations. The industry is at a stage where message protocols hand over security parameters to integrators, and after incidents, disputes arise over the ownership of default values. Whoever controls the Quickstart in the documentation has additional ammunition in court, claiming "you copied our default" or "you didn't change our default."
Structural judgments belong to regulatory changes. On-chain events are dragged into ordinary law negligence and product liability. The mechanism is: multi-validation is a cost, single validation is the default; after losses caused by the default, the cost is redistributed to either the one who wrote the default or the one who used the default.
ABAB News · Law of Cognition
The insurance for cross-chain lies not in the contract, but in the simultaneous nods of several people.
When the default configuration fails, the court will price the default value.
The bridge can change alliances, but the locked coins cannot immediately follow suit.