- Lido paused EarnETH after rsETH exposure reached around 9% TVL, while underlying staking remained safe.
- Lido activated an initial loss buffer of $3 million, with treasury shares held by the DAO covering any confirmed losses.
- Santiment data showed that Spark doubled within 48 hours as whale transactions jumped to 183 after the fall.
Lido Earn halted deposits and withdrawals into its EarnETH vault after the Kelp rsETH incident exposed approximately 9% of the total value of the vault. According to an official update on X, Lido’s core staking protocol is not included, and stETH and wstETH are not affected. The response focused on containing risks at the basement level while recovery work continued elsewhere.
1/ (Update on Lido Earn vaults and the ongoing Kelp incident) Lido Earn shareholders are working with the custodians (Veda and Mellow) to resolve two distinct issues arising from the Kelp incident: direct exposure to rsETH, and the ongoing liquidity crunch in the lending markets.
– Lido (@LidoFinance) April 23, 2026
The statement separated two issues within EarnETH. One was direct exposure to rsETH. The other reason was the liquidity crisis in the lending market, which led to higher borrowing costs on leveraged positions. Meanwhile, Arbitrum’s security board recovered approximately $70 million in ETH associated with the attack, while public updates on recovery and loss allocation were still under development.
Narrow the containment to a single vault
Update said as well Only EarnETH had direct exposure to Kelp’s rsETH. This position represents approximately 9% of the TVL value of the vault, making it the only Earn product affected. Meanwhile, the processing of deposits and withdrawals has been temporarily halted by the Treasurer while the resolution process is completed.
The curator was also working in positions unrelated to rsETH, shareholders said. High borrowing rates across lending markets forced deleveraging and portfolio adjustments within the same treasury. The team said these moves significantly reduced wETH’s debt exposure. She also said that improvement works on the remaining holdings are still ongoing.
DAO Backstop is activated for initial losses
According to Lido’s report, if losses are confirmed after dissolution, a $3 million first loss protection mechanism will be implemented by burning treasury shares owned by the DAO. The buffer is funded from the Lido DAO treasury and aims to absorb the initial damage before it reaches other EarnETH participants. This feature turned the treasury allocation into a direct shield for depositors during the incident.
4/ If EarnETH ends up incurring a loss upon dissolution, EarnETH’s “first loss protection mechanism” ($3 million, funded by the Lido DAO treasury) will be implemented by burning DAO vault shares. https://t.co/lfq1Ldzf8W
– Lido (@LidoFinance) April 23, 2026
Shareholders have also identified a fallback path if the pause lasts longer than expected. Under this option, users can access withdrawals earlier by accepting the expected maximum haircut. The team described this path as a last resort and not a default operation. Applications submitted before the withdrawal pause are also under review.
Other safes show different risk profiles
Meanwhile, DVV, GGV and EarnUSD have no direct exposure to Kelp’s rsETH, according to the status update. DVV and EarnUSD also avoided liquidity pressures in the lending market, with deposits, withdrawals and bonuses continuing as normal. Its operating status contrasts sharply with the temporary shutdown of EarnETH.
GGV has shown a different kind of stress, while its subsidiary has been using zigzag mortgage strategies and is now facing negative rates of return during rising borrowing rates. Furthermore, users who submitted withdrawal requests before the liquidity crisis will be refunded upon pre-crash assessment. Subsequent orders will be processed after liquidity conditions improve.
The ramifications spread far beyond EarnETH
It is worth noting that the broader market reaction showed that the incident did not stop at one basement. Santiment said that six days after Fallout from kelpHowever, refugee trading is starting to emerge elsewhere in DeFi. Spark token rose from $0.029 to $0.058 within 48 hours, representing a 100% increase. Furthermore, whale transactions worth more than $100,000 jumped from a baseline of near 30 per day to 183.
Six days after the fallout from the kelp disaster, there is evidence of the refugee trade emerging (Santiment MCP + Claude):
☝️ $SPK (Spark) rose from $0.029 to $0.058 in 48 hours – +100%.
☝️ Whale transactions (>$100k) increased from a baseline of around 30 per day to 183 today – a 6x increase.
☝️ In the meantime, $ghost He is… pic.twitter.com/SAx5aBjIZN— Santiment (@santimentfeed) April 23, 2026
However, ghost I moved the other way. Santiment said it fell near $92 even as bitcoin traded above $79,000 earlier in the week. These numbers showed a measurable redistribution of liquidity during the fallout. In this sense, the temporary shutdown of EarnETH from Lido was a containment measure and part of the broader market reshaping that was already evident in cross-chain activity.
Read also: Arbitrum Freezes Over $100 Million in ETH Related to KelpDAO Exploit
