Inside Arkham's Hunt for the $292M KelpDAO Attacker

Summary

Arkham CEO Miguel Morel explains how his team traced the $292M KelpDAO hack by monitoring on-chain movements through THORChain and cross-chain bridges. The discussion covers the exploit mechanics, the resulting bad debt on Aave, and the controversial freeze of $71M by the Arbitrum security council.

• Miguel Morel describes Arkham's automated and manual monitoring of anomalous on-chain movements.
• The KelpDAO hack involved exploiting Layer Zero's verifier network to mint fake rsETH, then borrowing on Aave.
• Lazarus Group is identified as the likely attacker based on money laundering patterns via THORChain.
• The hack created a bank run on Aave, trapping users in stablecoin markets with insufficient liquidity.
• Aave users are using real-time alerts to withdraw funds when new deposits arrive.
• The Arbitrum security council froze $71M of stolen funds, raising questions about decentralization.
• Gordon Liao proposed adjusting Aave's interest rate curves to incentivize new deposits and resolve the bad debt.
• The incident highlights systemic risks in DeFi from composability and trust assumptions between protocols.