KelpDAO Operator Sues LayerZero Over $292 Million Bridge Exploit

VANCOUVER, British Columbia — Evercrest Technologies, operator of the liquid restaking protocol KelpDAO, has sued LayerZero Labs, its Canadian subsidiary and co-founder Bryan Pellegrino over an April 18 exploit that it says cost $292 million. The notice of civil claim, filed in the Supreme Court of British Columbia, alleges that LayerZero approved in writing the bridge security configuration later exploited, then publicly blamed KelpDAO to protect its own reputation.

The claim alleges negligent misrepresentation, negligence and defamation. Evercrest is seeking general, aggravated and punitive damages. It says the exploit and its aftermath prompted more than $650 million in capital flight from KelpDAO and forced the company to put 2,000 Ether (ETH) of its own funds into restoring collateral backing for users.

At issue is a “1-of-1” configuration on bridges that used LayerZero infrastructure to move KelpDAO’s rsETH between blockchains. The liquid restaking token lets users retain liquidity on deposited assets while earning yields. Under the configuration, LayerZero’s proprietary Decentralized Verifier Network (DVN) alone confirmed that assets were locked on a source chain before corresponding tokens could be minted on another.

Evercrest says LayerZero reviewed draft code in February 2024, called it “good” and said there was “no problem” with the default single-verifier setup. The filing alleges that LayerZero directed Evercrest the following month to use its own verifier in a 1-of-1 arrangement. In January 2025, according to the claim, LayerZero said that even if a verifier were compromised, the worst outcome would be undelivered messages, not a catastrophic minting exploit.

The lawsuit traces the attack to malware allegedly installed on a LayerZero developer’s computer on March 6. Evercrest says the attacker gained internal access and tampered with LayerZero nodes so they would feed fraudulent data to the verifier network. On April 18, the attacker disabled third-party nodes used for cross-checking, and the compromised system falsely reported that 116,500 rsETH had been locked on Unichain, a Layer-2 network. The sole verifier approved the transfer, allowing the attacker to mint 116,500 rsETH on the destination chain without collateral. Evercrest says it paused its bridges within approximately one hour of detecting the anomaly and blocked a second attempted exploit.

The filing also cites a warning LayerZero allegedly gave another developer, USDT0, in late 2024 or early 2025 about risks inherent in its default verifier configurations. Evercrest says that warning led USDT0 to run independent validation nodes, while KelpDAO received no comparable warning.

After the exploit, LayerZero said in its official post-mortem that KelpDAO’s single-verifier setup contradicted the multi-DVN model it had “consistently recommended to all integration partners.” Pellegrino, LayerZero’s CEO, wrote on X, formerly Twitter, and Telegram that “nobody should be relying on [a] sole DVN.” Evercrest says those public statements falsely shifted blame to KelpDAO. It alleges that, days later, LayerZero privately acknowledged it “made a mistake by allowing [its] DVN to act as a 1-of-1 DVN for high-value transactions.”

Evercrest says a severe fall in its native KERNEL token drew formal warnings from several cryptocurrency exchanges and financial regulators and badly damaged the protocol’s viability. Pellegrino, responding to the lawsuit on X, called the claim one that “continues to be meritless” and said he intended to travel to Vancouver to defend the case personally.

Cross-chain bridges have long been identified as the most vulnerable infrastructure in decentralized finance (DeFi). According to blockchain analytics firms, bridge exploits have accounted for more than $2 billion in stolen digital assets over the last three years, including high-profile hacks of the Ronin, Nomad and Wormhole bridges. The Evercrest-LayerZero dispute comes amid growing legal and regulatory scrutiny of liability when smart contracts and infrastructure configurations fail.

None of Evercrest’s allegations has been tested or proven in court, and neither LayerZero nor Pellegrino has filed a formal response. Under British Columbia court rules, defendants have 21 days to respond if served within Canada and 45 days if served internationally.