LayerZero Sued Over $292M Bridge Exploit by KelpDAO Developer

KelpDAO's developer, Evercrest Technologies, has filed a civil claim against LayerZero, its Canadian arm, and co-founder Bryan Pellegrino in the Supreme Court of British Columbia. The claim alleges that a $292 million exploit in April was caused by LayerZero's negligence and misrepresentation. According to the filing, an attacker put malware on a LayerZero developer's computer six weeks before any funds moved.

The company claims that LayerZero had instructed it to use a 1-of-1 setup for its bridges, which used LayerZero's own verifier network to confirm token movements. However, in April, the attacker tampered with LayerZero's nodes to feed false readings to its verifier, allowing them to mint unbacked tokens.

Evercrest says it paused the bridges within an hour and blocked a second attempt, but the damage was already done. The company is seeking damages including a 2,000 ETH contribution to restore rsETH's backing, more than $650 million withdrawn since the exploit, and a fall in the KERNEL token that drew regulator and exchange warnings.

Pellegrino has responded to the claim, stating that it 'continues to be meritless' and that he will meet Evercrest in Vancouver to defend himself. The incident highlights concerns about security and accountability in the blockchain industry.