Aave suspended and then restored Wrapped ETH borrowing limits following a roughly $230 million exploit tied to rsETH, a liquid restaking token, which triggered a liquidity crisis and cascading liquidations on the protocol. The incident represents one of the larger single-collateral stress events on Aave in recent memory and prompted governance-level emergency intervention before conditions stabilized.
Armada's crypto repo desk uses Aave rates and parameters as a DeFi benchmark for ETH collateral pricing. An exploit of this scale that forced limit suspensions validates conservative no-rehypothecation and Fireblocks custody policies, but also signals that ETH-adjacent collateral including staked and restaked derivatives warrants tighter LTV buffers. Any Armada clients posting ETH or LST collateral should be reviewed against current Aave post-incident parameters.