What has been happening this week in the world of blockchain and cryptocurrencies? Current events and background reports in our weekly review.
Selected articles of the week:
A breach of the liquid restaking protocol KelpDAO triggered the largest DeFi shock of the year this week. The North Korean hacker group Lazarus, already linked to the Drift exploit in early April, compromised two RPC nodes in LayerZero’s verifier network and minted 116,500 unbacked rsETH tokens worth roughly USD 292 million. The attackers deposited the synthetic tokens as collateral on Aave and borrowed USD 195 million in WETH. The fallout was severe: Aave’s TVL collapsed from USD 26 billion to USD 17 billion within 48 hours, ETH markets reached 100% utilization, and withdrawals froze. The root cause lies in a risky default configuration. KelpDAO ran a 1-of-1 verifier setup – a single point of failure shared by roughly 40% of all LayerZero protocols.
KelpDAO hack: USD 292 million loss in the largest DeFi attack of 2026. Investors pulled more than USD 15 billion from the sector.
Hacks as main institutional blocker for DeFi
The chain reaction around KelpDAO has also drawn the attention of analysts at US banking giant JPMorgan. The team led by Managing Director Nikolaos Panigirtzoglou warns in a recent report that recurring security incidents and a stagnating Total Value Locked are persistently deterring institutional investors. In April alone, exploit losses add up to more than USD 600 million. Total DeFi TVL has dropped from USD 100 billion to USD 82.4 billion – a 52% decline from the October peak of USD 171.9 billion. JPMorgan identifies three structural hurdles: stagnating user growth in ETH-denominated terms, insufficient insurance coverage of less than 1% of TVL, and fragile liquidity buffers. As long as these weaknesses persist, institutional capital will remain on the sidelines.
JPMorgan warns: Recurring DeFi exploits and stagnant ETH-denominated TVL curb institutional engagement in the DeFi sector.
Controversy around HCD stadium sponsor
Trust issues are shaking the industry beyond the DeFi sector this week. At Polish crypto exchange Zondacrypto, the entire supervisory board has resigned in unison. Veronika Togo, former SEBA Bank CEO Guido Bühler, and Georgi Džaniašvili accuse CEO Przemysław Kral of systematic misinformation and governance failure in a joint statement. The figures from blockchain forensics firm Recoveris are striking: holdings in known hot wallets fell from 55.7 BTC in August 2024 to 0.07 BTC in early April 2026. Between December 2025 and April 2026, roughly USD 21 million flowed out to the Kraken exchange across 511 transactions. Kral cites an alleged 4,500 BTC in cold wallets but provides no evidence. Polish authorities are investigating. Through the “zondacrypto Arena” in Davos, the affair extends to Switzerland.
Zondacrypto: entire supervisory board resigns, including ex-SEBA CEO Guido Bühler. Hot wallets nearly empty, investigations underway.
Prediction Markets under scrutiny
While European regulators investigate individual exchanges, a fundamental dispute over prediction markets is escalating in the United States. New York Attorney General Letitia James has sued Coinbase and Gemini Titan, accusing both platforms of disguising unlicensed gambling offerings as CFTC-regulated derivatives. The lawsuit seeks at least USD 3.4 billion, including USD 2.2 billion from Coinbase and USD 1.2 billion from Gemini. Specifically, James criticizes wagers on sports, entertainment, and political events without a state gaming license, the absence of age verification, and bets on college games involving New York teams. Coinbase shares lost roughly 6% following the announcement. The dispute touches on a fundamental jurisdictional conflict between federal and state law. A day earlier, the Third Circuit ruled in favor of Kalshi in a parallel proceeding. A Supreme Court case appears to be on the horizon.
New York sues Coinbase and Gemini over prediction markets. AG James demands 3.4 billion USD. COIN stock falls 6 percent.
US Military runs Bitcoin node
In addition: Admiral Samuel J. Paparo Jr., commander of the US Indo-Pacific Command, confirmed before the Senate Armed Services Committee this week that his command operates an active Bitcoin node in the Indo-Pacific region. No mining is taking place. The node validates transactions independently and serves operational tests of network security via Bitcoin’s proof-of-work protocol. Paparo explicitly described Bitcoin as an “informational tool” rather than a financial asset. It is the first time an active four-star commander has publicly acknowledged Bitcoin’s national security relevance. The statement marks a clear shift away from the earlier focus on illicit financial flows. It comes during a period of strategic realignment: following Trump’s March 2025 executive order, the US government holds roughly 328,372 BTC in its Strategic Bitcoin Reserve, while Beijing is concurrently exploring Bitcoin’s strategic dimension.
Admiral Paparo confirmed to the US Senate: INDOPACOM operates an active Bitcoin node and is conducting operational tests to protect military networks.
