A federal judge in Manhattan allowed the Arbitrum DAO to transfer $71 million in frozen Ether to Aave, clearing the way for the DeFi protocol to recover from a North Korea-linked exploit.
Judge Margaret Garnett of the Southern District of Up-to-date York released order of Friday, amending the decision to close assets in the Arbitrum DAO. The modification enables onchain governance voting to send funds to a wallet controlled by Aave LLC and expressly protects anyone who participates in the transfer from being held in violation of the freeze.
The order continues to uphold legal claims by terrorism victims regarding the funds, meaning Aave cannot freely operate the funds and may be forced to hand over the funds if a court ultimately rules in favor of terrorism victims.
The judge allows Arbitrum to transfer the funds to Aave. source: court listener
The decision was made after Arbitrum delegates expressed powerful support for the move via an off-chain Snapshot vote as part of Aave’s broader recovery plan following last month’s rsETH exploit linked to North Korea. Any actual transfer still requires a separate, binding vote on chain governance.
Related: Arbitrum vote to release $71 million of frozen Kelp ETH exploit set to pass
Aave asks the court to lift the freeze on funds
Last week, Aave filed an emergency motion in a Up-to-date York court seeking to overturn a restraining order that prevented Arbitrum DAO from distributing funds to victims of the Kelp DAO exploit. The notice was served by Gerstein Harrow LLP, which represents families with $877 million in unpaid terrorism convictions against North Korea and claims the funds belong to its clients because North Korean hackers stole them in the April 18 hack.
Aave has vigorously pushed back against the attacks, arguing that a thief does not acquire legal ownership of stolen property and that attributing the hack to North Korea is based on little more than online speculation. He also warned that if the court upholds the access restriction order, it could discourage future DeFi recovery efforts and give bad actors a roadmap to exploit legal certainty after hacks.
Gerstein Harrow has made similar claims before. In January, they sued the Railgun DAO, alleging that the privacy protocol was used to launder proceeds from previous North Korean hacks, including the $1.5 billion Bybit exploit.
Related: Aave Deposits Drop by $15 Billion as Kelp Usage Causes DeFi Lender Run
Kelp exploit leaves $174 million security hole in rsETH
The Kelp DAO exploit left the rsETH support with a significant shortage. The hack resulted in the release of 116,500 rsETH on Ethereum without a corresponding burn on the source side, leaving only 40,373 rsETH in the adapter contract with confirmed support at 152,577, representing a gap of approximately 76,127 rsETH worth approximately $174.5 million at current prices.
Arbitrum’s freezing of 30,765 ETH has been hailed as a significant step towards closing this loophole, with supporters arguing that even a partial restoration of rsETH support would aid stabilize conditions for users across Arbitrum and the broader DeFi ecosystem.
Warehouse: 53 DeFi projects penetrated, 50 million NEO tokens can be “returned”: Asia Express
