Aave’s $300M dare: how DeFi’s safety net became a US court’s seizure target

On May 4, Aave LLC filed a 29-page emergency motion in the US District Court for the Southern District of New York, asking Judge Margaret M. Garnett to vacate a restraining notice that has frozen 30,766 ETH — roughly $71 million — recovered from the April 18 Kelp DAO bridge exploit.

The motion, filed by Morrison Cohen LLP, gives the court three options: lift the notice immediately, schedule an expedited hearing with a temporary vacatur, or — if the freeze stays in place — require the plaintiffs to post a cash bond of “no less than $300 million” to cover damages from continued delay.

Aave LLC has filed an emergency motion to vacate a restraining notice served on Arbitrum DAO on May 1, 2026 that attempts to seize approximately $71 million in ETH belonging to victims of the April 18 exploit.

A thief does not gain lawful ownership of stolen property simply by… pic.twitter.com/NwgKIdU1L7

— Aave (@aave) May 4, 2026

The motion: vacate, expedite, or post $300M

The plaintiffs are families holding more than $877 million in unpaid terrorism judgments against the Democratic People’s Republic of Korea, with claims dating to 2010-2016.

They are represented by Gerstein Harrow LLP, who served the restraining notice on Arbitrum DAO on May 1 via the protocol’s governance forum.

The plaintiffs argue the frozen ETH should be treated as North Korean property, based on widely shared on-chain attribution linking the Kelp DAO attacker to the Lazarus Group, and used to satisfy decades-old default judgments.

Aave’s filing rejects the premise on basic property law: a thief does not acquire ownership of what they steal. In a footnote that has already drawn industry attention, Aave’s lawyers accuse Gerstein Harrow of misrepresenting case law, calling the firm’s claim that “DAOs like Arbitrum DAO have been held to be general partnerships” a “flatly false” assertion. Neither Samuels v. Lido DAO nor Sarcuni v. bZx DAO — the two cases plaintiffs cited — has held any DAO to be a partnership.

“These funds belong to the affected users they were stolen from, full stop.” — Stani Kulechov, founder of Aave Labs.

The trap inside the rescue: how the freeze created jurisdiction

The detail no other outlet has led with is the structural irony at the center of the case.

When the Kelp DAO bridge was exploited on April 18, the attacker drained approximately $293 million in rsETH.

Aave alone took $124-$230 million in bad debt from positions that had used the resulting unbacked rsETH as collateral.

On April 20-21, Arbitrum’s Security Council — a small group of multisig signers with emergency powers — moved to freeze 30,766 ETH that had landed on the layer-2. That freeze was the tool that prevented further dispersal. It was also the moment the assets came within reach of US courts.

The Security Council’s intervention created a static, identifiable wallet on a known network with a known governance body.

Gerstein Harrow’s restraining notice could only attach because Arbitrum DAO had — through emergency action — converted the funds from in-flight stolen property into a held position.

The very mechanism DeFi uses to protect exploit victims gave external creditors the procedural foothold to claim those same funds.

This is the precedent the industry should be watching. If the court rules the restraining notice valid, every Security Council freeze going forward becomes a legible target for any creditor with a US judgment touching the underlying funds — not just terrorism plaintiffs, but tax authorities, bankruptcy trustees, sanctioned-entity claimants.

Future rescues will face a calculation that previously did not exist: freeze and create jurisdiction, or let the funds disperse and lose them.

The DeFi United coalition — Aave, Kelp DAO, LayerZero, Certora, with pledges from Consensys (30,000 ETH), Mantle (30,000 ETH), and Kulechov personally (5,000 ETH) — had assembled $311M+ in committed capital to make rsETH holders whole. The Arbitrum 30,766 ETH was the largest single contribution.

An Arbitrum Snapshot vote opened April 30 showed 99% support for releasing the funds, with a May 7 deadline. The court order has effectively suspended that deadline.

What the court decides — and what every DAO is now watching

Three open questions matter in the next 30 days.

1. Can a DAO be served? Aave’s filing raises procedural concerns about whether Arbitrum DAO qualifies as a legal entity capable of being served as a garnishee. If Judge Garnett rules it cannot be served in the manner attempted, the restraining notice fails on procedural grounds before reaching the property dispute. If she rules it can, every DAO with US-jurisdictional touchpoints becomes a serviceable defendant.

2. Does the property argument hold? The plaintiffs’ theory requires the court to treat ETH that briefly passed through an attacker’s wallet as North Korean property. Aave’s filing argues this collapses the standard rule that title doesn’t pass via theft. If the court accepts the plaintiffs’ theory, on-chain attribution becomes a sufficient basis to convert any recovered exploit funds into seizable state assets.

3. Will the bond be ordered? The $300M bond demand is the leverage point. If Judge Garnett requires plaintiffs to post that amount as a condition of maintaining the freeze, the case effectively ends — Gerstein Harrow’s clients are extracting from $877M of unpaid judgments, not from liquid capital. A meaningful bond requirement would force a settlement or withdrawal.

Attorney Gabriel Shapiro, reviewing the filing on X, summarized the procedural state: “Arbitrum DAO is not allowed to do anything with the KelpDAO funds for now, until a divestiture hearing.” On-chain analyst ZachXBT called the plaintiffs’ approach “predatory.”

No hearing date has been set. Gerstein Harrow has not yet filed a public response.