Arbitrum DAO Gets Court Approval to Send Frozen $71M Ether to Aave

Arbitrum DAO Gets Court Approval to Send Frozen $71M Ether to Aave

A Manhattan federal judge has cleared the way for Arbitrum DAO to transfer 30,766 $ETH, worth approximately $71 million, to a wallet managed by Aave LLC. The ruling was issued by Judge Margaret Garnett of the Southern District of New York, modifying a previous restraining notice that had locked the assets under Arbitrum DAO's control. The updated order allows Arbitrum DAO to initiate an on-chain governance vote to send the funds to Aave LLC, and participants in the transfer are explicitly protected from being treated as violators of the freeze.

The case traces back to April 18, 2026, when Kelp DAO lost roughly $292 million in rsETH through an exploit on its LayerZero bridge. Attackers, widely attributed to the Lazarus Group, compromised RPC nodes to fraudulently unlock rsETH from Ethereum mainnet escrow. In response, Arbitrum's Security Council froze 30,766 ETH tied to the hack, and the Arbitrum community voted overwhelmingly to transfer those assets to a recovery multisig managed by Aave, Kelp DAO, Certora, and EtherFi.

The hack caused 116,500 rsETH to be released on Ethereum without a corresponding burn on the source side, leaving a gap of roughly 76,127 rsETH worth around $174.5 million. The $71 million in ETH frozen by Arbitrum has been flagged as a significant step toward closing that shortfall.

North Korea Creditor Claims Remain Active

On May 1, attorney Charles Gerstein filed a restraining notice on behalf of terrorism judgment creditors holding $877 million in unpaid claims against North Korea, arguing the frozen ETH was DPRK property subject to seizure. Aave pushed back, arguing that a thief does not gain lawful ownership of stolen property and warning that if the court upheld the restraining notice, it could deter future DeFi recovery efforts and give bad actors a roadmap to exploit legal uncertainty following hacks.

The ruling left the terrorism victims' claims on the assets intact. Aave cannot freely withdraw the funds and may need to return them if the court ultimately rules in the creditors' favor. Despite the court's green light, Arbitrum DAO still needs to conduct a binding on-chain governance vote to finalize the transfer.

The case sits within the broader DeFi United recovery initiative led by Aave, Kelp DAO, and LayerZero, which had assembled more than $311 million in pledges from contributors including Consensys (30,000 ETH), Mantle (30,000 ETH), and Aave founder Stani Kulechov (5,000 ETH personally).

Sources:
The Block: Arbitrum's $71 Million in ETH Cleared for Aave Transfer as North Korea Terrorism Creditors Retain Legal Claim
Tron Weekly: Court Allows Arbitrum DAO to Transfer $71M ETH to Aave
Bitcoin Ethereum News: Court Approves Arbitrum DAO's $71M ETH Transfer Amid North Korea Hack