The notice, filed by Gerstein Harrow LLP, and it argues that its clients are owed over $877 million tied to North Korea-related judgments and claims the stolen assets fall under that liability. Aave argued that stolen funds cannot establish lawful ownership and that any link to North Korea remains unproven.
Aave Tries to Release Kelp Hack Funds
Aave filed an emergency motion in a New York district court seeking to overturn a restraining notice issued against Arbitrum DAO and its handling of funds linked to the recent Kelp DAO hack. The legal dispute centers on 30,766 ETH that Arbitrum DAO intends to transfer to victims affected by the exploit, which resulted in losses of approximately $292 million on April 18.
The restraining notice was served by Gerstein Harrow LLP, which claims that its clients are owed more than $877 million in default judgments tied to North Korea. The firm argues that the hacker group allegedly responsible for the exploit had possession of the stolen assets, and therefore its clients hold a legal claim over the ETH in question. This claim effectively seeks to block the transfer of funds intended to compensate victims.
Aave challenged this position by arguing that ownership cannot be established through theft and that the law firm’s argument lacks legal and logical foundation. The protocol also explained that any connection to North Korea is still unproven, which weakens the basis for the restraining notice.
In its court filing, Aave described the legal action as a threat not only to its users but to the overall decentralized finance ecosystem.
The dispute is happening as Arbitrum DAO continues an on-chain vote to determine whether the funds should be released to support DeFi United, which is an industry-wide initiative with the goal of restoring the backing of rsETH and reimbursing affected users. The vote is scheduled to conclude on May 7.
Aave’s legal team warned that maintaining the freeze on the assets could have far-reaching consequences. According to the protocol, delays in releasing the funds could discourage future recovery efforts involving hacks linked to state-sponsored actors, as legal complications may deter participants. In addition to this, it argued that such restrictions could inadvertently encourage malicious activity by increasing uncertainty around asset recovery.
The protocol also shed some light on the immediate risks posed to its users, as immobilized funds may disrupt collateral positions on multiple platforms. If users are unable to access assets tied up in the dispute, they may face cascading liquidations and financial instability in DeFi markets.
Aave’s main point is that the continued restraint of these funds risks causing irreparable harm to users and undermines confidence in decentralized financial systems.
