Aave Files Emergency Motion To Free 30,000 ETH Blocked By North Korea Lawsuit

Aave (@aave) has filed an emergency court motion seeking to unblock roughly $ETH 30,766 that Arbitrum DAO set aside for victims of last month's Kelp DAO bridge exploit — after a US law firm served a restraining notice claiming the funds belong to creditors owed money by North Korea.

The Legal Standoff

The restraining notice was served on May 1 by Gerstein Harrow LLP on behalf of plaintiffs who hold unpaid default judgments against North Korea from litigation dating between 2010 and 2016, with those claims totalling over $877 million. The firm's argument hinges on the alleged involvement of North Korea's Lazarus Group in the April 18 Kelp DAO exploit, asserting the frozen crypto qualifies as property in which a state-sponsored actor holds an interest.

Aave pushed back hard. In a 29-page memorandum filed before Judge Margaret M. Garnett of the Southern District of New York, Aave LLC argued that theft does not confer ownership — and that North Korea's involvement remains unproven. The filing called the law firm's position one that "defies logic, common sense and the law." As a fallback, Aave demanded that if the freeze were to remain in place, the plaintiffs should be required to post a cash bond of no less than $300 million to cover resulting damages.

Aave founder Stani Kulechov was blunt: "A thief does not own what he steals," he said in a public statement, comparing the situation to a robber stealing diamonds only to have them recovered by a bystander. "These funds belong to the affected users they were stolen from — full stop."

Judge Garnett gave plaintiffs until noon Tuesday to respond, with a hearing scheduled for Wednesday morning where both sides will present their case.

What's at Stake for DeFi

The April 18 exploit saw attackers drain approximately $292 million from the Kelp DAO protocol by compromising its rsETH bridge, then using the stolen tokens as collateral to borrow liquid assets from Aave — leaving the protocol with significant bad debt. The Arbitrum Security Council moved quickly, intercepting and freezing 30,766 $ETH in a controlled address within days of the attack.

Those funds were earmarked for DeFi United — an industry-wide recovery coalition led by Aave, Kelp DAO, and security firm Certora — to restore rsETH backing and compensate affected users. A governance proposal to release the ETH had drawn support from more than 1,400 wallet addresses representing approximately 139 million ARB before the restraining notice intervened.

Aave warned that prolonged delays could cause irreparable harm not just to individual users but to broader DeFi collateral arrangements tied to the frozen assets. The case also raises a wider question: when decentralised protocols act collectively to freeze and recover stolen funds, do they begin to resemble traditional financial intermediaries in the eyes of US law? The outcome of Wednesday's hearing may begin to answer that.

The Arbitrum Foundation said it is "in active consultation with counsel to assess the situation" and is evaluating next steps aligned with the long-term interests of its community.

Gerstein Harrow has pursued similar recoveries in the past, including funds connected to the 2023 Heco Bridge hack and the 2025 Bybit exploit, making this case part of a broader legal pattern worth watching.

Sources:
The Defiant – Aave Asks Court to Vacate Restraining Notice Targeting Recovered Kelp DAO Assets
The Block – Aave Fights $73 Million ETH Freeze
DL News – Aave Secures Emergency Hearing to Void 'Catastrophic' Restraining Order