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Aave service providers, alongside KelpDAO, LayerZero, EtherFi, and Compound, have submitted a governance proposal to the Arbitrum DAO seeking the release of 30,765.67 ETH that was frozen by the Arbitrum Security Council. The funds were frozen after an rsETH exploit on April 18, and the proposal would route the ETH into a coordinated cross-protocol recovery effort intended to restore rsETH backing and reduce losses for affected users across DeFi.
The Arbitrum Security Council froze the ETH on April 21, 2026, transferring it to a designated address after identifying the exploiter’s holdings. A governance vote is required before any release can occur. The proposal was submitted on April 25, 2026, and is currently open for community review and feedback.
Aave stated that releasing the ETH “would meaningfully advance the path to resolution as others confirm their commitments,” and said the proposal aims to direct recovered funds into DeFi United, a coordinated recovery effort.
LlamaRisk’s April 20 incident report described a bridge-related failure involving rsETH. The KelpDAO rsETH Unichain-to-Ethereum bridge released 116,500 rsETH on Ethereum without a corresponding burn on the source side.
At the time of the report, only 40,373 rsETH remained as confirmed backing for 152,577 rsETH in remote-chain claims, implying a shortfall of approximately 76,127 rsETH. The 30,765.67 ETH currently frozen on Arbitrum is described as a material portion of what is needed to close that gap. Returning the funds to the recovery effort would reduce the backing shortfall and improve conditions for rsETH holders across multiple protocols.
If the proposal passes, the ETH would be sent to a 2-of-3 Gnosis Safe at a designated recovery address. Signers from Aave Labs, KelpDAO, and Certora would control the multisig. The proposal specifies that the funds are intended solely for remediating losses from the exploit.
Within Aave’s Ethereum Core and Arbitrum markets, the exploiter supplied 89,567 rsETH and borrowed 82,650 WETH plus 821 wstETH against those positions. The proposal notes that Aave’s smart contracts were not compromised, stating the incident originated outside the protocol entirely.
The proposal timeline spans approximately 49 days, including a one-week forum discussion period, a Snapshot temperature check, a 14-day onchain vote, and additional waiting and finalization periods across both L2 and L1.
No new treasury allocation is requested from the Arbitrum DAO, because the ETH is already frozen and awaiting a governance decision on its destination. The proposal also indicates that even a partial recovery would reduce the shortfall proportionally, improving outcomes for affected users if full collateralization is not achieved immediately.
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