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The Arbitrum community has voted to release 30,765.6 ETH, valued at approximately $71 million, to support victims of the Kelp DAO security breach. The funds are set to flow into the DeFi United recovery fund, marking a major community-driven step toward restitution after a $292 million exploit.
Delegate participation in the governance proposal showed broad consensus. The measure secured approximately 182.2 million votes in favor, representing 90.96% of total voting power. About 9% of participants abstained from taking a position.
With the approval, Arbitrum becomes the single largest backer of the DeFi United initiative, a coordinated effort formed in response to damage caused by the Kelp DAO breach affecting multiple users and prominent protocols.
On April 18, attackers exploited a critical weakness in Kelp DAO’s infrastructure through its LayerZero-integrated bridge system. The vulnerability was linked to a single-verifier configuration in the Omnichain Fungible Token bridge setup. Using the gap, the attackers extracted 116,500 rsETH from the protocol.
After the initial theft, the attackers redirected part of the compromised rsETH into Aave’s lending platform. They used the stolen tokens as loan collateral to withdraw substantial quantities of WETH, leaving Aave with approximately $190 million in uncollateralized debt related to the incident.
Two days later, on April 20, the Arbitrum Security Council froze ether connected to the attacker’s wallet. These assets had been transferred to an Arbitrum One address immediately after the exploit, and were then moved to a protocol-controlled address for safekeeping.
The authorized transfer now faces a legal obstacle in U.S. federal court. Plaintiffs holding terrorism-related judgments against North Korea have filed claims asserting rights to the frozen cryptocurrency. Their argument alleges a connection between the stolen funds and North Korean state assets, citing purported Lazarus Group involvement.
Aave LLC responded to the restraining order by filing an urgent motion to dismiss. The company argued that unverified speculation about Lazarus Group connections does not establish actual ownership, and that the compromised assets belong to the victims who lost them.
Legal proceedings could significantly postpone fund movement. In addition, Arbitrum’s governance framework requires a minimum eight-day waiting period before proposal execution, giving time for the court to issue binding orders that could prevent the Kelp DAO recovery transfer.
DeFi United is serving as the central coordinating body for the recovery campaign. The coalition includes Aave, Kelp DAO, LayerZero, EtherFi, and Compound, with the stated goal of pooling resources and reducing the financial impact on affected users.
Several contributors have already pledged resources. Consensys and Joseph Lubin committed 30,000 ETH to the recovery fund, while Mantle provided a 30,000 ETH loan arrangement. LayerZero contributed 5,000 ETH to strengthen the restitution pool.
The incident underscores both the potential and the limits of decentralized governance in addressing infrastructure failures, while also highlighting ongoing concerns around cross-chain bridge security, jurisdictional authority over digital assets, and mechanisms for recovering compromised funds. Although Arbitrum has completed its governance approval, the final outcome depends on the judicial process.
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