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Aave Labs has joined KelpDAO, LayerZero, EtherFi, Compound, and other participants to urge Arbitrum’s governance community to unlock roughly $71 million in Ethereum that was seized earlier this month. The assets total 30,765.67 ETH, frozen by Arbitrum’s Security Council on April 21 and moved to a controlled address following an April 18 breach that drained approximately 116,500 rsETH through a compromised LayerZero bridge.
The proposal, filed as a Constitutional AIP on April 25, would direct the frozen ETH into an ongoing multi-protocol recovery program. The stated objective is to fully restore rsETH’s collateral backing and make affected holders whole.
The exploit created a reserve shortfall for rsETH, leading to bad debt across lending platforms, including Aave’s deployments on both Ethereum and Arbitrum. According to the proposal’s context, attackers used the stolen tokens as collateral to borrow wrapped ETH before markets were paused.
The frozen ETH on Arbitrum represents a critical recovered portion of the losses—about a quarter of the total drained value. Releasing the funds would be intended to reduce impairment on rsETH and ease pressure on interconnected DeFi markets.
Under the plan, the ETH would be transferred to a secure 2-of-3 Gnosis Safe controlled by Aave Labs, KelpDAO, and Certora, limited to use in the remediation effort. If the recovery is insufficient, the parties have committed to returning to Arbitrum governance for further guidance.
The initiative also tests Arbitrum’s governance process, since it requires token-holder approval to move funds previously immobilized under emergency powers. Ecosystem discussions have framed the effort as a coordinated “unified DeFi response,” reflecting how quickly protocols can mobilize when user funds and protocol solvency are at stake.
Separately, the Solana Foundation announced concrete support for Aave. Foundation Chair Lily Liu said the organization has deployed USDT from its treasury into Aave for the first time, providing immediate liquidity to help stabilize the protocol during the recovery phase.
Liu also emphasized that Solana’s health is tied to the broader DeFi ecosystem’s stability. In addition, the Foundation confirmed plans to launch the AAVE governance token on Solana as soon as this weekend, potentially expanding liquidity and user participation on the network.
The Arbitrum proposal is now open for community discussion and voting, while Solana’s contributions underscore growing interoperability across chains. The outcome of the governance process will determine whether the recovered ETH can be used to advance rsETH remediation and reduce downstream impacts across DeFi lending markets.
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