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A Manhattan federal judge on Friday modified a restraining notice that had barred Arbitrum DAO from moving 30,766 ETH (about $71 million) frozen after the April 18 Kelp DAO exploit. The change clears the way for an onchain governance vote to transfer the funds to a wallet controlled by Aave LLC, while explicitly shielding participants in the transfer from being held in violation of the freeze.
Judge Margaret Garnett of the U.S. District Court for the Southern District of New York issued a two-page order modifying the restraining notice that had locked the 30,766 ETH inside Arbitrum DAO since May 1.
The order allows an onchain governance vote to send the frozen ether to a digital assets wallet controlled by Aave. It also states that any party initiating or voting on the transaction “shall not be in violation of the Restraining Notice.”
In addition, Aave LLC agreed to be bound by the restraining notice as if it had been served directly, until the notice is vacated, modified, or expires. As a result, the funds are not automatically cleared once transferred; if the court ultimately rules for the terrorism creditors, Aave could be compelled to surrender the ETH.
The order also addressed a key question for Arbitrum’s delegate base: whether ARB holders who voted in favor of releasing the funds could be personally liable for violating the freeze.
Judge Garnett’s language states that any party initiating the on-chain transaction, voting on it, or participating in the transfer of assets to Aave LLC “shall not be in violation of the Restraining Notice.”
Arbitrum delegates approved the release on Thursday, with 182.2 million ARB tokens supporting the measure and roughly 91% of voting power in favor.
The modification reflects a compromise rather than a full win for either side. Aave had argued that the restraining notice should be dismissed entirely, contending that the frozen ETH was stolen from Aave users and that a thief does not gain ownership of property by taking it.
Aave founder Stani Kulechov said publicly that “These funds belong to the affected users they were stolen from, full stop.”
The plaintiffs, represented by Gerstein Harrow LLP, sought to keep the funds frozen inside Arbitrum while litigating their claim that the ETH qualifies as North Korean property. Their theory relies on the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act, which allow judgment creditors of a state sponsor of terrorism to attach property held by the regime or its instrumentalities.
The restraining notice names the Lazarus Group and APT-38 as DPRK instrumentalities, relying on LayerZero’s attribution of the Kelp DAO bridge breach to North Korean hacking.
The court left the underlying dispute between exploit victims and North Korea terrorism judgment holders unresolved. The three underlying judgments cited in the matter—Kim v. DPRK (about $330 million), Kaplan v. DPRK (about $169 million), and Calderon-Cardona v. DPRK (about $378 million)—carry a combined face value exceeding $877 million before post-judgment interest.
Gerstein Harrow’s pursuit of Arbitrum-frozen ETH is part of a broader effort to attach North Korea-linked crypto assets across DeFi infrastructure. In a separate January lawsuit, the same terrorism judgment creditors sued Railgun DAO and Digital Currency Group, alleging the privacy protocol was used to launder proceeds from prior North Korean cyberattacks, including the $1.5 billion Bybit exploit. CoinDesk reported that the plaintiffs sought default against Railgun DAO in March after claiming the protocol failed to respond.
The 30,766 ETH is described as the single largest contribution to DeFi United, the cross-protocol recovery effort that has raised upward of $320 million to restore rsETH’s economic backing. Other major contributions mentioned include 30,000 ETH from Consensys and Joseph Lubin, a 30,000 ETH loan from Mantle, and Aave’s liquidation of the attacker’s remaining rsETH positions earlier this week.
The restraining notice has followed the assets from Arbitrum to Aave, and the court has reserved decision on remaining matters. A further hearing—where the court would decide who has the better claim to the frozen ETH—has not yet been scheduled.
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