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A U.S. federal court has authorized an onchain Arbitrum DAO vote to transfer more than 30,765 ETH tied to the rsETH exploit recovery effort into custody under Aave LLC, marking a rare legal intervention into active DAO governance.
The amended Arbitrum Improvement Proposal (AIP), submitted by Aave Labs, KelpDAO, LayerZero, EtherFi, and Compound contributors, asks for approval to move the frozen ETH into custody under Aave LLC while court proceedings continue.
The Arbitrum Security Council originally immobilized the funds after the 18 April rsETH exploit linked to KelpDAO’s LayerZero OFT bridge infrastructure. The incident drained roughly 116,500 rsETH, valued at nearly $292 million at the time.
Under the latest proposal, exactly 30,765.6675 ETH would be transferred from an Arbitrum-controlled immobilization address to an Aave LLC-controlled wallet, subject to court-approved conditions.
The proposal follows a restraining notice served against Arbitrum DAO by plaintiffs in Kim v. Democratic People’s Republic of Korea, a U.S. case involving judgment creditors pursuing North Korean-linked assets.
After emergency motions and hearings, the U.S. District Court for the Southern District of New York issued an order allowing the DAO vote and transfer process to proceed.
The order states that any party initiating an on-chain transaction, voting regarding that on-chain transaction, or participating in the on-chain transfer of assets to Aave LLC will not be in violation of the restraining notice. It also requires that the restraining notice follow the ETH after transfer, meaning Aave LLC must continue holding the assets under court restrictions.
The amended AIP changes the recovery structure from an earlier plan that would have moved the ETH into a 3-of-4 multisig controlled jointly by Aave, KelpDAO, EtherFi, and Certora participants.
Instead, the amended proposal routes custody through Aave LLC to align with the court order and simplify legal administration. However, it specifies that Aave LLC cannot distribute, stake, lend, bridge, transfer, or otherwise use the ETH unless the court later authorizes such actions.
The court has not yet decided the final disposition of the funds.
The proposal also included updates on the broader rsETH recovery process. On 6 May, positions tied to the identified attacker were liquidated on Aave V3, and the recovered rsETH collateral was moved to a Recovery Guardian wallet as part of the coordinated recovery plan.
The proposal states that affected rsETH on Arbitrum will eventually be burned, while corresponding LayerZero packets on Ethereum will be retired to prevent additional minting.
The broader goal remains restoring full collateral backing for rsETH and normalizing impacted lending markets.
The amended AIP does not request any new treasury allocation from Arbitrum DAO. It focuses solely on transferring already immobilized ETH into court-supervised custody.
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