An Aave vote opening May 15 would transfer 30,765 ETH to Aave LLC as part of the Kelp exploit recovery.
Summary
- A binding Arbitrum Improvement Proposal was launched May 12 with a vote opening May 15 to transfer 30,765 ETH worth $71 million to Aave LLC.
- A Manhattan federal judge cleared the transfer path on May 9 but preserved the legal claim of terrorism creditors holding $877 million in unpaid North Korea judgments.
- The 30,765 ETH was frozen by Arbitrum’s Security Council on April 21 after being linked to the $292 million Kelp DAO exploit attributed to North Korea’s Lazarus Group.
Aave and other affected parties launched a binding Arbitrum Improvement Proposal on May 12, opening a governance vote on May 15 that would move 30,765 ETH worth approximately $71 million from Arbitrum’s Security Council wallet to an Aave LLC-controlled address. The vote is the final procedural step needed to unblock the Kelp DAO recovery effort.
A Manhattan federal judge modified a prior freeze on May 9, permitting the transfer to proceed through onchain governance. Judge Margaret Garnett’s order also shields voters and other participants from personal liability under the existing restraining notice.
However, the terrorism creditors’ legal claim on the funds survives the transfer, meaning Aave LLC cannot freely deploy the ETH if the court ultimately sides with the plaintiffs.
What the $71 million is and how it was frozen
The 30,765 ETH was intercepted by Arbitrum’s Security Council on April 21 after being linked to the April 18 exploit of Kelp DAO’s LayerZero-powered bridge.
Attackers used unbacked rsETH tokens as collateral on Aave v3 to borrow an estimated $230 million in wrapped ETH, generating over $190 million in bad debt and disrupting lending markets across DeFi.
The case became legally complex when Gerstein Harrow LLP, representing families holding $877 million in unpaid terrorism judgments against North Korea, argued the ETH constitutes DPRK property because blockchain analytics firms attributed the Kelp exploit to the Lazarus Group. No court has established that as a legal finding.
Aave founder Stani Kulechov pushed back directly. “These funds belong to the affected users they were stolen from, full stop,” he said. Aave had filed an emergency motion in New York on May 4 seeking to vacate the restraining notice entirely, arguing that a thief does not acquire lawful title to stolen property simply by moving it on-chain.
Recovery progress and what comes next
The broader DeFi United recovery initiative has now raised more than $314 million in ETH commitments from protocols including Mantle, EtherFi, Lido DAO, Ethena, LayerZero, and Compound. The $71 million transfer is one of the last remaining pieces needed to close the backing gap for rsETH.
Voting on the binding AIP opened May 15 and is expected to require roughly eight days before the ETH can move from Arbitrum to Ethereum through the standard L2-to-L1 withdrawal delay. The court dispute with terrorism creditors remains unresolved. If the court sides with the plaintiffs, Aave could ultimately be compelled to surrender the recovered ETH even after the transfer completes.
