Aave is moving forward with a governance vote to reclaim 30,765 ETH, worth about $71 million, that was frozen after the Kelp DAO exploit. The token transfer aims to restore funds to affected users and repair lending markets disrupted by the attack.
The onchain vote, opening on May 15, would move the ETH from Arbitrum’s Security Council wallet to an Aave LLC address. This step follows a court order that allowed the transfer while preserving legal claims from creditors tied to North Korea.
Judge Margaret Garnett modified a prior freeze on May 9, enabling the transfer through governance. The ruling continues to shield voters from personal liability but keeps the terrorism creditors’ claim active, meaning Aave could still face legal challenges over the funds.
The 30,765 ETH was frozen on April 21 when Arbitrum’s Security Council intercepted it after the Kelp DAO bridge exploit on April 18. Attackers used unbacked rsETH tokens on Aave v3 to borrow around $230 million in wrapped ETH, causing over $190 million in bad debt and disrupting DeFi lending.
The situation took a legal turn when Gerstein Harrow LLP, representing families with $877 million in unpaid terrorism judgments against North Korea, argued the ETH is North Korean property because blockchain analytics tied the exploit to Lazarus Group. No court has confirmed this legal status.
Aave founder Stani Kulechov firmly stated that the funds belong to the affected users, not the attackers. Aave had filed an emergency motion to vacate the restraining notice, arguing that stolen property does not become the thief’s lawful possession just because it moves on-chain.
The DeFi United recovery initiative has already raised over $314 million in ETH commitments from protocols like Mantle, EtherFi, Lido DAO, and others. This $71 million transfer is a key remaining piece to close the backing gap for rsETH.
Voting on the binding proposal opened May 15 and is expected to take about eight days before the ETH can move from Arbitrum to Ethereum via the standard L2-to-L1 delay. The court dispute with terrorism creditors remains unresolved, and if the plaintiffs win, Aave could be forced to surrender the recovered ETH even after the transfer completes.