Court Clears Arbitrum DAO to Move $71 Million in Frozen ETH After Aave Push

• Court ruling allows Arbitrum DAO moving frozen Ethereum toward Aave recovery efforts
• Aave recovery plan advances despite ongoing North Korea-linked legal ownership dispute
• Kelp DAO exploit aftermath continues pressuring decentralized finance markets and liquidity

Pressure surrounding the stalled recovery process inside the Arbitrum ecosystem eased after a Manhattan federal judge approved the movement of frozen Ether linked to the recent Kelp DAO exploit. The ruling arrived after weeks of legal uncertainty that placed more than $71 million in Ethereum at the center of a dispute involving Aave, Arbitrum DAO, and families pursuing terrorism-related judgments against North Korea.

Judge Margaret Garnett of the Southern District of New York modified an earlier restraining notice that previously blocked the assets from moving. Consequently, Arbitrum DAO can now proceed with governance steps tied to Aave’s recovery plan following the exploit connected to rsETH. Under the ruling, Arbitrum delegates may authorize the transfer of 30,765 ETH into a wallet controlled by Aave LLC. Besides approving the transfer path, the court also protected participants involved in the governance process from violating the restraining order. However, the legal dispute over ownership of the assets still remains active.

That detail carries major implications for Aave because the funds could still face seizure if the court later sides with the terrorism victims pursuing claims against North Korea. Their legal representatives argue that North Korean hackers controlled the stolen assets after the April 18 exploit.

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Aave Recovery Plan Gains Momentum After Court Decision

Support for the transfer had already strengthened inside the Arbitrum community before the ruling arrived. Delegates overwhelmingly backed the proposal through an off-chain Snapshot vote tied to Aave’s broader recovery effort. Even so, the transfer still requires a separate onchain governance vote before execution. Aave previously urged the court to remove restrictions on the funds, arguing that stolen assets should not automatically become lawful property of hackers. Additionally, the DeFi lender warned that maintaining the freeze could damage future recovery operations across decentralized finance platforms.

Meanwhile, Gerstein Harrow LLP, the law firm representing terrorism victims, maintained that the assets belonged to its clients because North Korean actors allegedly carried out the attack. The firm previously pursued similar claims involving Railgun DAO and other crypto-related exploits connected to North Korean hacking groups.

The dispute emerged after the Kelp DAO exploit created a major imbalance in rsETH reserves. According to recovery estimates, the exploit released 116,500 rsETH on Ethereum without proper burns occurring on the originating side. Consequently, confirmed reserves fell far below circulating supply levels.

Current estimates place the backing shortfall near 76,127 rsETH, valued around $174.5 million. Supporters of the transfer believe restoring the frozen ETH could significantly reduce pressure across the wider DeFi market. In the conclusion, the court ruling delivered an important victory for Arbitrum DAO and Aave as both groups continue managing the aftermath of the exploit. Nevertheless, the broader legal fight surrounding ownership of the frozen assets remains unresolved.

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