Aave LLC filed an emergency motion in New York on May 4 to vacate a restraining notice served on Arbitrum DAO.
Summary
- Aave says stolen ETH cannot become North Korea’s property through an alleged crypto exploit claim.
- Gerstein Harrow argues frozen ETH can satisfy judgments tied to alleged North Korea-linked crypto theft.
- Aave warns the freeze could delay rsETH recovery and harm users across the DeFi ecosystem.
The notice seeks to block the transfer of Ethereum linked to the April 18 rsETH incident. Aave asked the court to lift the notice, set a fast hearing, or require a $300 million bond if the freeze remains.
Gerstein Harrow LLP obtained court permission on May 1 to serve the notice, a writ of execution, and a coming turnover motion against Arbitrum DAO.
The filing says the notice targets about $71 million in frozen ETH that plaintiffs claim should satisfy unpaid judgments against North Korea. Aave disputes that claim.
Aave disputes North Korea ownership claim
Aave argued that stolen assets do not become a judgment debtor’s property because a thief held them for a short time. The filing said plaintiffs relied on “conjecture from posts on the internet” and that their theory “defies logic, common sense, and the law.”
The motion also said no court has found that North Korea, Lazarus Group, or any connected party carried out the hack. Aave said the immobilized assets belong to users who suffered losses during the exploit, not to North Korea or any linked entity.
Meanwhile, Arbitrum Security Council froze 30,765.6675 ETH on April 21. Aave said the funds were moved to a designated address so they could help restore rsETH backing and improve conditions for affected users.
The dispute comes as Arbitrum DAO weighs a plan to release the ETH for recovery work tied to the Kelp DAO exploit. Earlier crypto.news coverage said Aave and Kelp sought the release of 30,765 ETH, while a later report said Arbitrum’s frozen funds formed part of DeFi United’s wider recovery pool.
DeFi United effort grows across protocols
crypto.news reported that Mantle’s proposal to lend up to 30,000 ETH to Aave entered a Snapshot vote. The same report said DeFi United had gathered 1,137,714.633 ETH, worth about $314.57 million at the time, from commitments across several DAOs and protocols.
Other recovery steps also followed the Kelp incident. crypto.news reported that Aave DAO considered pausing AAVE buybacks until the rsETH issue was resolved. It also reported that Solana Foundation Chair Lily Liu said the foundation was lending USDT to Aave as part of a DeFi recovery effort.
Aave warns of harm to users
Aave told the court that keeping the ETH frozen could delay user withdrawals and recovery. Its lawyers said the restraint was causing “irreparable harm” to Aave users, protocol operations, and the wider DeFi community.
The filing also warned that the freeze could discourage future crypto recovery efforts after hacks. Aave said recovered assets should return to affected users, not outside judgment creditors. The court had not ruled on the emergency motion at the time of the filing.
