Aave Seeks New York Court Order to Unfreeze $71 Million Ether From Arbitrum

DeFi lender Aave has filed an emergency motion in New York seeking to block a restraining notice that freezes ether on Arbitrum after the rsETH-related Kelp exploit, according to multiple reports.

“DeFi lender Aave asks court to block $71 million crypto seizure tied to North Korea claims The filing challenges a New York restraining notice that froze ETH on Arbitrum after the rsETH exploit, with Aave arguing the funds belong to users, not North Korea judgment creditors What to know: - Aave has asked a federal court in New York to lift a restraining notice that blocks access to about $71 million in ether frozen after last month’s rsETH exploit on Arbitrum”

@coindesk

CoinDesk says the filing was submitted Monday in the Southern District of New York and asks the court to vacate a restraining notice served on Arbitrum DAO by lawyers representing judgment creditors of the Democratic People’s Republic of Korea.

@coindesk

Bitget similarly reports that “On Monday, decentralized finance protocol Aave took swift action by filing an emergency motion in New York,” aiming “to overturn a restraining order issued by a US law firm.”

The dispute centers on whether the restrained funds belong to Aave users or to North Korea-linked judgment creditors, with Aave arguing the seized assets “belong to innocent Aave users, not North Korea.”

CoinDesk puts the frozen amount at “about $71 million in ether,” while Bitget describes the restraining order as preventing Arbitrum DAO from releasing “30,766 frozen Ether.”

Decrypt frames the same fight as Aave asking a federal court in New York to unblock “about $71 million in crypto frozen on the Arbitrum network,” arguing the money belongs to its users, not to a hacker plaintiffs claim is tied to North Korea.

Across the coverage, the legal posture is consistent: Aave wants the freeze lifted immediately or suspended while the case is heard, and the court has not yet ruled on the motion, as described by Crypto Times.

The restraining notice is tied to ether that Arbitrum’s Security Council froze after an April exploit involving Kelp DAO’s rsETH token, with multiple outlets describing both the amount and the mechanism.

CoinDesk says “At the center of the fight is 30,765 ETH that Arbitrum’s Security Council froze after the April exploit,” when attackers used “improperly valued or unbacked rsETH as collateral on Aave.”

Blockonomi

Decrypt adds that “Arbitrum’s Security Council froze about 30,766 ETH, worth roughly $71 million,” placing the funds “under governance control.”

Bitget describes the restraining order as preventing Arbitrum DAO from releasing “30,766 frozen Ether to the victims of the Kelp exploit,” and ForkLog says Aave filed an emergency motion to lift the freeze on “30,766 ETH ($73 million).”

Blockonomi states the Southern District of New York issued an order on May 1 barring transfer of “the seized funds,” and it describes the freeze as stalling compensation plans for victims across Aave, LayerZero, and other affected protocols.

Cryptoast describes a governance proposal dated April 25, 2026—“Approve Release of Frozen ETH”—submitted by AaveLabs, and it says the law firm Gerstein Harrow LLP filed a “Notice of Restraint” before the United States District Court for the Southern District of New York.

CoinDesk also describes the broader context: Aave and others had planned to return intercepted funds to affected users as part of a coordinated recovery effort, but the restraining notice blocks access.

Aave’s filings argue that the restrained ether “belong[s] to completely blameless third parties,” and the company frames the restraining notice as a legal misstep that would rewrite basic property law.

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Blockonomi

CoinDesk reports that Aave argues the assets belong to users of its protocol, “not North Korea,” and warns that treating briefly stolen assets as the thief’s property would “upend basic property law.”

CoinDesk quotes Aave’s position that the restrained ETH “belong[s] to completely blameless third parties,” not to North Korea, and it says Aave disputes the underlying attribution by calling claims that the exploit was carried out by DPRK actors “conjecture” based on unverified reports.

Decrypt adds that Aave’s memorandum says “AaveLLC emphatically rejects the notion that those grievances can be lawfully addressed by restraining and seizing assets that belong to completely blameless third parties—namely, users of the Aave software protocol.”

Bitget says Aave’s legal team cautioned that the protocol, its users, and the larger DeFi community are suffering “irreparable harm” as a result of the delay.

CoinDesk similarly warns that keeping the funds frozen could trigger “cascading liquidations” and broader instability in decentralized finance, and it describes the filing’s language about “irreparable harm” to the platform and the broader DeFi ecosystem.

ForkLog adds a specific quote attributed to Aave founder Stani Kulechov: “A thief does not own what they have stolen. These funds belong to the users from whom they were taken, and no one else,” and it says Aave demanded “the complete lifting of the asset freeze” or a security bond of at least $300 million.

The restraining notice is described as being served by lawyers representing judgment creditors of North Korea, and the plaintiffs’ theory ties the Kelp exploit to Pyongyang’s alleged Lazarus Group.

CoinDesk says the restraining notice was served on Arbitrum DAO by “lawyers representing judgment creditors of the Democratic People’s Republic of Korea,” and it describes the plaintiffs as holding “three sets of judgment creditors holding $877 million in damages awards against North Korea.”

Cryptoast

CoinDesk adds that the plaintiffs argue the recovered ether can be claimed against those “decades-old judgments” because the rsETH attackers are “widely believed to be linked to Pyongyang's Lazarus Group.”

Bitget reports that on Friday, “Gerstein Harrow LLP informed Arbitrum DAO of its intention to issue a restraining order,” citing “the roughly $877 million in default judgments that its clients owe North Korea.”

Decrypt similarly frames the clash as creditors seeking to enforce long-standing judgments against the country, and it says plaintiffs argue the frozen assets can be treated as North Korean property and seized.

Cryptoast provides additional detail on the Notice of Restraint, stating that the law firm Charles Gerstein and Jason Harrow cite “three distinct cases dating back to April 9, 2015; September 30, 2016; and August 5, 2010,” with U.S. courts ordering North Korea to pay damages totaling “$877.44 million across the three cases.”

Blockonomi adds that Terror attack creditors with judgments against North Korea filed the legal action, and it states that LayerZero had publicly attributed the April hack to the Lazarus Group, “directly linking the ETH to Pyongyang.”

The legal dispute is already affecting Arbitrum governance decisions and the timeline for compensation, with outlets describing how the freeze blocks a planned transfer to a recovery fund.

“What if the 30,766 ETH frozen by Arbitrum weren't returned to the victims”

Cryptoast

ForkLog says that “In early May, the DAO of the L2networkinitiateda vote to transfer the funds to the DeFi United fund,” and it adds that “The Southern District of New York court prohibited the use of these funds at the request of plaintiffs linked to past North Korean terrorism cases.”

Decrypt

Blockonomi similarly reports that “DAO voters then approved a plan to send the ETH to a multisig wallet for victim compensation,” but it says “That approval now carries little weight under the court order.”

It also states that “Protocols involved in the recovery effort must now wait for a formal divestiture hearing,” and it notes that “No timeline for that proceeding has been confirmed.”

ForkLog says the vote in Arbitrum DAO will conclude on “May 7,” and it reports that “At the time of publication, over 99% of participants support transferring the assets to DeFi United.”

Decrypt describes the recovery effort as “DeFi United,” saying Aave and others including “Consensys, Lido, Compound, and the Avalanche Foundation” launched it and “They raised more than $300 million” to restore the value of rsETH and cover losses.

Meanwhile, Aave’s motion seeks expedited relief, and Crypto Times says “The court has not yet ruled on the motion,” while also describing that Aave requests “immediate vacatur of the order or, at a minimum, temporary relief while the court reviews the case on an expedited basis.”