Manhattan Judge Margaret Garnett Authorizes Aave Transfer of $71M Lazarus Group Frozen ETH

A Manhattan federal judge authorized the transfer of approximately $71 million in Ether (ETH) that was frozen after an exploit linked to the North Korean hacking syndicate known as the Lazarus Group.

The ruling, issued by Judge Margaret Garnett, partially modified a previous asset freeze order and permitted the DeFi lending protocol Aave to move the ETH to a protocol-managed wallet.

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The court order also upheld a separate claim of approximately $877 million against North Korea filed by victims of state-sponsored terrorism.

In the same legal fight, CoinDesk said the judge modified a restraining notice served on Arbitrum DAO to allow an onchain governance vote transferring the immobilized ETH to a wallet controlled by Aave LLC.

CryptoNinjas said Aave’s recovery effort moved into Phase II after it liquidated eight positions linked to the exploiter on Aave V3 on May 6 and handed recovered rsETH collateral to the Recovery Guardian following governance approval from the Aave DAO.

The same account described Arbitrum DAO and Mantle DAO voting on proposals involving recovering $71 million in ETH for DeFi United, while Aave said it activated a compensation mechanism for users affected by the issue.

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Cointelegraph reported that the decision came after Arbitrum delegates showed strong support for the move through an off-chain Snapshot vote as part of Aave’s broader recovery plan, while noting that any actual transfer still requires a separate binding onchain governance vote.

CoinDesk added that the order shielded participants from liability under the notice, stating that anyone who initiates, votes on or participates in the transfer would not violate the freeze.

The court action is framed as a step in how decentralized finance protocols interact with the U.S. legal system, with MEXC describing the case as a rare example of a DeFi protocol collaborating with federal courts to create a formal procedure for asset recovery amid a state-sponsored hack.

MEXC said the court also established legal protections for participants in the DAO governance process, and it described legal analysts noting the ruling could set a precedent for how DAOs interact with traditional legal frameworks when assets are frozen.

CoinDesk said the ruling resolves an immediate standoff tied to attorney Charles Gerstein’s argument that the frozen ETH could be seized because the exploit has been widely attributed to Lazarus Group.

Cointelegraph reported that the 30,765 ETH frozen by Arbitrum has been flagged as a meaningful step toward closing a gap in rsETH backing, with proponents arguing that even partial restoration would help stabilize conditions for users across Arbitrum and the wider DeFi ecosystem.