U.S. Court Freezes Arbitrum DAO From Moving 30,766 ETH From Kelp DAO Exploit

A U.S. court order has placed Arbitrum DAO’s planned use of frozen hack funds under legal restraint, blocking the DAO from moving 30,766 ETH tied to the Kelp DAO exploit.

“Onchain investigator ZachXBT has accused U”

Bitcoin News

In reporting tied to a May 1 restraining notice, plaintiffs served the notice through Arbitrum’s governance forum, preventing any movement of 30,766 ETH valued at nearly $71.1 million that had been frozen by the Arbitrum Security Council after the Kelp DAO exploit.

Bitcoin News

The order is described as coming from the U.S. District Court for the Southern District of New York, and The Block says the restraining notice barring transfer was served on April 30 after a New York federal court authorized substituted service.

The Block further states that the filings prohibit Arbitrum from transferring the ETH while the creditors litigate their claim that the funds belong to the DPRK because LayerZero attributed the underlying hack to its Lazarus Group.

The dispute is framed as a competing legal claim over assets that the DeFi industry’s recovery effort had been counting on, with Unchained Podcast describing the freeze as arriving at a critical moment for the DeFi United recovery initiative.

In the same thread of events, Bitget’s account ties the freeze to Arbitrum’s earlier emergency action on April 20, when its Security Council moved the assets into a controlled wallet after identifying attacker-linked addresses.

The court restraint also collides with governance timing, because Unchained Podcast says a Snapshot vote opened April 30 and voting data showed 99% support with a May 7 deadline set for the temperature check.

The restraining notice and related writs are tied to plaintiffs described as families holding three unpaid terrorism judgments against North Korea, with claims totaling more than $877 million excluding interest.

Multiple outlets identify the law firm Gerstein Harrow LLP as the filer and name specific plaintiffs, including Han Kim and Yong Seok Kim, whose relative was killed by Pyongyang in the account from The Block and Unchained Podcast.

bloomingbit

Unchained Podcast says the plaintiffs are families holding three unpaid terrorism judgments against North Korea, with claims totaling more than $877 million, and it adds that the frozen ETH is connected to the Kelp DAO bridge exploit.

The Block provides the legal theory in detail, saying the notice names Arbitrum DAO as a garnishee and treats the frozen ether as property in which North Korea has an interest, on the theory that the funds were stolen by Lazarus on Pyongyang’s behalf.

It also states that the action was filed by Gerstein Harrow LLP on behalf of Han Kim and Yong Seok Kim, and that a 2015 ruling produced a roughly $330 million default judgment against the DPRK in that case.

The Block further says the restraining notice bundles two additional unsatisfied judgments, including Kaplan v. DPRK (about $169 million) and Calderon-Cardona v. DPRK ($378 million), and that the combined face value across all three judgments exceeds $877 million plus more than a decade of post-judgment interest.

Bitget’s account similarly says lawyers representing terrorism victims argued the frozen ether can be seized to satisfy over $877 million in unpaid judgments against the DPRK, and it names the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act as the legal bases.

While the court restraint blocks movement, Arbitrum’s governance process had been moving toward a recovery plan for rsETH holders through DeFi United.

“US Law Firm Seeks to Block Transfer of Frozen Ether in Kelp Hack, Claims North Korea Link Summary - US law firm Gerstein Harrow said it had applied for an injunction to block the transfer of Ether (ETH) frozen after the Kelp hack”

bloomingbit

Unchained Podcast says the freeze lands at a critical moment for the DeFi United recovery initiative led by Aave, Kelp DAO, and LayerZero, and it describes the coalition as having assembled more than $311 million in pledges from contributors including Consensys (30,000 ETH), Mantle (30,000 ETH), and Aave founder Stani Kulechov (5,000 ETH personally).

Bitget’s account says Arbitrum DAO had opened a Snapshot vote on April 30 to decide whether the frozen ETH should be transferred to a recovery initiative formed after the exploit, and it says the proposal was authored by Aave Labs with contributions from Kelp DAO, LayerZero, EtherFi, and Compound.

The Block says voting concludes on May 7 and describes the proposal as directing the funds to a 3-of-4 Gnosis Safe co-signed by Aave, Kelp DAO, EtherFi, and onchain security firm Certora, designated solely to receive recovered ETH and apply it toward restoring rsETH’s economic backing.

It also says the Aave proposal includes an uncapped indemnification clause from Aave Labs covering the Arbitrum Foundation, Offchain Labs, and individual Security Council members for any claims arising out of the freeze or release.

CoinDesk adds that Aave is leading a coordinated DeFi recovery effort following the Kelp DAO exploit, with more than $300 million in support pledged by major players such as ConsenSys, Lido, EtherFi, and others, and it says the effort has raised about $303 million in commitments as of Monday.

CoinDesk also says Aave Labs presented a proposal asking Arbitrum governance to approve the release of roughly 30,765.67 ETH held in reserve by the network’s Security Council, with the aim of fully compensating rsETH holders and restoring rsETH backing.

The legal move has triggered sharp criticism from within the crypto community, with on-chain investigator ZachXBT accusing Gerstein Harrow of predatory tactics.

The Block quotes ZachXBT as writing on X: "This is a predatory US law firm with a strategy that is pure evil," and it also references another account name, banteg, in the same passage.

Cointelegraph

Bitcoin News similarly says ZachXBT accused Gerstein Harrow LLP of filing fraudulent claims over frozen crypto assets linked to North Korea’s Lazarus Group and describes the tactic as harming actual victims of recent exploits.

In that account, ZachXBT’s verdict is quoted directly: "This is a predatory U.S. law firm with a strategy that is pure evil," and it says he proposed a community DAO to counter the firm legally.

Cointelegraph adds a separate voice by quoting Charlie Gerstein, a lawyer for Gerstein Harrow, posting a restraining notice seeking to prevent the Arbitrum DAO from moving the frozen Ether.

Cointelegraph also quotes an Arbitrum DAO member under the handle Zeptimus, who argues that if the law firm’s action succeeds, the DPRK debt will not be transferred to the Kelp DAO victims, saying: "Your clients’ losses are real and the DPRK should answer for them. But the remedy the restraining notice asks for, blocking the return of stolen funds to their actual owners shifts the cost of the DPRK’s debt onto a different set of victims who were themselves robbed."

Unchained Podcast adds that attorney Gabriel Shapiro reviewed the filing and wrote on X that "Arbitrum DAO is not allowed to do anything with the KelpDAO funds for now, until a divestiture hearing," emphasizing the procedural path ahead.

The dispute sets up a procedural fight over who controls the frozen ETH and when victims can recover, with a divestiture hearing described as the next step that determines final control.

“Charlie Gerstein, a lawyer for Gerstein Harrow, posted a restraining notice seeking to prevent the Arbitrum DAO from moving the frozen Ether”

Cointelegraph

Unchained Podcast says a divestiture hearing will determine final control of the funds, and it frames the restraining order as barring Arbitrum DAO from moving the ETH while litigation proceeds.

Cryptonews.net

The Block says the legal posture leaves two open questions for Arbitrum’s delegate base over the next four days, including whether ARB holders who vote yes can be held personally liable for any subsequent transfer and which creditors have the better claim in a recovery scenario where stolen crypto is traceable to both immediate exploit victims and a sanctioned state sponsor with prior unsatisfied judgments.

Bitget’s account similarly says the extent to which indemnification protections would apply under an active court-ordered restraint remains unresolved, even though the Aave proposal includes an indemnification clause offering to cover the Arbitrum Foundation, Offchain Labs, and Security Council members against claims tied to the freeze or release of funds.

MEXC’s account says the legal maneuver raises questions about who ultimately bears responsibility for losses tied to state-backed cyber operations and how recovered assets should be allocated when multiple parties claim stakes in stolen funds.

Bloomingbit’s account adds that a federal district court in New York approved an injunction restricting the transfer of the assets, along with a writ of execution, and it warns that Arbitrum DAO could face legal liability if it moves the funds.

The Block also provides the timeline pressure, saying voting concludes on May 7 while the restraining notice remains in effect pending further proceedings.