Aave LLC filed an emergency motion in a New York court on May 4, seeking to lift a restraining notice placed on Arbitrum DAO over frozen Ethereum linked to the recent rsETH incident.
Summary
Aave argues that stolen ETH cannot legally become property of North Korea through alleged exploit claims.
Law firm Gerstein Harrow LLP contends the frozen ETH could be used to satisfy judgments tied to North Korea-linked crypto theft.
Aave warns that continued restrictions could delay rsETH recovery efforts and negatively impact DeFi users.
Aave challenges restraining notice
The restraining notice aims to block the movement of Ethereum tied to the April 18 rsETH exploit. Aave has asked the court to vacate the notice, schedule an expedited hearing, or require a $300 million bond if the freeze remains in place.
Gerstein Harrow LLP received court approval on May 1 to serve the notice, along with a writ of execution and a planned turnover motion targeting Arbitrum DAO.
The filing states that roughly $71 million worth of ETH is currently frozen, with plaintiffs arguing the funds should be used to settle outstanding judgments against North Korea. Aave strongly disputes this position.
Dispute over ownership of funds
Aave maintains that stolen crypto assets do not become the legal property of a third party simply because they were temporarily held by a hacker. The filing criticizes the opposing claims as speculative and unsupported by concrete evidence.
The protocol also noted that no court has officially determined that North Korea, the Lazarus Group, or any affiliated entity was responsible for the exploit. According to Aave, the frozen funds rightfully belong to affected users, not external claimants.
Following the incident, Arbitrum’s Security Council froze approximately 30,765 ETH on April 21 and moved the funds to a designated address to support recovery efforts and stabilize rsETH backing.
Broader recovery efforts underway
The dispute comes as Arbitrum DAO considers releasing the frozen ETH to assist recovery initiatives linked to the Kelp DAO exploit.
Wider ecosystem support is also building. Mantle has proposed lending up to 30,000 ETH to Aave, while the DeFi United initiative has reportedly gathered over 1.13 million ETH in commitments from multiple protocols.
Additional steps include Aave DAO weighing a pause on AAVE buybacks and support from the Solana Foundation, whose chair Lily Liu confirmed a USDT lending effort to aid recovery.
Aave warns of user impact
Aave cautioned that keeping the ETH frozen could delay withdrawals and recovery for affected users. Its legal team described the restraint as causing “irreparable harm” to users, protocol operations, and the broader DeFi ecosystem.
The filing also raised concerns that such actions could discourage future recovery efforts following crypto exploits, arguing that recovered assets should be returned to impacted users rather than redirected to unrelated creditors.
As of now, the court has not issued a ruling on Aave’s emergency motion.
