Arbitrum DAO OKs 30,765.67 ETH Release Amid U.S. Court Challenge

Arbitrum DAO voted Thursday to release 30,765.67 ETH, roughly $70 million, to a 3-of-4 Gnosis Safe controlled by Aave, KelpDAO, EtherFi and Certora for use in recovering funds from the recent rsETH exploit. The governance proposal passed with about 182.2 million votes in favor, or 90.96% of the total, with negligible opposition.

The ETH was frozen last month by the Arbitrum Security Council after an attacker exploited a flaw in KelpDAO’s LayerZero-powered cross-chain bridge. The attacker minted about 116,500 rsETH on Ethereum without a corresponding source-side burn and then used the unbacked rsETH as collateral on Aave, extracting roughly $230 million in ETH from protocol users.

The Security Council moved 30,765.67 ETH to an intermediary wallet and left further movement to Arbitrum governance. The DAO-approved transfer would place the funds into a multisig safe held by representatives from Aave, KelpDAO, EtherFi and Certora and would be used exclusively to reimburse victims. The frozen sum covers part of an estimated 76,127 rsETH shortfall tied to the exploit.

A legal challenge could prevent the transfer. On May 1, plaintiffs holding decades-old unpaid judgments against North Korea obtained permission from the Southern District of New York to serve a restraining notice on Arbitrum DAO. The plaintiffs argue the frozen ETH is property of the DPRK traceable to the Lazarus Group and therefore subject to seizure to satisfy their judgments.

Aave LLC asked the court to vacate the restraining notice and, if the notice remains, to require plaintiffs to post a bond of at least $300 million. Aave said the freeze is causing immediate and irreparable harm to users and that the restraining notice is baseless.

Legal advisers say executing the DAO vote while the restraining notice is in place could expose identifiable participants to contempt of court. Yuriy Brisov, a partner at Digital & Analogue Partners, warned that New York precedent treats a restraining notice as a type of injunction and that refusing to obey it can be punishable as contempt. He noted that while private keys can still sign transactions, anyone in the execution chain who has received actual notice of the order could face contempt liability and that standard indemnities are unlikely to cover that risk.

Alice Frei, head of legal and compliance at OMI, said lifting the freeze would remove the immediate obstacle to transfer but emphasized the vote is not self-executing. Additional governance steps remain, and plaintiffs may continue to press challenges over whether the ETH is legally attachable property.

A coordinated recovery effort called DeFi United has raised 132,650 ETH, about $303 million at recent prices, to cover losses from the exploit. The frozen Arbitrum ETH would contribute to the shortfall covered by that effort without creating new cost to the DAO.

How and whether the DAO approval becomes an on-chain transfer now depends on the Southern District of New York’s rulings, whether plaintiffs post a bond, and whether any party involved in moving the funds is willing to accept potential legal exposure in U.S. jurisdictions.