Five DeFi Protocols Ask Arbitrum DAO to Release 30,765.67 ETH

Five decentralized finance protocols asked Arbitrum DAO to release 30,765.67 ETH that the Arbitrum Security Council froze after an April 18 exploit of the KelpDAO rsETH bridge. The Constitutional AIP was filed on April 25 and requests routing the funds to a designated 2-of-3 Gnosis Safe to remediate losses tied to the incident.

The proposal was authored by Aave Labs, KelpDAO, LayerZero, Etherfi and Compound. It identifies 30,765.667501709008927568 ETH currently held on Arbitrum One and names the recovery address 0xf228130ce4fAB082C7D5522c90833cec83A9C15e. The Security Council moved the frozen funds on April 21 to an address ending in DA0 and said a governance vote would be required for any further movement.

The filing cites an incident report that found the KelpDAO rsETH Unichain-to-Ethereum bridge released about 116,500 rsETH on Ethereum without a corresponding burn on the source chain. At the time of the report, the adapter held 40,373 rsETH as confirmed backing for 152,577 rsETH in remote-chain claims, creating a backing shortfall of roughly 76,127 rsETH.

During the exploit, the attacker supplied 89,567 rsETH to Aave across its Ethereum Core and Arbitrum markets and borrowed 82,650 WETH plus 821 wrapped stETH against those positions. The proposal states, “Aave’s smart contracts were not compromised.” It further says the frozen ETH would contribute to closing the identified backing gap and move rsETH closer to full collateralization.

If the proposal passes, the 2-of-3 Gnosis Safe would be controlled by signers from Aave, KelpDAO and Certora. The authors specify the recovered ETH would be used only to remediate losses from the exploit. Aave Labs included an indemnity commitment in the proposal, agreeing to indemnify the Arbitrum Foundation, Offchain Labs, the Arbitrum Security Council and its members against claims arising from the freeze, the release or related enforcement actions.

The proposal estimates a roughly 49-day governance process from forum publication to execution. The timeline includes a week for forum discussion, a week for a temperature check, a three-day voting delay, a 14-day on-chain vote, an eight-day L2 waiting period, a week for L2-to-L1 message finalization and a three-day L1 waiting period. A Snapshot temperature check may occur before the on-chain vote, which would be submitted through Tally and target the Arbitrum Core governor.

The authors request no new treasury allocation and ask only that the DAO release funds already frozen on Arbitrum One. The filing says if the coordinated recovery does not proceed as planned, the parties will return to Arbitrum Governance for further direction. The Arbitrum DAO will now consider whether to authorize transferring the frozen ETH to the proposed recovery safe.