U.S. law firm seeks to block transfer of frozen Kelp ETH

A New York federal court approved a restraining notice from Gerstein Harrow LLP that bars the Arbitrum DAO from moving 30,766 ETH frozen after the April 18 Kelp DAO hack. The notice includes three writs of execution and threatens contempt if the funds are transferred.

Gerstein Harrow filed the notice after the Arbitrum Security Council froze Ether tied to a $292 million exploit of Kelp DAO. The firm says its clients won default judgments in U.S. courts in 2010, 2015 and 2016 totaling about $877 million in compensatory and punitive damages plus interest, and it argued in court papers that the stolen Ether is property in which the DPRK has a stake due to the hacker group’s affiliation.

The freeze covers 30,766 ETH, valued at more than $73 million when blocked. Arbitrum community members and protocol actors have debated how to use the frozen funds.

On April 25, Aave Labs proposed that the DAO unfreeze the Ether and direct it to DeFi United, a fund intended to restore rsETH and compensate holders harmed by the Kelp exploit. The restraining notice prevents any transfer while Gerstein Harrow pursues execution on its clients’ judgments.

Supporters of Kelp victims warned the legal action could delay compensation. An Arbitrum DAO member using the handle Zeptimus wrote on the forum: “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. That compounds the original harm; it doesn’t redress it.”

Gerstein Harrow has filed similar claims in other matters. In February the firm filed a claim against funds frozen by Tether tied to a 2023 hack, and it lists multiple active cases against DAOs on its website. An onchain investigator publicly accused the firm of using his research in court documents related to another large breach.

Researchers and blockchain analysis have linked multiple April thefts to actors associated with North Korea and to the Lazarus Group, alleging at least $578 million was stolen across several incidents.

The restraining notice remains in effect while the court process continues. The court will decide whether Gerstein Harrow can execute on the judgments against the frozen Ether, and DAO governance cannot proceed with transfers while the writs are in place.