DeFi lender Aave and other stakeholders affected by last month’s Kelp DAO hack have launched a binding arbitration vote to transfer $71 million in disputed ether to an Aave LLC-controlled address
A Constitutional Arbitrum Improvement Proposal, or AIP, is the DAO’s formal on-chain governance mechanism for approving binding protocol actions. This amended proposal implements Judge Margaret Garnett’s recent court order authorizing an on-chain Arbitrum DAO vote to transfer the frozen ETH from its current immobilized address to a wallet controlled by Aave LLC, provided the restraining order requested by North Korean terrorism judgment creditors is honored.
If approved, the proposal would move 30,765 ETH from the wallet where Arbitrum’s Security Council immobilized the funds to an Aave LLC-controlled address, as required by the court order. However, the assets will remain subject to strict legal restrictions and may not be freely used, transferred or deployed by Aave LLC unless permitted by court.
The legal battle over the frozen assets took an unusual turn after blockchain forensics firms widely attributed the exploit to North Korea’s Lazarus Group. This attribution comes from blockchain analytics firms and outside forensic research and has not been established as a legal finding within either the arbitration process or the ongoing litigation.
Still, that attribution has been cited alongside broader legal arguments by lawyers representing families who have about $877 million in unpaid U.S. terrorism judgments against North Korea, who argue that if the assets are ultimately deemed linked to North Korea for enforcement purposes, they could potentially be used to satisfy those lengthy court orders.
Aave disputes this premise, arguing that the ether belongs to users harmed in the exploit, not to the attackers who briefly controlled it, making the case a battle over whether the funds should go to DeFi victims or to terrorist creditors.
In a separate lawsuit, many of the same creditors of the terrorism ruling sued the Railgun DAO privacy protocol, claiming it allowed North Korean-linked funds to move through its infrastructure instead of freezing them, as part of a broader strategy to pursue allegedly Pyongyang-linked crypto across decentralized finance.
The vote on the AIP is scheduled to begin on May 15.
