Arbitrum delegates are deliberating whether to release the 30,765 ETH frozen after last month’s rsETH exploit for a coordinated recovery effort. But a lawyer for victims of North Korean terrorism appeared at the forum and told them they could not.
The ether was drained from regenerated ETH holders (a token representative of ETH locked on another platform for fixed dividends) during the Kelp DAO bridge exploit on April 19, which CoinDesk previously reported as the biggest DeFi hack of 2026.
The governance filing, authored by attorney Charles Gerstein, serves as a restraining order under New York law on behalf of three sets of judgment creditors with about $877 million in claims against the Democratic People’s Republic of Korea.
The claims behind the application stretch back decades. One stems from the massacre at Lod Airport in Israel in 1972, when gunmen killed 26 people, including 17 pilgrims from Puerto Rico, in an attack later found by a US court to have been supported by North Korea.
Another involves Pastor Kim Dong Shik, an American permanent resident who was abducted near the Chinese border in 2000 and later killed in DPRK custody. A third is linked to the 2006 Israel-Hezbollah war, in which a federal judge found that Pyongyang had supplied weapons and training used in rocket attacks.
The plaintiffs won their cases, but North Korea never paid. With sovereign assets effectively impossible to seize, the families have spent years searching for any North Korean property they can legally muster to satisfy their sentences.
Gerstein’s filing claims that because US authorities have linked the Lazarus Group, the hacking entity responsible for the exploit, to the North Korean state, the 30,765 ETH frozen by Arbitrum’s Security Council qualifies as North Korean property under US enforcement law.
If the court accepts this framework, the families with unpaid judgments would have a senior legal claim to those funds, ahead of the rsETH depositors who originally held them.
The reason Arbitrum is involved is straightforward: after the rsETH exploit, its security board froze 30,765 ETH at a specific address on its network, effectively placing the funds under its control. Gerstein’s filing points to three underlying cases, Calderon-Cardona, Kim and Kaplan, with execution orders totaling about $877 million.
The legal tool used is CPLR ยง5222(b), an enforcement mechanism in New York that allows creditors to freeze assets simply by serving a lien notice, without first obtaining a new court order, although the target can challenge it afterward.
After service, the beneficiary is barred from moving the assets for up to one year or until the judgment is settled. Ignoring it can lead to contempt of court, the same category of offense used when someone defies a judge’s order.
The complication here is that Arbitrum DAO is not a company with clear legal status. This means that the risk is not neatly tied to “The DAO”, but to whoever a court ultimately decides has control of the frozen ETH.
The filing and legal theory presented drew backlash in the same forum thread. Delegate Zeptimus argued that the legal premise is backwards, writing that ETH “is not property in which the DPRK has an ‘interest’… It is stolen property,” adding that under basic property rights, “a thief acquires no property rights.”
In that view, the funds belong to the original rsETH depositors, and the proposed recovery effort is not a redistribution, but a return of assets to their rightful owners. Blocking this process, Zeptimus wrote, “shifts the cost of the DPRK’s debt onto another set of victims who were themselves robbed.”
Delegates had worked through a different set of trade-offs. Entropy Advisors called for a FOR vote citing the daily interest charges for Aave users with locked-in positions. Axia flagged questions about whether the Arbitrum Captive Insurance product would cover delegates if something went wrong.
Gerstein’s filing sharpens this issue considerably, where coverage for general vicarious liability is one thing, but exposure tied to a direct enforcement action is another.
What remains is a choice between the victims. On the one hand, Aave depositors with positions they cannot close. On the other hand, families behind decades-old judgments against North Korea are still seeking to collect.
