Aave launches binding Arbitrum vote to move $71 million in disputed ETH

Arbitrum delegates begin the binding governance process to transfer disputed exploit funds to Aave, while North Korean terrorism creditors continue fighting for ownership in Manhattan court

What to know:

• Aave and other parties affected by last month’s Kelp DAO hack have proposed a binding Arbitrum governance vote to transfer $71 million in disputed ether into Aave LLC’s custody.
• The amended Constitutional Arbitrum Improvement Proposal would move 30,765 ETH from an Arbitrum Security Council wallet to an Aave-controlled address in compliance with a recent court order tied to North Korean terrorism claims.
• The case pits DeFi users against U.S. terrorism judgment creditors, who argue the funds are North Korean property that could satisfy $877 million in unpaid awards, with voting on the proposal set to begin May 15.

DeFi lender Aave and other stakeholders impacted by last month's Kelp DAO hack have launched a binding Arbitrum governance vote to transfer $71 million in disputed ether into 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, which authorizes an on-chain Arbitrum DAO vote to transfer the frozen ETH from its current immobilized address to a wallet controlled by Aave LLC, provided that the restraining notice sought by North Korean terrorism judgment creditors is respected.

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’s order. However, the assets would remain subject to strict legal restrictions and cannot be freely used, transferred, or deployed by Aave LLC unless permitted by the court.

The legal fight over the frozen assets took an unusual turn after blockchain forensics firms widely attributed the exploit to North Korea’s Lazarus Group. That attribution comes from blockchain analytics firms and external forensic research, and has not been established as a legal finding within either the Arbitrum governance process or the ongoing court proceedings.

Still, that attribution has been cited alongside broader legal arguments by lawyers representing families holding roughly $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 longstanding court awards.

Aave disputes that premise, arguing that the ether belongs to users harmed in the exploit, not to the attackers who briefly controlled it, turning the case into a fight over whether the funds should go to DeFi victims or to terrorism creditors.

In a separate lawsuit, many of the same terrorism judgment creditors sued privacy protocol Railgun DAO, alleging it allowed North Korean-linked funds to move through its infrastructure rather than freezing them, as part of a broader strategy to pursue allegedly Pyongyang-linked crypto across decentralized finance.

Voting on the AIP is scheduled to begin May 15.

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