DeFi lender Aave asks court to block $71 million crypto seizure tied to North Korea claims

The filing challenges a New York restraining notice that froze ETH on Arbitrum after the rsETH exploit, with Aave arguing the funds belong to users, not North Korea judgment creditors

What to know:

• Aave has asked a federal court in New York to lift a restraining notice that blocks access to about $71 million in ether frozen after last month’s rsETH exploit on Arbitrum.
• The company argues the seized funds belong to innocent Aave users, not North Korea or its alleged Lazarus Group hackers, and says treating briefly stolen assets as the thief’s property would upend basic property law.
• Aave warns that keeping the funds frozen could trigger cascading liquidations and broader instability in decentralized finance, and says a ruling for the North Korea judgment creditors could chill future crypto hack recovery efforts.

Leading decentralized lending platform Aave has asked a U.S. federal court to block an attempt by victims of North Korean terrorism to seize about $71 million in crypto frozen after last month’s rsETH-related exploit, escalating a dispute that has already split Arbitrum’s governance.

The filing, submitted Monday in the Southern District of New York, seeks to vacate a restraining notice served on Arbitrum DAO by lawyers representing judgment creditors of the Democratic People’s Republic of Korea. Aave argues the assets belong to users of its protocol, not North Korea, and warns that keeping them frozen risks “irreparable harm” to the platform and the broader DeFi ecosystem.

At the center of the fight is 30,765 ETH that Arbitrum’s Security Council froze after the April exploit, when attackers used improperly valued or unbacked rsETH as collateral on Aave, contributing to a situation that the plaintiffs allege resulted in approximately $230 million in ETH being withdrawn from the Aave Protocol. Some of those funds were later intercepted and immobilized on Arbitrum, with plans to return them to affected users as part of a coordinated recovery effort.

The dispute centers on whether stolen property briefly held by hackers becomes their legal property.

The plaintiffs, three sets of judgment creditors holding $877 million in damages awards against North Korea, argue it does — and that's because the rsETH attackers are widely believed to be linked to Pyongyang's Lazarus Group, the recovered ether can be claimed against those decades-old judgments.

Aave's lawyers call that theory "flatly wrong" and warn it would punish blameless users while rewriting basic property law.

Aave’s motion challenges that theory directly. The filing argues the restrained ETH “belong[s] to completely blameless third parties,” not to North Korea, and that even if a thief briefly held the assets, that does not confer legal ownership.

It also disputes the underlying attribution, calling claims that the exploit was carried out by DPRK actors “conjecture” based on unverified reports.

Aave is asking the court to immediately lift the restraining notice, or at a minimum to suspend it while the case is heard.

Aave says keeping the funds frozen via the restraining notice could deepen losses and destabilize DeFi markets already strained by the exploit. The filing warns this “increases the likelihood of cascading liquidations, sustained liquidity outflows, and irreversible changes to user positions,” a chain reaction the industry has been trying to avoid for two weeks.

The outcome could have consequences far beyond this case. If courts allow seized or recovered crypto to be claimed by outside creditors, it could deter future rescue efforts and complicate how the industry responds to hacks, where speed and coordination are often the only tools to limit damage.

More For You

World Liberty alleged that Sun engaged in short-selling, straw purchases and defamation.

Bitcoin used to hate inflation. Now it might be the opposite

3 hours ago

Ripple to share North Korean threat intelligence with crypto firms

3 hours ago

Bitcoin crosses $81,000, ETH, SOL, DOGE steady as options desks bid on further price jump

4 hours ago

XRP slips below $1.40 on heavy volume, tightening range puts breakout in focus

4 hours ago

Bitcoin tests $80,000 as Asia’s bid fades and Hong Kong AI IPOs surge

8 hours ago

GameStop's $55.5 billion eBay takeover bid puts its $368 million bitcoin stash in the crosshairs

13 hours ago

U.S. voters don't trust Trump administration to oversee crypto sector, CoinDesk poll finds

May 3, 2026

Crypto industry backs CLARITY Act yield compromise, pushes Senate Banking for markup

May 2, 2026

Coinbase boosts Solana trading with DFlow integration

23 hours ago

Veteran trader Peter Brandt sees bitcoin hitting $250,000, but only after a bottom later this year

May 4, 2026

Laywer pops up on Arbitrum DAO forums seeking funds for victims of decades-old North Korean terrorist acts

22 hours ago

Strategy raised $82 million last week but holds off on bitcoin buys ahead of earnings

May 4, 2026