Judge Allows Aave to Move $71M in Frozen ETH for Kelp DAO Recovery

The frozen balance was only one part of the broader exploit fallout. One report put the wider Kelp DAO exploit at about $292 million and said the frozen ETH represented roughly 24% of the amount taken ^[10].

Why the court dispute happened

The legal fight began because a restraining notice blocked Arbitrum DAO from moving the recovered ether ^[16][18]. Gerstein Harrow LLP, representing plaintiffs with unpaid judgments against North Korea, argued that the ETH could be treated as DPRK-linked property because of alleged connections between the attackers and North Korean hacking activity, including Lazarus Group allegations ^[16][18][1].

Aave disputed that theory. Its position was that the recovered assets belonged to users harmed by the Kelp DAO exploit, not to the alleged hackers or to North Korea, and that the funds were needed for the recovery process ^[1][13]. Other reporting on Aave’s argument noted the protocol’s view that theft does not transfer ownership to the thief or create a legitimate claim for unrelated creditors ^[25].

What the judge allowed Aave to do

The order allowed Aave to move the immobilized ETH from Arbitrum into an Aave-controlled recovery wallet ^[8]. That matters because the prior restraint had made it legally risky for Arbitrum DAO or other participants to assist with the transfer ^[16][18]. By modifying the restraint, the judge cleared the immediate legal obstacle to custody while keeping competing claims preserved ^[8].

In practical terms, the ruling shifted the funds out of frozen governance limbo and into the recovery structure Aave had been trying to set up. It did not, based on the available reporting, erase every claim asserted by the North Korea judgment creditors or guarantee an instant payout to affected users ^[8].

How it fits Aave’s Kelp DAO recovery plan

Aave’s emergency motion sought to vacate the restraining notice so the recovered ETH could be used for the benefit of users affected by the April 18 exploit ^[1]. Arbitrum delegates had also approved releasing 30,765 ETH for a coordinated recovery effort, with more than 90% support in the reported vote ^[4]. The judge’s order gave that plan a legal path forward by letting the assets move into Aave’s recovery custody ^[8].

The recovery effort was broader than this one wallet transfer. Whale Alert reported that Joseph Lubin and ConsenSys pledged up to 30,000 ETH toward rsETH recovery, indicating that the frozen ETH was part of a wider backstop and remediation effort rather than the whole solution ^[1]. Some reporting described the recovery mechanics as involving steps such as burning liquidated rsETH and restoring KelpDAO bridge backing, but the clearest supported takeaway is narrower: the order lets Aave take custody of the recovered ETH so the recovery process can proceed ^[15][8].

What remains unresolved

Three caveats matter:

• The Lazarus/North Korea connection is part of the legal and reporting record, but Aave contests the idea that alleged attacker possession makes the ETH North Korean property ^[1][16][25].
• The order allows transfer into Aave’s recovery control, but available reporting says competing legal claims remain protected ^[8].
• Affected users still depend on the recovery process itself, not merely the court’s permission to move the funds ^[1][8].

Bottom line

The Manhattan ruling allowed Aave to transfer roughly $71 million in recovered ETH into an Aave-controlled recovery wallet, clearing the key obstacle that had stalled its Kelp DAO remediation plan ^[8][1]. For users, it is a step toward recovery. For DeFi, it is a reminder that on-chain governance and emergency freezes can still collide with off-chain courts, creditors, and national-security-linked allegations ^[4][16].