The court order allows the on-chain Constitutional AIP vote and transfer to proceed without violating the restraining notice, but the freeze itself extends to Aave LLC.
A federal judge in Manhattan on Friday modified the restraining notice locking up roughly $71 million in recovered ETH tied to the April 18 Kelp DAO bridge exploit, clearing a procedural path for Arbitrum DAO to vote on transferring the funds to Aave LLC, though the freeze itself will carry over to the recipient.
Judge Margaret M. Garnett of the Southern District of New York issued the order, ruling that an on-chain vote and the subsequent transfer of the immobilized assets to a digital wallet controlled by Aave LLC “will not be deemed to be a violation of the Restraining Notice.” Voters, participants, and any party initiating the on-chain transaction are explicitly shielded under the terms of the order.
The catch: upon transfer, Aave LLC has agreed to abide by the restraining notice as if it had been issued directly to the company, until the notice is vacated, withdrawn, modified by plaintiffs, or expires. The court “reserves decision on all other matters” related to the underlying dispute, leaving unresolved Aave LLC’s demand for a $300 million cash bond and the broader question of whether judgment creditors can reach the funds at all.
Aave LLC said in a Friday X post that the amended Constitutional AIP preserves the recovery intent approved by Arbitrum DAO, and that the ETH remains directed toward the rsETH recovery effort. “Aave LLC will comply with all court obligations as proceedings continue,” the company said.
The order is the latest turn in a fast-moving legal fight over the 30,766 ETH frozen by the Arbitrum Security Council days after the bridge exploit, which drained roughly $293 million in rsETH and left Aave with as much as $230 million in bad debt. The funds were earmarked for the DeFi United recovery coalition, a multi-protocol effort led by Aave Labs and Kelp to make affected users whole.
The restraining notice was served May 1 by Gerstein Harrow LLP on behalf of plaintiffs in three consolidated terror-judgment cases against North Korea and Iran. The firm argued that public attribution of the Kelp exploit to the Lazarus Group made the recovered ETH DPRK property eligible to satisfy decades-old unpaid judgments. Aave LLC filed an emergency motion to vacate days later.
Friday’s ruling is procedural rather than substantive. It preserves the on-chain governance mechanism that Arbitrum DAO was using to authorize releasing the frozen ETH to Aave LLC, but does not resolve the central legal question of whether the recovered funds can ultimately be reached by the judgment creditors.
This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.
