The emergency motion challenges a New York court order redirecting recovered Kelp DAO exploit funds toward decades-old terrorism judgments against North Korea.
Aave LLC, a software development company contributing to the Aave Protocol, filed an emergency motion in the Southern District of New York on Monday seeking to vacate a restraining notice served on Arbitrum DAO last week that locks up roughly $71 million in recovered ETH tied to the April 18 Kelp DAO bridge exploit.
The 29-page memorandum, filed before Judge Margaret M. Garnett by Morrison Cohen LLP, asks the court to vacate the notice immediately, or alternatively to schedule an expedited hearing with a temporary vacatur in the interim. As a third option, if the notice is maintained at all, the filing demands that plaintiffs post a cash bond of “no less than $300 million” to cover the damages Aave argues the freeze is causing.
The restraining notice was served on May 1 by Gerstein Harrow LLP on behalf of plaintiffs who hold unpaid judgments against North Korea from prior litigation between 2010 and 2016. The firm argues that public attribution of the exploit to the Lazarus Group is sufficient to treat the recovered funds as DPRK property eligible to satisfy those judgments.
Aave LLC contests that framing on multiple grounds. The motion argues that a thief does not acquire lawful ownership of stolen property by taking possession of it, that property recovered from a thief during a theft remains the victim’s, and that plaintiffs have offered no admissible evidence beyond “internet-post hearsay opinions” tying the attacker to their specific judgment debtor.
In a pointed footnote, Aave LLC accuses Gerstein Harrow of misrepresenting case law to the court, calling the firm’s claim that “DAOs like Arbitrum DAO have been held to be general partnerships” a “flatly false” assertion designed to “pull a fast one.” Neither Samuels v. Lido DAO nor Sarcuni v. bZx DAO, the two cases cited by plaintiffs, has held any DAO to be a partnership, the filing notes.
The disputed funds are the 30,765 ETH frozen by the Arbitrum Security Council on April 21, days after the bridge exploit, which drained roughly $293 million in rsETH and left Aave with between $124 million and $230 million in bad debt. The filing pegs the actual theft from Aave Protocol users at approximately $230 million worth of ETH borrowed against unbacked rsETH collateral.
The “DeFi United” coalition published a technical implementation plan last week to refill rsETH backing and clear the exploiter’s outstanding borrow positions on Aave and Compound. That plan depends in part on the Arbitrum Security Council releasing the frozen ETH. The related Arbitrum DAO Snapshot proposal authorizing the release has drawn support from more than 1,400 wallet addresses representing approximately 139 million ARB.
“The global DeFi community came together to recover assets stolen from users, and we are not going to let those assets be wrongfully redirected,” said Stani Kulechov, founder of Aave Labs, in a press release viewed by The Defiant. “These funds belong to the affected users they were stolen from, full stop.”
Aave LLC said it does not dispute the legitimacy of the underlying grievances against North Korea but maintains they cannot lawfully be addressed through the seizure of stolen assets belonging to innocent third parties without any connection to the DPRK.
This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.
