Starting May 15th, Aave users will vote on a proposal to send 30,765 ETH to Aave LLC. This transfer is intended to help cover losses from the recent Kelp exploit.
Summary
- A binding Arbitrum Improvement Proposal was launched May 12 with a vote opening May 15 to transfer 30,765 ETH worth $71 million to Aave LLC.
- A Manhattan federal judge cleared the transfer path on May 9 but preserved the legal claim of terrorism creditors holding $877 million in unpaid North Korea judgments.
- The 30,765 ETH was frozen by Arbitrum’s Security Council on April 21 after being linked to the $292 million Kelp DAO exploit attributed to North Korea’s Lazarus Group.
On May 12th, Aave and others initiated a formal proposal for the Arbitrum network. This proposal led to a vote starting on May 15th to transfer roughly $71 million (30,765 ETH) from a security fund managed by Arbitrum to an account controlled by Aave. This vote is the last step required to enable the Kelp DAO recovery process.
A federal judge in Manhattan adjusted a previous order on May 9th, allowing the transfer to move forward through a community voting process. Judge Margaret Garnett’s decision also protects those who vote and participate from being held personally responsible under the current legal notice.
Even if the funds are moved, the legal claim from those affected by terrorism remains valid. This means Aave LLC won’t be able to use the ETH freely if the court rules in favor of the plaintiffs.
What the $71 million is and how it was frozen
On April 21st, Arbitrum’s Security Council stopped 30,765 ETH from being used. This happened because the funds were connected to a security breach that affected Kelp DAO’s bridge, which uses LayerZero, on April 18th.
Hackers exploited a vulnerability on Aave v3 by using fake rsETH tokens as collateral. This allowed them to borrow around $230 million worth of wrapped ETH, resulting in over $190 million in losses and causing significant disruption to lending platforms in the decentralized finance (DeFi) space.
The legal situation became complicated when the law firm Gerstein Harrow LLP, representing families owed $877 million due to North Korean-linked terrorism, claimed the Ethereum (ETH) in question belonged to North Korea. They based this on reports from blockchain analysis companies which connected a security breach called the Kelp exploit to a hacking group, the Lazarus Group, believed to be associated with North Korea. However, no court has officially confirmed this connection as a legal fact.
Stani Kulechov, the founder of Aave, strongly disagreed with the claims, stating plainly that the funds rightfully belong to the users they were stolen from. Aave had already filed an urgent request with a New York court on May 4th to cancel the restraining notice, asserting that a thief doesn’t gain legal ownership of stolen assets just by transferring them on the blockchain.
Recovery progress and what comes next
As part of the DeFi United recovery efforts, we’ve secured over $314 million in ETH commitments from key protocols like Mantle, EtherFi, Lido DAO, Ethena, LayerZero, and Compound. This recent $71 million transfer is a crucial step, essentially finalizing the funding needed to fully back rsETH.
Voting on the important AIP proposal began on May 15th and should take about eight days to finish. After that, the ETH can be moved from Arbitrum to Ethereum, following the usual process for withdrawals. However, there’s still an ongoing legal issue with creditors claiming the funds are related to terrorism. If the court rules against Aave, they might be forced to hand over the ETH, even after it’s been transferred.
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2026-05-12 22:56