Aave Files Motion to Lift Restraining Order on $71M Frozen ETH

• Aave filed an emergency motion to vacate a restraining notice freezing $71 million in ETH.
• Arbitrum community intercepted the funds to return them to victims of the April 18 exploit.
• Plaintiffs suing North Korea claim the hacker’s brief possession makes the assets theirs now.

Aave LLC filed an emergency court motion Monday asking a New York federal judge to immediately lift a restraining notice that has frozen $71 million in Ethereum belonging to victims of last month’s devastating protocol exploit, arguing that plaintiffs suing North Korea have essentially seized the wrong assets from the wrong people.

The restraining notice was served on Arbitrum DAO on May 1, just as the DeFi community was finalizing plans to return those funds to thousands of users who lost money in the April 18 hack. Its timing could not have been worse.

What Happened

On April 18, an attacker exploited a vulnerability in the rsETH cross-chain bridge, using forged transaction messages to drain approximately $230 million worth of Ethereum from the Aave Protocol. The funds belonged to ordinary users who had deposited assets to earn interest, not to any party connected to North Korea or any other sanctioned entity.

Members of the Arbitrum blockchain community intercepted roughly $71 million of those stolen funds before the attacker could escape with them, freezing the assets with the intention of returning them to Aave’s affected users through a coordinated recovery effort that became known across the industry as DeFi United. Then the plaintiffs arrived.

The Legal Argument

Victims of North Korea with unpaid court judgments obtained permission to serve a restraining notice on Arbitrum DAO, arguing that because North Korea’s Lazarus Group allegedly carried out the hack, the frozen funds effectively belong to North Korea and can be seized to satisfy those judgments.

Aave LLC’s response was blunt. A thief does not gain lawful ownership of stolen property simply by taking it. The assets were never North Korea’s. They belonged to Aave’s users before the theft.

“Those assets were recovered to be returned to users victimized in the April 18 exploit,” Aave said in a statement. “Freezing them harms the very people this recovery effort is designed to protect.”

What Aave Is Asking For

Aave LLC has asked the court for an expedited hearing and a temporary vacatur of the restraining notice pending resolution of the matter. If the court declines immediate relief, Aave has asked that plaintiffs be required to post a cash bond of at least $300 million to cover the cascading damages the freeze is causing across the DeFi ecosystem.

Every day the funds remain frozen, users with collateral positions elsewhere face mounting liquidation risk with no way to access the assets they are owed.

Related: Frozen Kelp DAO ETH on Arbitrum Sparks US Legal Dispute Over DPRK Claims