A US court order placed Arbitrum DAO’s planned use of frozen hack funds under legal restrictions.
summary
- A US court has blocked Arbitrum DAO from transferring 30,766 ETH linked to the Kelp DAO exploit after prosecutors linked the funds to North Korea.
- Lawyers representing terrorism victims argued that the frozen ether could be seized to satisfy more than $877 million in unpaid judgments against the DPRK.
according to filings Authorized by the US District Court for the Southern District of New York, the plaintiffs filed a restraining notice on May 1 through Arbitrum’s administration forum, blocking any movement of 30,766 ETH, worth approximately $71.1 million, which had been frozen by Arbitrum’s security board following the Kelp DAO exploit.
Lawyers representing the plaintiffs, identified as victims who served unpaid terrorism-related judgments against North Korea, said the seized ether represents property in which the DPRK has an interest. Their claim is based on allegations that funds were stolen by the Lazarus Group on behalf of Pyongyang, a link previously attributed by LayerZero in its investigation into the breach.
Arbitrum’s intervention dates back to April 20, when its security board moved assets to a controlled wallet after identifying addresses linked to the attackers. In an update dated April 21, the network said the freeze came after input from law enforcement regarding the identity of the exploiter, adding that the action did not disrupt user activity or applications.
Gerstein Harrow LLP filed the lawsuit on behalf of Han Kim and Young Seok Kim, whose case stems from the killing of Pastor Kim Dong-shik by North Korean agents. A US court awarded approximately $330 million in damages in this case, and the latest ruling combines this ruling with two other rulings, Kaplan v. Democratic People’s Republic of Korea and Calderon Cardona v. Democratic People’s Republic of Korea, bringing the total claims to more than $877 million before interest.
The plaintiffs’ legal arguments cite the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act, which allow creditors to seize assets linked to state sponsors of terrorism. The filing names both Lazarus Group and APT-38 as tools of the DPRK.
Voting on governance conflicts with the legal claim
The Arbitrum DAO opened a quick vote on April 30 to determine whether Frozen Ethereum It should be transferred to the recovery initiative formed after the exploit. The proposal, prepared by Aave Labs with contributions from Kelp DAO, LayerZero, EtherFi, and Compound, seeks to direct funds to a multi-signature wallet managed by ecosystem participants and security firm Certora.
Voting data shows more than 99% support for the plan as of press time, with a May 7 deadline for temperature checks. The design limits the wallet’s functionality to receiving redeemed assets and using them to restore support for rsETH.
Aave Labs included an indemnification clause in the proposal, offering to cover the Arbitrum Foundation, Offchain Labs and Security Council members against claims associated with the freezing or release of funds. The extent to which this protection applies under active court-ordered restrictions remains unresolved.
The dispute is unfolding against the backdrop of a $292 million exploit that drained 116,500 rsETH from Kelp DAO’s LayerZero-based bridge on April 18. LayerZero’s analysis indicated a compromise of the RPC nodes and 1-on-1 validator setting that allowed a forged cross-chain message to pass validation, while Kelp DAO confirmed that the configuration followed the default deployment parameters.
Show cross-chain tracking mentioned in subsequent reports The attacker transfers the money Through Arbitrum and the conversion of assets into Tron-based USDT, a pattern that analysts said is intended to fragment the transaction path. Estimates cited by Yahoo Finance put North Korea-linked cryptocurrency thefts near $600 million in the first quarter, with the Kelp DAO incident accounting for a significant share.
Arbitrum’s freeze was initially framed as a step toward recovery, but the court-backed claim has now presented competing demands for the same pool of assets, leaving the DAO’s next move subject to legal constraints.
