Aave Challenges Legal Block on Frozen ETH in Kelp Exploit Case

Emergency Motion Filed to Release Arbitrum Funds

Aave has filed an emergency motion in a New York court seeking to lift a restraining notice that prevents Arbitrum DAO from transferring 30,766 ETH linked to the Kelp exploit. The motion directly challenges claims made by Gerstein Harrow LLP, which argues the funds should be tied to outstanding terrorism-related judgments against North Korea.

Aave contends that stolen assets cannot legally become the property of a thief, calling the opposing argument “illogical” and unsupported by law. The protocol also emphasized that attribution of the exploit to North Korea remains unproven.

Legal Dispute Raises Stakes for DeFi Recovery Efforts

The contested ETH is part of recovery efforts following the $292 million Kelp DAO exploit on April 18. A proposal is currently under vote to direct the funds toward DeFi United, aimed at restoring value for affected users.

Aave warned that continued restrictions could cause “irreparable harm” to users and the broader DeFi ecosystem, particularly where locked funds impact collateralized positions across platforms.

Bond Request and Broader Implications

If the restraining notice remains, Aave is requesting a $300 million bond from Gerstein Harrow. The case also raises wider concerns that such legal actions could discourage future fund recovery efforts and potentially incentivize further attacks on crypto protocols.