US Law Firm Blocks Arbitrum ETH Transfer in Kelp DAO Exploit Recovery Dispute

New York Court Action Freezes Ethereum From Kelp DAO Hack

A US law firm, Gerstein Harrow LLP, has filed a restraining notice in a New York federal court seeking to block the transfer of approximately 30,766 ETH, worth around $73 million, that was frozen following the Kelp DAO exploit. The court also issued writs of execution preventing Arbitrum DAO from moving the funds, according to filings shared on governance forums.

The firm argues its clients hold unpaid default judgments totaling more than $877 million against North Korea from cases in 2010, 2015, and 2016. These include compensation claims linked to terrorism-related incidents such as Kaplan v. DPRK, Calderon-Cardona v. DPRK, and the Kim Dong-shik abduction case. The lawyers claim the frozen Ethereum qualifies as DPRK-related property due to alleged attribution of the hack to the Lazarus Group and APT-38.

Arbitrum DAO Recovery Proposal and DeFi United Plan

The Kelp DAO exploit on April 18 resulted in roughly $292 million in losses, reportedly linked to North Korea’s TraderTraitor subgroup. Arbitrum’s Security Council froze the ETH on April 20 after tracing wallet activity. A competing proposal backed by Aave Labs and partners, including Kelp DAO and LayerZero, suggests redirecting the funds into a recovery structure called DeFi United to compensate rsETH holders.

Legal Conflict Over Crypto Victims and Sovereign Claims

The restraining notice raises a conflict between terrorism judgment creditors and hack victims seeking restitution. Critics argue the legal action could delay recovery for affected users while expanding claims over frozen digital assets tied to state-linked cyber incidents.