Courts are now open to consider $71 million worth of frozen Ethereum after the Kelp DAO hack. Aave filed an emergency petition in a federal court in New York demanding the return of these funds to its users.

The developments unfolded as follows: after exploiting rsETH worth $292 million on April 18, the Ethereum Security Council successfully froze 30,766 Ethereum linked to the attacker. Just as the funds were about to be returned to the victims, the American law firm Gerstein Harrow LLP intervened. Citing a total amount of $877 million in damages related to terrorism issued against North Korea in 2010, 2015, and 2016, the firm obtained a restraining order on May 1. Their justification was that the attack was allegedly connected to the Lazarus group, so the frozen assets should be considered property of North Korea.
Aave’s lawyers took a firm stance against this claim. The petition states that "a thief does not become the legal owner of stolen goods just because they held onto them for a few hours," emphasizing that North Korea’s claim is based on online rumors and lacks concrete evidence. They also warned that continuing this freeze could prevent protocol users from fulfilling collateral obligations, and that the risk of chain liquidation could threaten the entire DeFi ecosystem. They are requesting the court to lift the freeze immediately, or if not possible, for the plaintiffs to deposit $300 million as collateral. An emergency hearing is scheduled for tomorrow.
This case is unprecedented in the DeFi world. For the first time, the court is discussing who owns the recovered funds from a hack. Whatever the outcome, it will set a precedent that will influence the future of all recovery operations.
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