Recently, I saw a rather complex legal dispute in the Arbitrum community—a lawyer is fighting for compensation for victims of terrorism from decades ago, directly aligning with the interests of DeFi users. This is truly quite interesting.

Here's what happened. Last month, the Kelp DAO bridge was hacked, and 30,765 ETH were frozen on the Arbitrum network. The Arbitrum DAO Security Council planned to return these funds to the original rsETH holders, which seemed like a reasonable recovery step. But then, lawyer Charles Gerstein suddenly posted on the governance forum saying this was not acceptable; these ETH are actually assets of North Korea and should be used to satisfy legal judgments against North Korea.

What’s the logic behind this? U.S. authorities have linked the Lazarus Group, a hacking organization, to the North Korean government. According to this lawyer’s theory, those 30,765 ETH now become North Korean property. Moreover, he represents three cases with a total judgment amount of up to $877 million, all from old cases—victims’ families from the 1972 Lod Airport terrorist attack, families of hostages kidnapped in 2000, and victims from the 2006 Israel-Hezbollah conflict. These families won their lawsuits, but North Korea has never paid.

The legal tool the lawyer uses is New York CPLR §5222(b), a mechanism that allows creditors to freeze assets by sending a freeze notice, without needing a new court order in advance. Once the notice is delivered, the recipient is prohibited from transferring those assets; violating this can lead to contempt of court charges.

The problem is that Arbitrum DAO is not a traditional legal entity, so the risk isn’t directed at the DAO itself but at those who actually control the ETH. This makes things very complicated.

Community reactions are also quite divided. A delegate named Zeptimus argues that this legal basis is flawed; his point is that these ETH are not North Korean property but stolen property. According to basic property law, thieves do not acquire ownership, so these funds should belong to the original rsETH holders. From this perspective, freezing the recovery process essentially shifts the cost of North Korea’s debt onto another group of victims—those users who were hacked in DeFi exploits.

On the other hand, Entropy Advisors recommends voting to release these funds, citing that Aave users are incurring daily interest costs on frozen positions. Some have also asked whether Arbitrum’s insurance products could cover the liabilities of delegates in such cases—this involves not only ordinary delegate liability but also the risks of ongoing enforcement lawsuits.

Ultimately, this is a choice between two groups of victims. One side is Aave users whose positions are locked and cannot be closed. The other side is families holding decades-old judgments, continuously seeking compensation from North Korea. This case highlights the real-world dilemmas faced by DeFi and the complexities of international legal enforcement, with no perfect solution.