Aave has filed an emergency motion in a New York court to fight a freeze order on $92 million worth of Ether. The order was requested by law firm Gerstein Harrow, which notified Arbitrum DAO that its clients hold $877 million in debt judgments secured against North Korea and that the frozen ETH is linked to a hacker group associated with the Kelp attack.
Background and Legal Proceedings
Last week, Gerstein Harrow formally informed Arbitrum DAO about the claim, arguing the Ether could be legally used to compensate its clients. In its filing, Aave countered that transferring stolen crypto does not create new legal ownership. The company emphasized that North Korea's involvement remains unproven and rests solely on allegations, making the freeze request legally and logically unfounded.
“If the frozen assets remain unavailable and victims cannot be compensated, the stability of the entire DeFi ecosystem could be at risk,” Aave stated.
Aave's Arguments and DeFi Impact
Aave warned that approving Gerstein Harrow's request could jeopardize future efforts to recover funds from North Korea-linked cyberattacks. The team highlighted the risk that malicious actors could exploit such legal barriers to hinder asset recovery. The ongoing delay is causing irreversible harm to both the Aave protocol and its users, according to Aave's legal representatives, and is undermining broader confidence in DeFi. They stressed that lost assets cannot be replaced financially, and prolonged legal disputes threaten the sector's overall stability.
Meanwhile, Arbitrum DAO is conducting a community vote ending on May 7 to authorize a plan called “DeFi United,” an industry-wide response aimed at compensating victims of the Kelp DAO breach on April 18, particularly rsETH holders.
Past Actions by the Law Firm and Outlook
Aave's attorneys repeatedly noted that claims linking the disputed Ether to North Korea rely only on online speculation, with no substantiated basis. Gerstein Harrow previously pursued similar actions targeting assets allegedly tied to North Korea on Bybit and Heco Bridge. So far, the court has neither ruled on Aave's urgent application nor set a hearing date. Aave has requested that if the freeze notice remains in effect, Gerstein Harrow be required to post a $300 million bond to mitigate potential damages.
The rise of such lawsuits spotlights the mounting legal hurdles decentralized protocols face when compensating users after attacks.