Arbitrum DAO has approved the release of 30,765 ETH, worth about $71 million by the report’s estimate, to compensate users harmed in the April 18 Aave exploit. On-chain voting closed Friday Hong Kong time, with more than 90% of participants backing the move.
The ether had been frozen by the Arbitrum Security Council after the attack. According to the source material, the attackers used unsupported rsETH as collateral and withdrew around $230 million in ETH from Aave. The frozen funds were designated for a joint recovery effort involving Aave, KelpDAO, LayerZero, EtherFi, and Compound, with the stated goal of reimbursing affected users.
Federal court dispute now stands in the way
The vote does not mean the ETH will be released right away. The assets are now part of an active legal dispute in federal court in Manhattan. Last week, attorney Charles Gerstein filed a restraining notice against Arbitrum DAO on behalf of families holding roughly $877 million in unpaid terrorism compensation judgments against North Korea, arguing that the funds belong to the regime. That position is tied to widespread suspicions that the hack was carried out by the Lazarus cyber group.
Aave’s side asked earlier this week for the restriction to be lifted, saying the assets should go back to innocent users rather than North Korea. It also warned that a drawn-out case could create liquidity problems across DeFi markets. Gerstein has taken the opposite view, arguing that the matter is fraud rather than theft because the attackers allegedly obtained ownership by posting worthless collateral.
Eight-day delay leaves room for intervention
Under Arbitrum’s protocol rules, the governance decision cannot be executed for at least eight days. That delay is meant to leave time for any possible court action. The proposal also highlights legal protections for the Arbitrum Foundation, Offchain Labs, Security Council members, and governance delegates against claims tied to either freezing or releasing the funds. The vote settled one issue, but not the legal risk.
Speaking at the Consensus event in Miami, Aave Labs Head of Legal and Policy Linda Jeng said the incident has already changed how the platform evaluates risk. She said collateral standards are being revised to cover not only financial metrics but also cybersecurity, interoperability, and technical infrastructure reviews.
Jeng said, “During the financial crisis, we had to rescue banks. Now, as an ecosystem, we’ve come together to rescue ourselves.” The final outcome now depends on how the Manhattan federal court handles the dispute.