On-chain detective ZachXBT has exposed a controversial legal maneuver by U.S. litigation law firm Gerstein Harrow LLP, which is attempting to claim approximately $71 million in frozen Ethereum (ETH) — assets recovered from the April 2026 hack of KelpDAO by North Korea's Lazarus Group.
The firm argues that the frozen funds should be used to satisfy a 2015 U.S. court judgment in the case Han Kim et al. v. North Korea, which stems from the kidnapping of a South Korean pastor in 2000. This judgment has no connection to the KelpDAO exploit. If successful, the strategy would place Gerstein Harrow's clients ahead of the actual victims of the 2026 hack in any recovery queue.
How the Scheme Works
On April 18, 2026, Lazarus Group exploited a vulnerability in the Layerzero V2 bridge to drain approximately $292 million from KelpDAO. The Arbitrum Security Council quickly froze 30,766 ETH (worth about $71 million at that time) to prevent further laundering. ZachXBT's on-chain investigation provided crucial evidence for the freeze.
Gerstein Harrow then filed claims asserting that the frozen ETH should be redirected to satisfy the 2015 judgment. This effectively seeks to funnel the assets away from the victims of the KelpDAO hack, who remain unable to recover their stolen funds. ZachXBT called the firm's approach "pure evil" and urged the crypto community to form a Decentralized Autonomous Organization (DAO) to mount a coordinated legal defense.
Community Response and Broader Context
ZachXBT's proposal gained immediate widespread support. Community members suggested pooling resources to hire legal teams and fight Gerstein Harrow in court to ensure the frozen funds are returned to KelpDAO. The incident highlights a new dimension in crypto theft recovery: traditional legal systems may be exploited to undermine on-chain transparency.
Lazarus Group has stolen over $6 billion in crypto since 2017, representing 76% of all hack losses in 2026. The KelpDAO attack was the group's second major operation in weeks, following a $285 million theft from Drift Protocol in early April. After the freeze, hackers have moved an estimated $175 million in ETH, complicating recovery efforts.
The outcome of this legal battle will set a precedent for how frozen hack proceeds are handled. Whether the $71 million returns to KelpDAO victims or is diverted through court order remains to be seen. ZachXBT's DAO plan represents a novel community-driven countermeasure against what he calls "predatory law firms."