CoinDesk
A Manhattan federal judge has cleared Aave to move roughly $71 million in frozen ether tied to a North Korea-linked exploit off Arbitrum, while preserving the legal claim terrorism victims hold on the assets. In a two-page order released late Friday U.S. time, Judge Margaret Garnett modified a prior restraining notice served on Arbitrum DAO, allowing an onchain governance vote to transfer the immobilized ETH to a wallet controlled by Aave LLC. The order also shields anyone who initiates, votes on, or participates in the transfer from liability under the freeze.
The dispute centers on the rsETH exploit from last month, widely attributed to Lazarus Group, the hacking operation backed by Pyongyang. Attorney Charles Gerstein, representing families holding roughly $877 million in unpaid terrorism judgments against North Korea, argued the frozen ETH was fair game for seizure because of that attribution. The order resolves the immediate standoff but does not extinguish the underlying claim — the legal freeze follows the assets, meaning the creditors' pursuit does not end at the Arbitrum bridge.
Why it matters
The ruling is a narrow procedural win that lets a coordinated DeFi recovery effort proceed, but it also embeds a structural tension into onchain asset recovery: governance can move the funds, yet the restraining notice moves with them. Arbitrum delegates had already signaled support in an off-chain Snapshot temperature check; a binding onchain vote is still required before any ETH changes hands.
Gerstein's broader legal strategy is reaching across DeFi infrastructure wherever North Korea-linked wallets surface. In January, many of the same plaintiffs sued Railgun DAO, alleging the privacy protocol let DPRK actors move funds that should have been frozen — including proceeds from the $1.5 billion Bybit exploit. The complaint also names Digital Currency Group over its $10 million 2022 purchase of Railgun governance tokens, a theory that, if sustained, would make institutional token buyers participants in DAO governance for liability purposes. Plaintiffs have since sought default against Railgun and moved to secure USDT the U.S.
Frequently asked questions
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What did the judge actually allow Aave to do?
Judge Margaret Garnett modified a prior restraining notice on Arbitrum DAO, letting governance vote to transfer roughly $71 million in frozen ETH to an Aave-controlled wallet. Anyone initiating, voting on, or participating in the transfer is shielded from liability under the freeze.
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Is the restraining notice now lifted on the ETH?
No. The order modifies the freeze to permit the transfer but does not extinguish the underlying claim. The legal cloud follows the assets to the destination wallet, meaning terrorism judgment creditors can keep pursuing the ETH after it moves.
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What is the rsETH exploit and who is Lazarus Group?
The rsETH exploit hit Aave roughly a month before the ruling, and has been widely attributed to Lazarus Group, the hacking operation backed by North Korea. Attorney Charles Gerstein argued the frozen ETH could be seized for that reason, on behalf of families holding about $877 million in unpaid terrorism judgments…
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Does the ruling let Aave return funds to affected users?
It removes the immediate legal obstacle to doing so, but a separate binding onchain governance vote on Arbitrum is still required before any ETH actually moves. Arbitrum delegates had already signaled support in an off-chain Snapshot temperature check.
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How does this connect to the Railgun and Digital Currency Group lawsuit?
The same plaintiffs suing over the frozen ETH also sued Railgun DAO in January, alleging the privacy protocol helped North Korean actors launder funds including proceeds from the $1.5 billion Bybit exploit. The complaint names Digital Currency Group over its $10 million 2022 purchase of Railgun governance tokens, a…
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