TheBlock
Lawyers representing holders of three unsatisfied terrorism judgments against North Korea served Arbitrum DAO on May 1 with a restraining notice barring the DAO from moving 30,766 ETH (~$71.1 million) frozen by the Arbitrum Security Council on April 20 after the $292 million Kelp DAO exploit. A New York federal court authorized substituted service on the DAO through a forum post, and the plaintiffs — victims of DPRK-backed attacks, not the Kelp hack — claim the funds belong to Pyongyang because LayerZero attributed the underlying bridge breach to the Lazarus Group.
The restraining notice bundles three judgments totaling more than $877 million in face value: a ~$330 million 2015 default judgment for the family of Reverend Kim Dong-shik, abducted and killed by North Korean agents; ~$169 million in Kaplan v. DPRK over alleged Hezbollah support during the 2006 Lebanon war; and $378 million in Calderon-Cardona tied to the 1972 Lod Airport attack. Filed by Gerstein Harrow LLP under the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act, the notice names the DAO as a garnishee and treats the frozen ETH as property in which North Korea has an interest.
Why it matters
Arbitrum DAO opened a Snapshot temperature check on April 30 — co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound — to send the frozen ETH to DeFi United, a cross-protocol relief fund funneling funds into a 3-of-4 Gnosis Safe to restore rsETH's economic backing. Over 99% of votes are currently in favor, with voting concluding May 7. The proposal carries an uncapped indemnification clause from Aave Labs covering the Arbitrum Foundation, Offchain Labs, and individual Security Council members, but whether that shield holds against an active federal restraining notice is untested.
The legal theory cuts at a precedent Gerstein Harrow has pressed before: that DAOs function as unincorporated associations whose members can be held personally liable for the entity's conduct.
Frequently asked questions
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Why is Arbitrum DAO being served with a restraining notice over the frozen Kelp ETH?
Lawyers for North Korea terrorism-judgment creditors, not Kelp hack victims, argue that LayerZero attributed the $292M Kelp DAO exploit to the Lazarus Group, making the 30,766 ETH (~$71.1M) frozen by the Arbitrum Security Council property in which North Korea has an interest.
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Who are the plaintiffs behind the restraining notice?
Gerstein Harrow LLP filed on behalf of Han Kim and Yong Seok Kim, whose family member Reverend Kim Dong-shik was abducted and killed by North Korean agents, bundling three unsatisfied default judgments against the DPRK totaling more than $877 million in face value.
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What is the DeFi United proposal on Arbitrum's Snapshot vote?
Co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound, the proposal sends the frozen ETH to a cross-protocol relief fund held in a 3-of-4 Gnosis Safe designated to restore rsETH's economic backing. Voting concludes May 7 with over 99% currently in favor.
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Can ARB delegates who vote yes on the DeFi United proposal be held personally liable?
That question is now live. Gerstein Harrow has argued in prior federal litigation that DAOs function as unincorporated associations whose individual members can be held liable for the entity's conduct, and at least one federal judge has allowed claims to proceed on that theory.
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Has this legal strategy been used against previous hack recoveries?
Yes. Blockchain sleuth ZachXBT noted on X that Gerstein Harrow has run versions of the same strategy after the Harmony and Bybit exploits, attaching restraining notices to funds frozen in those recoveries despite no relation to the underlying hacks.
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