Aave Files Emergency Motion to Lift $73 Million ETH Freeze Tied to Kelp DAO Exploit

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Aave LLC has filed an emergency motion in federal court to lift an order freezing roughly $73 million in Ether recovered after the Kelp DAO exploit. The filing challenges plaintiffs holding terrorism judgments against North Korea who want to claim the recovered Ether as restitution.

Aave argues the funds were stolen from its users, not owned by the attacker, and cannot be seized to pay North Korea’s liabilities.

Plaintiffs Seek Recovered ETH Based on Unproven Lazarus Attribution

The dispute centers on 30,766 ETH that the Arbitrum Security Council intercepted after the April 18 Kelp DAO exploit and set aside for victim recovery. A May 1 court order restricted Arbitrum DAO from moving the funds after plaintiffs holding existing terrorism judgments against North Korea moved to claim them.

The plaintiffs’ case rests on the theory that the Kelp DAO exploit was carried out by North Korea’s Lazarus Group. LayerZero has preliminarily attributed the attack to Lazarus, but that attribution has not been confirmed by U.S. law enforcement or independently verified in court.

Aave’s filing argues that even if the Lazarus link were proven, temporary possession of stolen assets does not create ownership. The funds were taken from Aave protocol users, not generated by the attacker.

Aave Founder: “A Thief Does Not Own What He Steals”

Aave founder Stani Kulechov framed the dispute in blunt terms. “A thief does not own what he steals,” Kulechov said in a statement, comparing the situation to a robber stealing diamonds from a jewelry store only to have them recovered by a bystander.

“These funds belong to the affected users they were stolen from, full stop,” he added.

The filing states directly:

“The Immobilized Assets are funds that were taken from Aave Protocol users, not assets owned by any alleged wrongdoer.”

Aave is asking the court either to vacate the restraining notice or to require the plaintiffs to post a bond of at least $300 million to cover potential damages if the freeze stays in place.

DeFi United Has Raised Over $327 Million for Victim Recovery

The recovered ETH was initially expected to form the first major pool of funds returned to exploit victims. That effort expanded into “DeFi United,” an industry-wide coalition that has raised more than 137,700 ETH, worth nearly $327 million, to backstop the losses from the Kelp DAO attack.

The coalition’s contributions are pending the release of the frozen ETH and the outcome of outstanding protocol governance votes. If the court lifts the freeze, the recovered funds would flow back into the broader recovery pool alongside DeFi United’s commitments. If the freeze holds, the largest single block of recovered funds remains locked while the terrorism-judgment plaintiffs pursue their claim.

The Case Tests Whether Terrorism Judgments Can Reach DeFi Recovery Funds

The plaintiffs hold valid judgments against North Korea tied to terrorism. They are arguing that if Lazarus carried out the exploit, the recovered proceeds can be seized to satisfy those judgments under existing enforcement mechanisms.

Aave’s position is that the funds were stolen from protocol users, not earned or held by North Korea, and that routing them to terrorism-judgment creditors would effectively make exploit victims pay for North Korea’s liabilities. The $300 million bond request is designed to underscore the scale of harm Aave says the freeze is causing to the actual victims of the theft.