A federal judge in Manhattan last month cleared the way for Aave’s recovery efforts to move forward after the North Korean-linked rsETH exploit, allowing $71 million in frozen ether to be moved out of Arbitrum while preserving North Korean terror victims’ legal claim to the funds.
In a two-page format Published late Friday US time.Judge Margaret Garnett modified a restraining order previously served on the Arbitrum DAO to allow for an onchain governance vote to move the inactive ETH to a wallet controlled by Aave LLC.
The order also protects participants from liability under the notice, stating that anyone who initiates, votes or participates in a transfer will not violate the freeze.
Judge Garnett’s decision follows an earlier off-chain snapshot temperature test in which Arbitrum delegates strongly indicated support for the return of frozen ETH as part of Aave’s broader recovery plan. However, any actual transfer still requires a separate binding on-chain governance vote.
The decision resolved a quick impasse that threatened to derail a concerted effort to recover DFI after attorney Charles Gerstein, representing families with nearly $877 million in unpaid terrorism judgments against North Korea, argued that the frozen ETH could be forfeited because the exploit was widely attributed, backed by the group Lazang.
Beyond the Arbitrum Dispute
Gerstein’s action against Arbitrum fits into a broader legal strategy to pursue assets linked to North Korea as they appear on decentralized finance (DeFi) infrastructure.
In a separate January lawsuit, many of the terror judgment creditors that went after the arbitrage. Sued Railgun DAOAlleging that the Privacy Protocol allowed North Korean actors to transfer funds that should have been frozen and made available to creditors.
At the time, the plaintiffs claimed that North Korean hackers used Railgun to launder funds from earlier cyberattacks, including the $1.5 billion Bybit exploit, and argued that the protocol should have frozen those assets instead of allowing them to proceed.
They argued that once DPRK-controlled wallets were moving funds through the protocol, they became potential targets for asset freezes.
In March, they asked a clerk of federal court in Washington to enter a default against Relgun DAO because the protocol failed to respond to the complaint despite being served. Their complaint also names the digital currency group, which alleges that the crypto investment firm’s $10 million purchase of Railgun governance tokens in 2022 made it a stakeholder in the DAO’s governance and economics.
And in February, plaintiffs moved to preserve the USDT that the U.S. government sought to seize through a forfeiture motion.