Court Order Freezes $73M ETH Linked to Kelp DAO Exploit

TLDR

• A US law firm filed a restraining notice to block the transfer of frozen Ether linked to the Kelp exploit.
• A New York district court approved three writs of execution against the Arbitrum DAO.
• The firm claims its clients are owed more than $877 million in damages by North Korea.
• The Arbitrum Security Council froze 30,766 ETH worth over $73 million after the Kelp DAO hack.
• Aave Labs proposed unfreezing the funds to compensate victims through DeFi United.
• An Arbitrum DAO member argued that blocking the funds would harm victims of the Kelp exploit.

A US law firm has taken legal action to stop the transfer of frozen Ether linked to the Kelp exploit. A New York court approved a restraining notice and writs of execution targeting the Arbitrum DAO. The firm claims its clients are owed more than $877 million by North Korea and seek access to the frozen assets.

Court Order Targets Kelp Exploit Funds

Gerstein Harrow LLP filed a restraining notice against the Arbitrum DAO in a New York district court. The court signed three writs of execution that block the movement of 30,766 ETH. The Ether remains frozen following emergency action tied to the Kelp exploit.

Charlie Gerstein posted details of the order on the Arbitrum DAO forum. He stated that the court order prevents any transfer under threat of contempt. He argued that the stolen Ether qualifies as DPRK property because the hacker group maintains state ties.

The firm said its clients secured default judgments against North Korea in 2010, 2015, and 2016. Those rulings awarded over $877 million in damages and compensation. The firm also claims interest continues to accrue on the unpaid amounts.

Gerstein Harrow stated that its clients hold valid claims to DPRK property. The filing asserts that the frozen Ether represents such property. Therefore, the firm seeks to attach those assets to satisfy the court judgments.

The Arbitrum Security Council froze the 30,766 ETH on April 18. The assets had an estimated value above $73 million at the time of action. Authorities linked the wallet to the Kelp DAO breach.

Kelp DAO reported a $292 million hack on April 18. Investigators attributed the breach to TraderTraitor, a subgroup of Lazarus Group. Officials have tied Lazarus Group to North Korea’s state-backed operations.

Dispute Over Compensation and DAO Response

Aave Labs proposed on April 25 that the DAO release the frozen funds. The proposal directed the $73 million in Ether to DeFi United. The fund aims to restore rsETH and compensate affected holders.

An Arbitrum DAO member known as Zeptimus responded to the filing. He said, “Your clients’ losses are real and the DPRK should answer for them.” He added that blocking the return of stolen funds shifts harm onto new victims.

Zeptimus argued that the restraining notice compounds the original loss. He said the measure prevents victims of the Kelp exploit from recovering assets. He maintained that the action does not redress prior court awards.

Gerstein Harrow has pursued similar claims in past crypto cases. In February, the firm filed a claim over funds frozen by Tether. Those assets related to the 2023 Heco Bridge hack.

The firm has also filed class-action suits against several DAOs. Onchain investigator ZachXBT accused the firm of using his research in court filings. He linked the claim to funds from the $1.5 billion Bybit hack.

North Korea-linked actors have faced accusations of large-scale crypto theft. Reports indicate they stole at least $578 million during April alone. Authorities also connected them to several major exchange breaches.

The Arbitrum DAO has not announced a final decision on the proposal. The frozen 30,766 ETH remains under court order. The restraining notice currently blocks any transfer of the assets.

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