DeFi lender Aave and other stakeholders affected by last month’s Kelp DAO hack initiated a binding Arbitrum governance vote to move $71 million in disputed ether to an address controlled by Aave LLC
The Constitutional Arbitration Improvement Proposal (AIP) is the DAO’s formal on-chain governance mechanism for approving binding agreement actions. This revised proposal implements Judge Margaret Garnett’s recent court order authorizing an on-chain Arbitrum DAO vote to move frozen ETH from its current fixed address to a wallet controlled by Aave LLC, subject to respecting the notice of restrictions sought by North Korea Terrorism Judgment Creditors.
If approved, the proposal would move 30,765 ETH from the Arbitrum Security Committee’s wallet where the funds are fixed to an address controlled by Aave LLC, as required by the court order. However, these assets will still be subject to strict legal restrictions and Aave LLC will not be free to use, transfer or deploy these assets unless permitted by the court.
The legal battle over the frozen assets has taken an unusual turn after blockchain forensics firms widely blamed North Korea’s Lazarus Group for the breach. This attribution comes from blockchain analytics firms and external forensic research and has not yet been established as a legal finding within the Arbitrum governance process or ongoing court proceedings.
Still, lawyers representing families holding about $877 million in unpaid U.S. terrorism judgments against North Korea cited that attribution in a broader legal argument that if the assets are ultimately deemed to be tied to North Korea for enforcement purposes, they could be used to satisfy those long-standing court rulings.
Aave disputes this premise, arguing that the ether belongs to the user harmed in the exploit rather than the attacker who briefly took control of it, turning the case into a debate over whether funds should go to DeFi victims or terrorist creditors.
In a separate lawsuit, a number of terrorism judgment creditors sued privacy protocol Railgun DAO, claiming that the protocol allowed North Korea-related funds to flow through its infrastructure rather than freezing them as part of a broader strategy to pursue cryptocurrencies allegedly linked to Pyongyang in the decentralized finance space.
AIP voting is scheduled to begin on May 15.
