Arbitrum freeze of $71 M KelpDAO ETH blocked by US court

Arbitrum’s Security Council seized 30,766 ETH—about $71 million—linked to the Kelp DAO exploit, but a U.S. district court order now bars the DAO from accessing the funds [1]. The freeze, intended to aid a coordinated DeFi recovery effort, has been caught in a competing claim by families of North Korean terrorism victims who argue the crypto is DPRK property.

Key takeaways

• Arbitrum’s Security Council froze 30,766 ETH after the April 18 Kelp DAO bridge hack [3].
• A Southern District of New York restraining order on May 1 bars any transfer of the frozen ETH [2].
• Plaintiffs are U.S. nationals whose relatives were killed by North Korea; they cite a 2015 judgment awarding them over $300 million in damages [1].
• The freeze disrupts the Aave‑led “DeFi United” recovery coalition that had pledged more than $311 million, including the frozen ETH as its largest contribution [2].
• A divestiture hearing will decide final control of the assets, highlighting the tension between decentralized governance and centralized legal authority [1].

Court order halts Arbitrum’s emergency action

When the Kelp DAO bridge was drained of roughly $292 million on April 18, Arbitrum’s Security Council acted quickly, routing the stolen ETH to an address it controls and announcing the freeze on its official X account [3]. The council’s emergency powers, built into Arbitrum’s hybrid governance model, allowed it to block further movement of the funds on the Arbitrum One network. However, the same centralized step placed the assets within the reach of U.S. courts. On May 1, the Southern District of New York issued a restraining order that prohibits Arbitrum from transferring the 30,766 ETH, valued at about $71.1 million, until a divestiture hearing determines rightful ownership [2].

The plaintiffs—Han Kim and Yong Seok Kim, U.S. citizens whose relative was killed by North Korea—have previously secured a judgment exceeding $300 million against Pyongyang in 2015. Their lawyers argue that the frozen ETH constitutes DPRK property because LayerZero linked the April 18 hack to North Korea’s Lazarian Group, invoking the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act to attach the assets [2].

Recovery effort stalls as legal claim takes precedence

The freeze was a cornerstone of the “DeFi United” recovery initiative, led by Aave, Kelp DAO, and LayerZero, which had assembled pledges totaling more than $311 million from entities such as ConsenSys, Mantle and Aave founder Stani Kulechov [2]. A snapshot vote on April 30 showed 99 % support for releasing the frozen ETH, with a May 7 deadline for a decision. Attorney Gabriel Shapiro, reviewing the court filing, emphasized that the freeze carries real legal weight and that the DAO cannot act until a divestiture hearing resolves the competing claim [1][2].