# Arbitrum DAO Faces Legal Hurdle Over 30,765 ETH Recovery

**Published:** 2026-05-29T17:16:52.000Z  
**Topic:** Arbitrum  
**Sentiment:** neutral  
**Publisher:** TrendWatcher — https://www.trendwatcher.in/article/b2019871-9bad-4b6b-8e35-669cd2c99df0

Arbitrum DAO is voting on whether to release 30,765 ETH to the DeFi United fund, but a legal restraining notice has placed the assets in limbo.

The Arbitrum DAO is currently weighing a proposal to release 30,765 Ether to the DeFi United fund, a move intended to address bad debt stemming from the Kelp DAO exploit [1]. However, the distribution of these assets has been stalled by a legal restraining notice filed by the law firm Gerstein Harrow LLP, which has placed the funds in a state of legal limbo [1].

**Key takeaways**
* Over 90% of Arbitrum DAO members have voted in favor of releasing the frozen 30,765 ETH to the DeFi United fund [1].
* The funds are intended to help recover losses from the Kelp DAO exploit, which left Aave with more than $190 million in bad debt [1].
* A US law firm, Gerstein Harrow LLP, filed a restraining notice to prevent the DAO from redistributing the assets [1].
* Aave has filed an emergency motion to vacate the restraining notice to allow the recovery process to proceed [1].

## The push for recovery following the Kelp DAO exploit
The Kelp DAO exploit caused significant disruption across the decentralized finance ecosystem, leading to a $190 million shortfall for the lending platform Aave [1]. The hacker utilized stolen rsETH tokens as collateral to borrow wrapped Ether, triggering a massive wave of withdrawals and causing Aave’s total value locked to drop by nearly $12 billion in a single week [2]. Aave Labs has requested that the 30,765 ETH held by the Arbitrum DAO be transferred to a recovery address managed by Aave, Kelp DAO, and the security platform Certora [2].

Aave Labs claims that a full recovery of these funds would restore the backing for rsETH and normalize conditions for liquidity providers and borrowers [2]. The organization estimates that the recovery effort would take approximately 49 days and has committed to returning the funds if the initiative fails [2]. While the proposal has gained significant support from the DAO, the restraining notice remains a primary obstacle [1].

## Legal challenges and the path forward
The situation remains complex as Aave seeks to secure the necessary commitments to finalize the recovery [1]. Beyond the Arbitrum DAO’s assets, Aave is also working to clear the hacker’s remaining collateral on Ethereum and Arbitrum, which is valued at approximately $30.2 million [1]. 

Aave is currently awaiting further commitments from stablecoin issuers including Circle, Ethena, and Frax, as well as the Kraken-built layer 2 network, Ink [1]. Aave representatives have stated that these commitments are essential to "get it over the line and plug the hole" created by the exploit [1]. As of late April, voting on the Arbitrum DAO proposal was scheduled to close on a Friday, though the legal status of the assets continues to dictate the timeline for any potential distribution [1].

## Sources
1. CoinTelegraph — [Aave liquidates Kelp DAO hacker's rsETH positions on Ethereum, Arbitrum](https://cointelegraph.com/news/aave-liquidates-kelp-dao-hackers-rseth-stash-ethereum-arbitrum)
2. CoinTelegraph — [Aave asks Arbitrum to send 30K ETH from Kelp exploiter to ‘DeFi United’](https://cointelegraph.com/news/arbitrum-dao-asked-to-unfreeze-30k-eth-tied-to-kelp-hacker-direct-them-to-defi-united)

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Cite as: TrendWatcher, "Arbitrum DAO Faces Legal Hurdle Over 30,765 ETH Recovery", https://www.trendwatcher.in/article/b2019871-9bad-4b6b-8e35-669cd2c99df0