The federal court in Manhattan approved Aave’s fund recovery initiative, which was launched after the North Korea-related rsETH attack last month. The decision paves the way for approximately $71 million of frozen ether in Arbitrum to be moved to a wallet controlled by Aave LLC, while protecting the legal rights of victims of a terrorist attack originating from North Korea over these assets.
Court decision and transfer process
According to the two-page court decision published by US Judge Margaret Garnett, the injunction previously applied to Arbitrum DAO was updated and the transfer of ETHs to Aave became possible with an on-chain governance vote. Another important detail about this process was that the transfer process was secured in a way that would not pose a legal risk for any participant. Therefore, there will be no “asset freezing” violation for those who initiate, vote or participate in the transaction.
Prior to this step, the Arbitrum community had clearly supported the return of funds to Aave in an off-chain Snapshot vote. However, the actual transfer will also require a binding on-chain governance vote.
Legal fight in DeFi and pressure on Arbitrum
Aave’s recovery plan has moved forward despite long-standing claims from victims of North Korea-related cyberattacks. Attorney Charles Gerstein represents victims of terrorism in U.S. courts against North Korea with uncollectible damages judgments totaling $877 million. Gerstein argued that this asset should be seized on behalf of the victims, on the grounds that the frozen ETH was linked to the Lazarus Group and supported by the Pyongyang administration.
Gerstein’s move on Arbitrum reflects a broader strategy of legal pressure on North Korea-linked digital assets on decentralized finance infrastructure. In particular, it is claimed that the funds transferred over the Railgun protocol were used by North Korean hackers to launder assets obtained from previous large-scale cyber attacks.
Complex litigation and Railgun claims
The plaintiffs allege that North Korean groups laundered assets obtained from many cybercrimes through Railgun, including the attack on the Bybit exchange, which is said to total $1.5 billion. It is reported that the Railgun protocol was supposed to detect and freeze these assets in advance, but since this was not prevented, the transfer of assets took place.
In March, a request for default judgment was submitted to the federal court clerk’s office in Washington after the protocol did not defend itself in the case filed against Railgun DAO. In addition, since the blockchain investment company Digital Currency Group purchased the Railgun governance token for $ 10 million in 2022, the plaintiffs claim that the company in question also took part in the management and economic processes.
In February, the plaintiffs made a separate application to secure the USDT amounts that the US government planned to seize.
The court’s latest decision is seen as a critical step in the asset freezing and fund management processes that have created controversy in the field of decentralized finance (DeFi) due to North Korea-related cyber attacks.
