American-based law firm Gerstein Harrow issued a court order to prevent the transfer of frozen Ether belonging to the Kelp attack, citing its $877 million compensation claim against North Korea. Accordingly, the official letter issued by the New York district court prohibits Arbitrum DAO from transferring the frozen Ether funds elsewhere. In his application, Gerstein Harrow states that his clients were entitled to a total of $877 million in compensation in three separate cases against North Korea in 2010, 2015 and 2016. The company also claimed that the frozen Ether belonged to hacker groups linked to the North Korean state.
Kelp attack and frozen assets
Last April, the Kelp DAO suffered a massive $292 million attack. The attack is thought to have been carried out by TraderTraitor, which is identified as a subgroup of the famous hacker network called Lazarus Group, supported by North Korea. Shortly after the incident, the Arbitrum Security Council immediately froze 30,766 Ether (approximately $73 million) in a wallet linked to the attack. Then, how these funds should be used became a matter of debate.
Five days after the attack, Aave Labs submitted a proposal to Arbitrum DAO that the Ether in question should be unraveled and transferred to a fund called “DeFi United” and rsETH holders would be compensated for their losses. However, legal claims over ownership of frozen funds have complicated the process.
US law firm’s claim: Right to compensation and effort to seize funds
Gerstein Harrow law firm states that its clients have receivables in three different cases filed and concluded against North Korea, therefore the frozen Ether should also be considered “an asset belonging to North Korea”. Lawyer Charlie Gerstein, in his post on the Arbitrum DAO forum, announced that the official letter received from the American court blocked Arbitrum DAO’s Ether transfer and that if the decision is violated, the consequences will be severe.
There were statements emphasizing that the ownership of Ether, which was frozen on the grounds that it belonged to hacker groups affiliated with North Korea, was linked to the state and that the clients claimed rights over this asset.
A member of the Arbitrum DAO community with the nickname Zeptimus pointed out that if the law firm achieves its goal, the debt belonging to North Korea can be transferred to the victims of the Kelp DAO attack.
Other members of the DAO think that this obstacle to the frozen money reaching the real victims is unfair, and that those who suffered the real damage will be victimized a second time.
Legal disputes and previous examples in crypto funds
Gerstein Harrow has also previously laid claim to funds allegedly originating from North Korea and frozen in different exchanges or projects. It is known that an application was made in February for the assets frozen in Tether as a result of the Heco Bridge attack in 2023. Additionally, the company was actively involved in the $1.5 billion Bybit hack and class-action lawsuits filed against various DAOs.
Blockchain researcher ZachXBT accused the company of using its own research as documents in litigation. The company’s website shows there are three active cases.
It is known that actors affiliated with North Korea were involved in many hacking incidents that resulted in a total loss of at least $ 578 million in the crypto asset ecosystem throughout April and were mentioned in the largest cyber attacks in the sector.
