Aave, one of the decentralized finance protocols in the cryptocurrency industry, filed an urgent application to the federal court in New York. Aave’s request is to cancel the freezing order issued by an American law firm named Gerstein Harrow, which prevented Arbitrum DAO from sending 30,766 Ether to the victims of the Kelp attack.
Background and litigation
In the legal notice submitted to Arbitrum DAO by Gerstein Harrow last week, it was stated that the law firm’s clients had debt judgments totaling $877 million against North Korea. These Ethers, which are allegedly thought to belong to the hacker group linked to the Kelp attack, are among the assets that can be legally claimed by the law firm’s clients.
In its urgent application, Aave argued that the owner of illegally acquired crypto money will not be deemed to have changed. In addition, it was stated that the application made by the law firm was inconsistent in terms of law and logic, since North Korea’s connection with the incident was only an allegation and had not been concretely proven.
“If stolen assets remain frozen and cannot be delivered to compensate protocol users for their losses, the stability of the entire DeFi ecosystem is at risk.”
Ave’s claims and its impact on the DeFi ecosystem
The Aave side argued that if the court approved Gerstein Harrow’s request, future attempts to recover losses following North Korea-related attacks would be at risk. It was also emphasized that the risk of malicious people taking advantage of such legal obstacles may increase in the future.
The legal team stated that the delay caused irreparable damage to the Aave protocol, its users and the DeFi industry in general. According to them, it is not possible to replace the lost assets materially; Moreover, such processes can lead to general instability in the DeFi space.
As part of the community vote that will end on May 7, the Arbitrum DAO is preparing to approve an industry-wide coordination effort called “DeFi United” to transfer Ether to victims. It was noted that this initiative was planned to protect rsETH holders who were damaged after the Kelp DAO attack on April 18.
The law firm’s past initiatives and litigation expectations
Aave lawyers have frequently emphasized that claiming that the Ethers subject to the case belong to North Korea is based solely on guesses on the internet, and that this justification is unfounded. Moreover, it is known that the law firm has previously filed similar lawsuits targeting North Korea-linked funds on platforms such as Bybit and Heco Bridge.
The court has not yet ruled on Aave’s urgent application and a hearing date has not been set. Additionally, if the court is unable to make an immediate decision, the Aave team is requesting that Gerstein Harrow post a $300 million bond if the notice remains in effect.
The Aave side presented the opinion that only predictions in internet posts were used as the basis of the case and that the short-term control of the assets by North Korea does not mean ownership.
While the number of such cases increases in the crypto ecosystem, legal obstacles to the efforts of decentralized protocols to compensate for post-attack losses attract attention.
