Federal judge Margaret Garnett, sitting in the Southern District of New York, allowed Arbitrum DAO to transfer $71 million of cooled Ether to decentralized finance platform Aave. This step represents an important threshold in the recovery process initiated after a North Korea-related cyber attack.
Court decision and legal process
The decision came with the amendment of the restriction notice, which ensures that assets in Arbitrum DAO’s reserve remain locked. It will now be possible to transfer assets to the digital wallet under the control of Aave LLC as a result of the on-chain management vote by the community. The court also specifically stated that no one involved in the transfer can be accused of violating the current freezing measure.
Still, the court’s decision preserves the legal rights of terror victims who were directly harmed by the attack to the fund. For this reason, the resources to be transferred cannot be used completely freely; If the final decision is in favor of the victims, Aave will be obliged to deliver the funds.
The court emphasized that the assets to be transferred through on-chain community voting will protect the parties involved in the process from possible legal violations and that the victims’ claim continues.
Effects of North Korea-related attack
Following the North Korea-related rsETH attack last month, the Arbitrum community strongly supported transferring funds to Aave in an off-chain Snapshot vote as part of a larger recovery plan Aave is developing. But a final, binding transfer also requires an on-chain governance vote.
Last week, Aave filed an emergency request with a New York court to lift the restraining order preventing Arbitrum DAO from delivering these funds to victims of the Kelp DAO attack. This legal obstacle was placed through the Gerstein Harrow law firm. That firm represents families with judgments totaling $877 million in unpaid terrorism damages against North Korea and claims its clients are entitled to funds stolen during the April attack.
Aave, on the other hand, stated that people holding the stolen asset cannot gain legal ownership of it and that the attribution of the attack to North Korea was largely based on internet rumors. He also warned that the court’s support for the restriction order could disrupt similar recovery efforts in the DeFi ecosystem and lead bad actors to exploit such legal uncertainties.
Huge open in rsETH after Kelp attack
The Kelp DAO attack created a serious gap in rsETH reserves. Following the attack, 116,500 rsETH on Ethereum were removed from the system, but an equivalent amount of assets were not burned at source. There are currently only 40,373 rsETH adapter contracts, bringing the total to support to 152,577 units. In this case, it was calculated that there was a deficit of approximately 76,127 rsETH, or 174.5 million dollars at current prices.
While the 30,765 ETH in Arbitrum’s possession is considered to be an important start for the solution, the community thinks that the transferred funds will close at least part of the rsETH gap, which will be a stabilizing step for Arbitrum and the DeFi market in general.
The community argues that the release of frozen funds would be meaningful in terms of restoring users’ trust and reducing their impact on the market.
