- Arbitrum froze over $71 million in Ether connected to the Kelp exploit.
- The security council took emergency action, moving funds to a governance-controlled wallet.
- The $293 million Kelp exploit is linked by LayerZero to North Korea and caused cascading bad debt.
- The freeze sparked debate, with critics questioning Arbitrum‘s decentralization.
The Arbitrum layer-2 blockchain took dramatic action on Monday, freezing over 30,000 Ether worth approximately $71.2 million held in a wallet tied to Saturday’s massive Kelp exploit. Its elected 12-member security council stated it performed an “emergency action” to protect the community. Consequently, the ETH was transferred to an intermediary frozen wallet accessible only through further governance decisions.
Kelp, a liquid restaking protocol, was hacked for at least $293 million through its LayerZero-powered bridge. LayerZero has accused North Korea of carrying out the sophisticated attack. This exploit has created millions in “bad debt” within the interconnected crypto lending market as attackers used stolen tokens to borrow on platforms like Aave.
However, the decision to freeze funds proved divisive within the crypto sector. Multiple users on X criticized the move and questioned Arbitrum‘s decentralization. Security council member Griff Green posted that the group “did not make this decision lightly, there were countless hours of debates.”
The council ultimately voted with nine members supporting the freeze after weighing its commitment to security. It acted with input from law enforcement, aiming not to impact any Arbitrum users or applications. Meanwhile, the broader implications of such centralized interventions continue to spark debate about blockchain integrity versus security.
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