- A legal battle over $71 million in crypto seized from North Korean Hackers will be heard in a New York court on Wednesday.
- The funds, frozen by Arbitrum DAO after an April Kelp DAO hack, are claimed by victims with a decade-old judgment against North Korea.
- Aave LLC has filed an emergency motion, warning that freezing the assets risks destabilizing the DeFi ecosystem.
A federal judge in New York will hold an emergency hearing Wednesday to decide who gets $71 million in crypto that was nearly stolen by North Korean hackers in April. The outcome could complicate a broader industry effort to compensate victims of the April 18 Kelp DAO exploit.
On that date, hackers allegedly stole nearly $300 million in rsETH from the protocol. They then used the stolen assets as collateral to borrow more liquid crypto on Aave, the largest DeFi platform.
Arbitrum DAO successfully froze about $71 million of the funds, however. Consequently, the DAO planned to transfer the assets to a recovery fund for hack victims.
Meanwhile, other North Korean victims, including relatives of a slain minister with a $330 million judgment, served a restraining order on Arbitrum DAO. They claim the frozen assets belong to the state, citing Friday’s legal filing.
Aave LLC responded by asking the court to throw out the order to avoid “catastrophic injuries to the Aave Protocol, its users, and the DeFi system writ large.” The company argues the assets belong to its users, not North Korea.
Founder Stani Kulechov wrote on X, “We will keep fighting for the DeFi community.” He rejected the idea that a thief gains rightful ownership.
Consequently, the legal dispute creates problematic incentives according to Aave. The company stated, “No one would dare to stop a thief from stealing funds or property if the reward for being a Good Samaritan was a legal battle.”
The Arbitrum Foundation stated it is evaluating the situation carefully. Meanwhile, the DAO’s vote to send the funds to the recovery fund ends on May 7, one day after the emergency hearing.
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