In a significant legal move, decentralized finance (DeFi) protocol Aave has filed an emergency motion in New York, seeking to overturn a restraining notice from the law firm Gerstein Harrow. This notice currently prevents the Arbitrum DAO from reallocating 30,766 Ether (ETH) that was frozen due to a hacking incident known as the Kelp exploit.
Gerstein Harrow LLP had asserted that their clients are entitled to these assets, claiming over $877 million based on alleged debts tied to North Korean hackers responsible for the exploit. The law firm contends that because these hackers possessed the stolen tokens, they have a legal claim over the frozen Ether.
Aave's Legal Justification
Aave counters this position, arguing emphatically that theft does not confer lawful ownership. Their legal team has criticized the rationale behind Gerstein Harrow’s claims, stating that it “defies logic, common sense, and the law.”
The protocol emphasizes that North Korea's alleged involvement in the Kelp exploit is based on mere suspicion, not concrete evidence. Their court documents highlight that the immobilized assets rightfully belong to users of the Aave protocol who suffered losses during the cyber-attack on April 18, 2026.
The Consequences of Inaction
Aave's lawyers further argue that if the restraining notice is upheld, it will set a dangerous precedent, potentially deterring future recovery efforts for victims of such hacks. They believe that this could encourage more cybercriminals to target DeFi platforms if they sense the possibility of legal challenges to recover stolen funds.
“The immobilized assets do not belong to North Korea or any affiliated entities. Instead, they are owned by those users victimized by the exploit,” the Aave legal team stated.
Potential Legal Implications
If the court does not act to vacate the notice quickly, Aave is requesting that Gerstein Harrow post a $300 million bond to maintain the restraining order until a decision is reached. The court has not yet scheduled a hearing date for this emergency motion.
Gerstein Harrow has a history of filing similar claims where they assert their clients have rights to frozen assets linked to North Korea’s cyber activities, including past cases related to the 2023 Heco Bridge hack and the 2025 Bybit exploit.
Community Impact and Voting Decisions
The broader DeFi community is watching closely, as the Arbitrum DAO is currently engaged in a voting process to decide whether to release the frozen Ether to support DeFi United, an initiative focused on rectifying the consequences of the Kelp exploit. Voting will conclude on May 7.
Aave's proposals hinge on the urgent need for these funds to stabilize the protocol and restore trust within the DeFi ecosystem—a functionality that may be jeopardized by the ongoing freeze.
For updates on this developing story, stay tuned.
Source: Cointelegraph
