Arbitrum DAO Approves Release of 30,765.6 ETH to DeFi United

The Arbitrum DAO voted to release 30,765.6 ETH, about $70 million, to DeFi United to support restitution and recovery after the April exploit of Kelp DAO. The DAO recorded 182.2 million votes in favor, representing 90.96% of voting power. Roughly 9% of voters abstained.

The ETH earmarked for release had been frozen after an attacker moved funds to an Arbitrum One address following the April 18 breach. On April 20 the Arbitrum Security Council froze the tied ETH and moved those assets into a protocol-controlled address for safekeeping.

On April 18 an attacker exploited a single-verifier configuration in an Omnichain Fungible Token bridge to siphon 116,500 rsETH from Kelp DAO. Security teams traced part of the proceeds to an Arbitrum One address. The attacker supplied large amounts of the stolen rsETH to Aave as collateral to borrow WETH, generating about $190 million in bad debt on that lending market.

DeFi United formed as a coalition to coordinate compensation and mitigation efforts for Kelp DAO. Other contributors and commitments include a 30,000 ETH pledge from Consensys and its founder Joseph Lubin, a 30,000 ETH loan from Mantle, and a 5,000 ETH commitment from LayerZero. With the DAO vote, Arbitrum would become the largest donor to the multi-party restitution effort if the transfer proceeds.

Legal challenges may block the transfer. A May 1 court order, filed by multiple plaintiffs holding longstanding terrorism judgments against North Korea, seeks to attach the recovered ETH as restitution and restricts Arbitrum DAO from moving the funds pending further proceedings. Crypto attorney Gabriel Shapiro wrote on X, “Arbitrum DAO is not allowed to do anything with the KelpDAO funds for now, until a divestiture hearing.”

Aave LLC filed an emergency motion in federal court asking the judge to lift or modify the restrictions. In its filing Aave argued the court's order rests on unproven speculation that the Lazarus Group carried out the exploit and contended that temporary possession of stolen assets does not equate to ownership. The motion asks the court to reconsider the freeze so DeFi United and affected protocols can proceed with restitution actions.

DeFi United plans to marshal donor funds and loans to cover losses and stabilize affected markets while the legal disputes continue. The timing and distribution of the Arbitrum-held ETH now depend on the outcome of the divestiture hearing and other litigation tied to claims on the assets.