Arbitrum DAO votes to free 30,766 ETH to DeFi United

Arbitrum DAO members opened an on-chain vote this week to release 30,766 ETH that the Arbitrum Security Council froze after the Kelp DAO exploit. Early voting showed strong support, with 16.9 million ARB tokens cast in favor in the first hour and no recorded votes against. The vote closes on May 7.

The proposal would transfer the ETH held at a quarantined Arbitrum One address, 0x0000000000000000000000000000000000000DA0, to DeFi United. The Security Council moved the funds into that address on April 20 under its emergency authority; the freeze was approved by nine of the council’s 12 members. Releasing the ETH requires a governance decision by the DAO.

DeFi United is a coalition led by Aave that has coordinated compensation and liquidity actions after the Kelp DAO breach. Contributors have pledged or loaned more than $311 million in ETH and stablecoins. If the Arbitrum DAO approves the transfer, Arbitrum would be the largest single contributor to the recovery pool to date. Other commitments include a combined 30,000 ETH from ConsenSys and Joseph Lubin, a 30,000 ETH loan from Mantle, a pending Aave DAO vote to release 25,000 ETH plus a 5,000 ETH pledge from Aave’s founder, and 5,000 ETH from LayerZero with an additional 5,000 ETH to be deployed on Aave to earn interest. Kelp DAO has contributed 2,000 ETH.

Earlier this month attackers exploited a cross-chain communication channel used by Kelp DAO to drain about $292 million worth of the protocol’s rsETH, roughly 18% of rsETH’s circulating supply. The stolen assets were moved through lending platforms such as Aave, Compound and Euler and used as collateral to borrow wrapped ether and other tokens, creating roughly $236 million in debt positions. In response, Kelp and several lending protocols paused affected markets and contracts.

The Security Council said it coordinated with law enforcement before acting. The council wrote, “The Security Council acted with input from law enforcement as to the exploiter's identity, and, at all times, weighed its commitment to the security and integrity of the Arbitrum community without impacting any Arbitrum users or applications.” Some observers raised concerns about the use of emergency powers and the implications for on-chain immutability, while others supported the council’s intervention on the basis of its mandate to protect the network.

If the DAO approves the proposal, the 30,766 ETH will be routed to DeFi United’s recovery pool to be used with existing donations and loans to repay affected users and shore up rsETH reserves. The governance vote will be enacted or rejected after it closes on May 7 based on the final tally.