A federal judge in Manhattan has permitted the transfer of $71 million in frozen ether from Arbitrum to Aave, following a cyber exploit linked to North Korea. This decision maintains the legal claims of terrorism victims against the assets while enabling Aave’s recovery efforts.
In a two-page order issued late Friday, Judge Margaret Garnett modified a restraining notice that had previously been placed on Arbitrum DAO. The modification allows for an on-chain governance vote to facilitate the transfer of the immobilized ether to a wallet controlled by Aave LLC. The ruling also protects participants from liability, stating that those who vote or engage in the transfer will not violate the existing freeze.
This ruling addresses an urgent situation that had the potential to disrupt a coordinated recovery initiative in decentralized finance (DeFi). Attorney Charles Gerstein, representing families with approximately $877 million in unpaid terrorism judgments against North Korea, argued that the frozen ether could be subject to seizure due to its connection to the Lazarus Group, a hacking organization believed to be backed by the North Korean government.
Gerstein’s actions against Arbitrum are part of a wider legal strategy targeting North Korean-linked assets as they become accessible within DeFi platforms. In a separate lawsuit filed in January, the same group of creditors accused Railgun DAO of enabling North Korean actors to transfer funds that should have been frozen. The plaintiffs claimed that North Korean hackers utilized Railgun to launder funds from past cyberattacks, including a notable $1.5 billion exploit involving Bybit.
They contended that Railgun should have prevented these assets from moving and should have instead frozen them to protect creditor claims. Following the movement of funds through DPRK-controlled wallets, these assets became potential targets for collection.
In March, the plaintiffs requested a default entry against Railgun DAO in a Washington federal court, asserting that the protocol did not respond to their complaint despite being served. Their complaint also implicates Digital Currency Group, alleging that its $10 million acquisition of Railgun governance tokens in 2022 positioned it as a participant in the governance and economic structure of Railgun.
Additionally, in February, the plaintiffs sought to secure USDT that the U.S. government aimed to seize through a forfeiture motion.
A Manhattan federal judge has authorized the transfer of $71 million in frozen ether to Aave, while preserving legal claims from North Korean terrorism victims. The ruling follows a broader strategy to pursue North Korean-linked assets in decentralized finance.