Arbitrum DAO Faces Urgent Request to Release $71M in Ethereum Funds

Aave Labs and Kelp DAO are requesting the release of $71 million in Ethereum funds from the Arbitrum DAO to support the recovery of rsETH, a digital asset affected by a recent exploit. The proposal would direct the recovered funds to DeFi United, a cross-protocol recovery effort formed after the $292 million Kelp DAO exploit.

The assets were frozen by the Arbitrum Security Council after being linked to the exploiter and are worth approximately $71 million, based on Ethereum trading prices near $2,317. The proposal outlines that the recovered funds would be moved to a 2-of-3 Gnosis Safe managed by Aave, Kelp DAO, and Certora, with the primary goal of restoring rsETH's economic backing.

The incident is described as an external exploit affecting assets used across DeFi markets, rather than a direct failure in Aave's lending system. The proposal includes an indemnification clause from Aave Labs covering the Arbitrum Foundation, Offchain Labs, and Security Council members. However, some delegates have raised concerns about the 49-day governance process, which may delay urgent recovery plans for users with active Aave positions.