Aave Seeks Court Order to Lift Freeze on $71M in Recovered ETH

Aave, a leading lending protocol, has filed an emergency motion with a US court to lift the freeze on $71 million in ETH. The funds were recovered after the KelpDAO exploit, which hit the rsETH markets and created pressure across Aave lending pools.

The restraining notice was served on Arbitrum DAO by plaintiffs in a separate North Korea-related case. Aave argues that the freeze now harms users whose assets were stolen, recovered, and meant for restitution. The company claims that a thief does not gain legal ownership by moving stolen assets on-chain, and that blockchain transfers show movement, not a valid title.

Aave's motion also challenges the claim that the funds can satisfy judgments against North Korea. The company argues that this theory depends on attribution, not a court finding that North Korea owns the ETH. This raises important questions for DeFi governance, as courts may treat DAOs as entities that can receive process and face legal restraint.

Aave is seeking temporary relief while it works with Arbitrum, KelpDAO, and DeFi United to rebuild support and reimburse affected users. The court has not ruled on the emergency motion yet, and Aave wants an expedited hearing. The outcome will determine whether the recovered ETH is returned to users or remains tied to outside litigation.