Judge Clears Path for Aave’s Recovery Effort

A Manhattan federal judge has issued a two-page order allowing Aave’s recovery effort to move forward after last month’s North Korea-linked rsETH exploit. The order permits an on-chain governance vote transferring $71 million in frozen ether out of Arbitrum while preserving the legal claim on the funds from North Korean terrorism victims.

The ruling resolves an immediate standoff that had threatened to derail a coordinated DeFi recovery effort after attorney Charles Gerstein, representing families holding unpaid terrorism judgments against North Korea, argued the frozen ETH could be seized. The transfer is part of Aave’s broader recovery plan and follows an earlier off-chain Snapshot temperature check where Arbitrum delegates overwhelmingly signaled support for returning the frozen ETH.

The order also shields participants from liability under the notice, stating that anyone who initiates or participates in the transfer would not violate the freeze. The ruling is a significant development in the ongoing efforts to recover assets linked to North Korea’s cyberattacks. It remains to be seen whether this decision will have any implications for other DeFi protocols and their handling of frozen funds.