Gerstein Harrow seeks to block transfer of frozen ETH tied to Kelp exploit

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Gerstein blocks ETH transfer

Highlights

Gerstein Harrow LLP secured a New York court order to block Arbitrum DAO from transferring over $73 million in Ether frozen after the Kelp DAO exploit.
The law firm's clients claim entitlement to DPRK-linked crypto assets based on $877 million in default U.S. judgments won against North Korea from 2010 to 2016.
If Gerstein Harrow's legal action prevails, DeFi victims of the $292 million Kelp DAO hack may face protracted recovery delays for their stolen funds.

Court order targets Arbitrum-held Ether

As reported by Cointelegraph, Charlie Gerstein of Gerstein Harrow LLP said in a post on the Arbitrum DAO forum on Friday that a New York district court has approved a restraining notice and three writs of execution aimed at preventing the DAO from transferring the frozen Ether. The firm argues the assets qualify as DPRK-linked property because the alleged hackers are affiliated with North Korea.

Gerstein Harrow says its clients, who were not victims of the Kelp exploit, won default judgments against North Korea in three separate U.S. court cases in 2010, 2015 and 2016. The firm says those judgments total $877 million in compensatory and punitive damages, plus interest, and that its clients therefore have a claim on property tied to the DPRK.

Kelp DAO suffered a $292 million hack on April 18, an attack believed to have been carried out by TraderTraitor, a subgroup of Lazarus Group, the North Korea-backed hacking unit. Days later, Arbitrum's security council took emergency action to freeze 30,766 Ether, valued at more than $73 million, in a wallet linked to the exploit.

Recovery delays add pressure on DeFi victims

Aave Labs proposed on April 25 that the Arbitrum DAO unfreeze the Ether and direct the funds to DeFi United, a vehicle intended to restore rsETH and compensate affected holders. If Gerstein Harrow's action succeeds, victims of the Kelp exploit could face a longer wait to recover their funds.

An Arbitrum DAO member using the handle Zeptimus said the law firm's approach would effectively shift North Korea's debt burden onto a separate group of victims whose funds were already stolen. The member argued that blocking the return of the Ether compounds the harm rather than redressing it.

The case adds to a broader pattern of claims by Gerstein Harrow over crypto assets allegedly linked to North Korea. The firm filed a similar claim in February over funds frozen by Tether after the 2023 Heco Bridge hack, and North Korea-linked actors have been accused of stealing at least $578 million across major incidents in April alone.

Our earlier coverage of New York’s settlement with Uphold over its marketing of the CredEarn product detailed how state authorities alleged misleading disclosures and insufficient registration, leading to significant customer losses after Cred’s bankruptcy. We also noted that the case fits into a wider New York enforcement push in digital asset markets, alongside escalating legal clashes over regulatory authority.

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