Judge clears path for Aave to move $71 million in ETH linked to North Korea hack

A recent ruling by a Manhattan federal judge has paved the way for Aave’s recovery efforts to progress following the rsETH exploit linked to North Korea. The judge has authorized the transfer of $71 million in frozen ether out of Arbitrum, while also upholding the legal claim of North Korean terrorism victims on the funds.

Judge Margaret Garnett issued a two-page order on Friday, allowing an onchain governance vote to transfer the immobilized ETH to a wallet controlled by Aave LLC. The order also provides protection to participants involved in the transfer, stating that they would not be in violation of the freeze.

This decision comes after an off-chain Snapshot check where Arbitrum delegates showed overwhelming support for returning the frozen ETH as part of Aave’s recovery plan. However, a binding onchain governance vote is still needed for the actual transfer to take place.

The resolution of this dispute prevents any potential disruptions to the DeFi recovery efforts. Attorney Charles Gerstein, representing families with unpaid terrorism judgments against North Korea, had raised concerns about the frozen ETH being seized due to its connection to Lazarus Group, believed to be backed by Pyongyang.

Gerstein’s legal actions against Arbitrum are part of a broader strategy to target North Korean-linked assets in the DeFi space. In a separate lawsuit filed in January, the same terrorism judgment creditors sued Railgun DAO, alleging that the privacy protocol facilitated the movement of funds by North Korean actors that should have been frozen for creditors.

The plaintiffs claimed that North Korean hackers used Railgun to launder funds from cyberattacks, including the Bybit exploit, and argued that the protocol should have frozen these assets. They sought to secure USDT that the U.S. government had moved to seize through a forfeiture motion.

Overall, these legal actions highlight the growing efforts to track and recover assets linked to illicit activities on decentralized finance platforms. The involvement of the judiciary in overseeing such disputes underscores the importance of regulatory oversight in the rapidly evolving DeFi landscape.