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US Law Firm Seeks to Halt Transfer of Frozen ETH From Kelp Exploit

US Law Firm Seeks to Halt Transfer of Frozen ETH From Kelp Exploit

Court-backed notice seeks to block the movement of ETH tied to exploitation.

Written by Rahul Dhingra, Edited by David Delima | Updated: 4 May 2026 15:32 IST

US Law Firm Seeks to Halt Transfer of Frozen ETH From Kelp Exploit

Photo Credit: Unsplash/Jievani Weerasinghe

Court order challenges planned recovery of exploit-linked Ether assets

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Highlights

Law firm cites unpaid judgments tied to North Korea
Restricting notice targets frozen ETH linked to the exploit
Arbitrum recovery efforts face a potential legal obstacle

In the aftermath of the Kelp exploit last month, a US law firm has taken steps to file a restraining notice to block the transfer of frozen Ether. The law firm argued that its clients are owed $877 million (roughly Rs. 8,333 crore) in compensation and damages by North Korea. On Friday, a lawyer from the US law firm Gerstein Harrow LLP named Charlie Gerstein said in a statement on the Arbitrum DAO forum that the New York district court signed off on a restraining notice and three writs of execution preventing the Decentralised Autonomous Organisation (DAO) from moving Ether under threat of contempt of court.

Legal Dispute May Delay Recovery Process for rsETH Holders

The law firm said its clients, who were not affected by the Kelp exploit, obtained default judgements against North Korea in three separate US court cases in 2010, 2015, and 2016 and are owed a collective $877 million (roughly Rs. 8,333 crore) in compensatory and punitive damages, plus interest. It also said it has a claim on DPRK property for its clients.

Gerstein further added in the restraining notice that the stolen Ether is actually categorised as “property” in which the DPRK has a stake because the hacker group is affiliated with the country. The freeze could mean that those affected by the Kelp exploit will have to wait longer to get their funds back.

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A member of the Arbitrum DAO who goes by the identity Zeptimus said that if the law firm's effort is successful, the DPRK debt will be handed over to the victims of the Kelp DAO. “The rightful owners are the rsETH depositors whose funds were drained. Their ownership claim didn't extinguish when Lazarus moved the tokens. It followed the assets. DeFi United is not a third party receiving a windfall from the DAO. It's a coordinated mechanism for returning those assets to the original owners.”

Last month, Aave Labs had proposed that Arbitrum should unfreeze $73.5 million (roughly Rs. 698 crore) in Ethereum tied to the Kelp DAO attack and direct those funds to a fund called “DeFi United,” which has a core objective of restoring rsETH and compensating its holders. Aave Labs has ensured that a full recovery would not only restore rsETH's backing but also assist in normalising conditions for its holders, liquidity providers, and borrowers on Arbitrum and other DeFi protocols.

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Rahul Dhingra

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Rahul Dhingra is a crypto writer at Gadgets 360, where he covers the exciting world of Cryptocurrency, Blockchain, Defi and Web3. Before joining Gadgets 360, he worked as a content specialist for a European-based Crypto Exchange. Rahul loves storytelling, not just through the written word but also through the visual medium. Beyond his professional life, Rahul is a sports fanatic. Whether it’s cricket or football, his passion for the game is contagious. More