Aave has filed an emergency motion in the U.S. District Court for the Southern District of New York seeking to vacate a restraining notice that froze roughly 30,766 ETH tied to the April 18, 2026 Kelp DAO exploit. The assets, valued at about $71 million to $73 million, had been intercepted after the hack and were expected to support a DeFi recovery plan for affected users.
The filing turns a crypto recovery effort into a legal test over ownership, restitution and creditor claims. Aave argues that stolen assets cannot become lawful property simply because they briefly passed through an alleged attacker’s control.
Aave LLC has filed an emergency motion to vacate a restraining notice served on Arbitrum DAO on May 1, 2026 that attempts to seize approximately $71 million in ETH belonging to victims of the April 18 exploit.
A thief does not gain lawful ownership of stolen property simply by… pic.twitter.com/NwgKIdU1L7
— Aave (@aave) May 4, 2026
Aave Challenges Third-Party Claim to Frozen ETH
The restraining notice was obtained on May 1, 2026 by Gerstein Harrow LLP, which represents clients holding a default judgment against the Democratic People’s Republic of Korea. The firm argues that its clients may be entitled to the frozen ETH because the funds allegedly passed through a hacking group commonly associated with North Korea.
Aave rejects that theory. In its motion, the protocol frames the issue around basic property law: thieves do not obtain lawful title to stolen assets. Founder Stani Kulechov put the argument plainly: “A thief does not own what he steals. These funds belong to the affected users they were stolen from—full stop.”
Aave’s counsel described the plaintiffs’ claim as speculative and legally unsound, warning that keeping the freeze in place could cause irreparable harm to users and recovery operations. The protocol asked the court either to lift the restraining notice quickly or require the plaintiffs to post a cash bond of at least $300 million.
Court Order Collides With On-Chain Recovery
The frozen ETH was held by Arbitrum’s Security Council after the Kelp DAO exploit. Arbitrum has been coordinating with recovery efforts intended to return value to affected users, while the Arbitrum DAO is separately voting on a proposal to route the funds to a governance-approved recovery vehicle called DeFi United.
That DAO vote is expected to conclude on May 7, 2026. Before then, Aave has requested an expedited hearing before Judge Margaret Garnett on May 6 at 11:00 a.m.
The proposed $300 million bond is meant as a backstop if the court does not immediately vacate the freeze. Aave argues that prolonged immobilization of the ETH could trigger cascading losses, including liquidations across lending markets.
The dispute highlights a structural fault line between on-chain governance and off-chain legal enforcement. DeFi recovery mechanisms are designed to move quickly after an exploit, but traditional judgment creditors can still seek court orders that interrupt those processes.
The next two milestones will determine the immediate path forward: the May 6 hearing and the May 7 Arbitrum DAO vote. If the court lifts the restraining notice, governance channels may proceed toward user restitution. If the freeze remains, DeFi markets could face a longer legal process, delayed recovery and added liquidity stress.
