[Constitutional] AIP: Approve Release of Frozen ETH

Proposals
21

I want to start by acknowledging the users impacted by this incident. Many have been put in a difficult position through no fault of their own, and as @Entropy pointed out, in some cases the costs are continuing to accrue daily. I also want to recognize the broader ecosystem response here: the coordination and contributions through the DeFi United effort are encouraging and reflect a meaningful commitment to making affected users whole and ensuring that DeFi will win.

At a high level, I support releasing the frozen ETH. I also agree that time matters and the governance process can be accelerated, but there is some nuance here. Specifically, my suggestion is to skip the temp check, but use part of that saved time for a few additional days of forum discussion so delegates can resolve any remaining questions before this unprecedented vote moves onchain.

In particular, I want to double-click on what @TodayInDeFi brought up in their comment. I still do not fully understand whether the Arbitrum Captive Insurance Product (CIP) provides delegates with sufficient protection here, or whether there remains a meaningful gap relative to the Foundation and Security Council if coverage is denied, capped, or exhausted.That may be manageable, but I do not think it is a trivial point.

I also think Entropy raises a fair concern regarding Aave users who continue to incur interest while the funds remain frozen. If the coordinated recovery effort is genuinely intended to make users whole, then it seems worth discussing whether those incremental interest costs can also be covered. If that is feasible, I would rather spend a few more days resolving the remaining issues properly than compress discussion solely because delay has an economic cost.

1 Like
22

Dear Arbitrum DAO,

My name is Charlie Gerstein, and I represent the plaintiff-judgment creditors in Kim v. Democratic Peoples Republic of Korea, 25-MC-527 (S.D.N.Y.), and related cases. The United States District Court for the Southern District of New York has authorized me to serve on Arbitrum DAO a restraining notice and three writs of execution. You can find these documents here: Service in Arbitrum. The text of the restraining notice is pasted below:

To: Arbitrum DAO

GREETING:

WHEREAS, in an action in the United States District Court for the District of Columbia between Han Kim and Yong Kim, Plaintiffs, and Democratic People’s Republic of Korea, Defendant, a judgment was entered therein on April 9, 2015, in favor of Han Kim and Yong Kim, the Judgment Creditors, and against Democratic People’s Republic of Korea, the Judgment Debtor, for the sum of $15,000,000 ($15 million) in favor of Han Kim and $15,000,000 ($15 million) in favor of Yong Kim, and an additional $300,000,000 ($300 million) collectively to Han Kim and Yong Kim, and

WHEREAS, that judgment has been registered in the United States District Court for the Southern District of New York, see Dkt. 1, AO-451 Registration of Judgment, Kim v. Democratic People’s Republic of Korea, No. 25-MC-527 (S.D.N.Y.), and

WHEREAS, the sum of the Kim judgment-creditors’ compensatory and punitive damages is now due and owing with interest accruing from April 9, 2015, and

WHEREAS, in an action in the United States District Court for the District of Columbia between Chaim Kaplan, et al., and the Democratic People’s Republic of Korea, et al., a judgment was entered therein on September 30, 2016, in favor of Chaim Kaplan, et al., the Judgment Creditors, and against the Democratic People’s Republic of Korea, et al., Judgment Debtors, with damages in favor of Judgment-Creditors for $38,161,966.67 in compensatory damages and $131,277,165.34 in punitive damages, and

WHEREAS, that judgment has been registered in the United States District Court for the Southern District of New York, see Dkt. 1, AO-451 Registration of Judgment, In re: Central Bank of the Islamic Republic of Iran, et al., No. 26-MC-33 (S.D.N.Y.), and

WHEREAS, the sum of the Kaplan judgment-creditors’ compensatory and punitive damages is now due and owing with interest accruing from September 30, 2016, and

WHEREAS, in an action in the United States District Court for the District of Puerto Rico between Ruth Calderon-Cardona, et al., Plaintiffs, and Democratic People’s Republic of Korea, et al., Defendants, a judgment was entered therein on August 5, 2010, in favor of Ruth Calderon-Cardona et al., Judgment Creditors, and against Democratic People’s Republic of Korea et al., the Judgment Debtors, for the sum of $78,000,000, with an additional $300,000,000 in punitive damages to Judgment-Creditors, and

WHEREAS, that judgment has been registered in the United States District Court for the Southern District of New York, see Dkt. 1, AO-451 Registration of Judgment, Calderon-Cardona et al. v. Democratic People’s Republic of Korea et al., No. 26-MC-94 (S.D.N.Y.), and

WHEREAS, the sum of the Calderon-Cardona judgment-creditors’ compensatory and punitive damages is now due and owing with interest accruing from August 5, 2010, and

WHEREAS, it appears that you are in possession or custody of property in which the Judgment Debtor has an interest, specifically: assets, funds, and property interests of the Democratic People’s Republic of Korea, including but not limited to the digital ledger balance at address 0x0000000000000000000000000000000000000DA0 on the Arbitrum One blockchain.

TAKE NOTICE that pursuant to CPLR §5222(b), set forth fully below, you are hereby forbidden to make or suffer any sale, assignment, transfer or interference with any property in which the Democratic People’s Republic of Korea, a/k/a North Korea, has or is known or believed to have an interest, including but not limited to property held through any agency, instrumentality, controlled person, or controlled entity of the Democratic People’s Republic of Korea, including, but not limited to, APT-38 and the Lazarus Group, except upon direction of the sheriff or pursuant to an order of the court.

TAKE FURTHER NOTICE that this Restraining Notice also covers all property in which the above-named Judgment Debtor has an interest hereafter coming into your possession or custody, and all debts hereafter coming due from you to the Judgment Debtor.

CIVIL PRACTICE LAW AND RULES §5222(b)

Effect of restraint; prohibition of transfer; duration: A judgment debtor or obligor served with a restraining notice is forbidden to make or suffer any sale, assignment, transfer or interference with any property in which he or she has an interest, except as set forth in subdivisions (h) and (i) of this section, and except upon direction of the sheriff or pursuant to an order of the court, until the judgment or order is satisfied or vacated. A restraining notice served upon a person other than the judgment debtor or obligor is effective only if, at the time of service, he or she owes a debt to the judgment debtor or obligor or he or she is in the possession or custody of property in which he or she knows or has reason to believe the judgment debtor or obligor has an interest, or if the judgment creditor or support collection unit has stated in the notice that a specified debt is owed by the person served to the judgment debtor or obligor or that the judgment debtor or obligor has an interest in specified property in the possession or custody of the person served. All property in which the judgment debtor or obligor is known or believed to have an interest then in and thereafter coming into the possession or custody of such a person, including any specified in the notice, and all debts of such a person, including any specified in the notice, then due and thereafter coming due to the judgment debtor or obligor, shall be subject to the notice, except as set forth in subdivisions (h) and (i) of this section. Such a person is forbidden to make or suffer any sale, assignment or transfer of, or any interference with, any such property, or pay over or otherwise dispose of any such debt, to any person other than the sheriff or the support collection unit, except as set forth in subdivisions (h) and (i) of this section, except upon direction of the sheriff or pursuant to an order of the court, until the expiration of one year after the notice is served upon him or her, or until the judgment or order is satisfied or vacated, whichever event first occurs. A judgment creditor or support collection unit which has specified personal property or debt in a restraining notice shall be liable to the owner of the property or the person to whom the debt is owed, if other than the judgment debtor or obligor, for any damages sustained by reason of the restraint. If a garnishee served with a restraining notice withholds the payment of money belonging or owed to the judgment debtor or obligor in an amount equal to twice the amount due on the judgment or order, the restraining notice is not effective as to other property or money.

TAKE FURTHER NOTICE, that disobedience of this Restraining Notice is punishable as a contempt of court.

Dated: April 30, 2026

/s/ Charles Gerstein

Charles Gerstein

Gerstein Harrow LLP

1629 Columbia Road NW, Suite 302

Washington, DC 20009

charlie@gerstein-harrow.com

(202) 670-4809

/s/ Jason Harrow

Jason Harrow

Gerstein Harrow LLP

401 Park Ave. S. 10th Floor

New York, NY 10016

jason@gerstein-harrow.co m

‪(323) 744-5293

/s/ Robert Tolchin

Robert Tolchin

The Berkman Law Office LLC

829 E. 15th Street, Suite Seven

Brooklyn, New York 11230

rtolchin@berkmanlaw.com

(718) 855-3627

Attorneys for Judgment Creditors

1 Like
24

Voting abstain on the temperature check.

We understand the urgency of the recovery effort and want to facilitate any decision the DAO decides, however the legal risk involved based on current information prevents us from directly supporting the proposal.

Our onchain vote will depend on how the legal questions are resolved before submission.

25

Mr. Gerstein,

With real respect for the judgments your clients hold against the DPRK, two points of pushback on the restraining notice itself:

  1. The frozen ETH at 0x…0DA0 is not property in which the DPRK has an “interest” under CPLR §5222(b). It’s stolen property. Lazarus exploited the rsETH protocol, drained funds belonging to depositors, and held them transiently at an address now under the control of Arbitrum’s Security Council. Theft doesn’t pass the title. That’s elementary property law in New York and most other jurisdictions (cf. UCC §2-403(1): a thief acquires no title and cannot pass title even to a good-faith purchaser). Transient possession through an exploit is not ownership.

  2. 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.

If “code is law” carries any weight here, it cuts the same way: the exploit was a violation of the protocol’s intended function, not an exercise of it. The principle does not vest ownership in the actor who broke the rules.

The Security Council’s freeze of these funds was itself a code-level response to an exploit, and it created exactly the window we’re in now: the DAO deliberating and directing the assets back to their rightful owner. The exploit was a break with the protocol’s intended function. This vote is how the protocol corrects it.

Your clients’ losses are real and the DPRK should answer for them. But the remedy the restraining notice asks for, blocking the return of stolen funds to their actual owners shifts the cost of the DPRK’s debt onto a different set of victims who were themselves robbed. That compounds the original harm; it doesn’t redress it.

Respectfully.

5 Likes
26

gm, voting FOR.

The regulatory uncertainty here is the main risk, and as Entropy has noted it will not be clarified in the short term.

However, affected users and the DeFi ecosystem will greatly benefit (survive?) the sooner funds are returned, and I believe that’s what we as a DAO should prioritize.

Still, it would be greatly appreciated before the onchain vote to add better disclosure around DAO delegate indemnification and align it with the AF, Offchain Labs, and the Security Council. It’s unclear to me why this has not been addressed already.

Thanks
Max Lomu

3 Likes
27

We are deeply in favor of utilizing the funds to reback rsETH on Aave. We wanted to comment that we are also in alignment with equally distributing the funds, and we are happy to see other delegates agree. Our reasoning is that the funds did not come from Arbitrum’s treasury, so Arbitrum does not necessarily have an extra claim to unique reimbursement. This shouldn’t be an issue anyways because it seems Defi United has raised enough funds, ideally avoiding the haircut altogether.

Lastly we are in favor of speeding up the process in any way possible. We thought @daniel 's idea #1 of getting someone to loan the 30765 ETH was great. If it’s impossible to find someone to loan that much out individually, perhaps Defi United can add an option to loan eth—and then the frozen rsEth can be used to pay them back once the proposal passes.

3 Likes
28

Thank you for the proposal!

We have deep respect for Aave, and that’s why @AaveLabs, we would appreciate a feedback on our view. We certainly do not know your internal operation, so we (Eureka) can only speak as an external observer. If there were a fully developed technical team with its role being to communicate with the corresponding technical team of each protocol before creating a liquidity pool or any other service, then it would be possible to identify the vulnerabilities that a hacker eventually discovers. Trying to reduce costs, with fewer people/AI agents involved, these gaps are instead found by malicious actors. User safety, and the long-term sustainability of ecosystems, should not be sacrificed in the name of profit maximazation.

Regarding the two components we based our vote:

  • There is a huge need to reduce timelines. So, we thank @dzack23 for the clarification on this matter.
  • We highly evaluate the safeguards for Arbitrum users.

Therefore, we strongly support the proposal and we are voting FOR.

1 Like
29

I understand that there’s no answer to the technical question about the address not matching DeFi United (it’s more convenient to use a different one with different signers).

But how do you propose voting for a 3/4 multisig address, which, in reality, is currently 2/3, and which contains addresses that can’t be linked to the announced parties, since they are either new or haven’t been used before.

I’d also like to hear the Foundation’s opinion on the restraining notice situation.

2 Likes
30

Those are great points.

Given the high visibility this entire situation is reaching, I also want to hear the opinions/input of Entropy, OCL, AF and the Security Council on the restriction notice.

1 Like
31

The following reflects the views of GMX’s Governance Committee, and is based on the combined research, evaluation, consensus, and ideation of various committee members.

GMX’s Governance Committee is FOR the release of the frozen ETH into the coordinated rsETH recovery efforts.

We commend the Arbitrum Security Council for its swift actions in freezing and securing these funds, and in developing a recovery path. The ~30,765.67 ETH is material in contributing toward restoring rsETH’s backing.

@AaveLabs could you please clarify if WETH depositors will be protected from any outstanding debts in the scenario where rsETH holders are able to instantly exit/redeem at improved prices? This way Aave ETH suppliers on Arbitrum have more clarity on where they situate in the recovery timeline. The solution should create downstream benefit for Arbitrum’s DeFi users.

We are FOR this proposal, and advise there’s recognition of AAVE’s ETH suppliers resolution as apart of recovery communications.

32

Voting FOR at this stage, given the urgency of the situation and the need to progress the coordinated recovery effort.

We also acknowledge and appreciate the publication of the rsETH Backing Technical Implementation Plan, which improves transparency and signals alignment among the involved parties. While several of the community’s questions and concerns have been at least partially addressed, there are some important gaps remaining that should not be overlooked.

We support releasing the frozen ETH as the most constructive path forward for affected users, for Arbitrum, and for DeFi more broadly. At the same time, delegates have raised legitimate and well-founded concerns, particularly around the ambiguity of the current proposal, the scope of responsibilities, and potential liabilities that have only been partially resolved or remain unaddressed.

Our support for the subsequent onchain vote will be explicitly conditioned on these outstanding issues being fully addressed. In particular, the onchain proposal should include clear and enforceable protections for delegates, such as explicitly adding delegates as indemnified parties, as many other delegates have pointed out.

33

The Arbitrum Foundation is aware of recent filings related to the Kim v. Democratic People’s Republic of Korea case, including actions involving third-party protocols.

We are closely monitoring developments, including recent statements and filings made by Aave, and are in active consultation with counsel to assess the situation.

Given the fluid nature of this matter, we are carefully evaluating potential next steps to ensure any response is measured, appropriate, and aligned with the long-term interests of the Arbitrum community.

We will provide further updates as we get greater clarity.

8 Likes
34

Hey all,

Thanks to the 1,600+ addresses that have voted in favor of this proposal as we head into the final two days of voting.

In case anyone missed it, Aave LLC filed an emergency motion yesterday with the United States District Court for the Southern District of New York to vacate the restraining notice served on Arbitrum DAO on May 1, 2026 regarding the frozen ETH mentioned in this proposal.

The law is clear that a thief does not gain lawful ownership of stolen property simply by taking it. The ETH was recovered to be returned to users harmed in the April 18, 2026 exploit, and freezing it now harms the very people the ongoing recovery effort is designed to protect.

We’ve also asked the court for an expedited hearing and a temporary vacatur. We’ll provide more updates as we have them and will continue working alongside the Arbitrum community and DeFi United to make affected users whole.

3 Likes
35

I am voting FOR on the Snapshot to release the frozen ETH into the rsETH recovery efforts. In my view, routing the frozen ETH toward remediation is the best path to reducing harm for affected users in the Arbitrum ecosystem and DeFi more broadly, even if there are more granular details to be ironed out in the onchain vote.

36

DAOplomats voted FOR this proposal on Snapshot.

We support the release of the frozen ETH to support recovery efforts for affected users and protocols. While we acknowledge there are still open questions around legal considerations, transparency, distribution mechanics, and precedent risks, this proposal is currently only a temperature check and not an executable on-chain action.

As such, we are comfortable signaling support in principle while expecting further clarity and refinements before any binding vote. We believe supporting coordinated remediation efforts is important for maintaining confidence in the broader Arbitrum and DeFi ecosystem.

37

[Constitutional] AIP: Amended Release of Frozen ETH Pursuant to Court Order

Status: Amended following passed Temp Check

Authors: Aave Labs, KelpDAO, LayerZero, EtherFi, Compound

Date: 5/11/26

Summary

This amended Constitutional AIP updates the execution path for the previously posted proposal to release the frozen ETH secured by the Arbitrum Security Council in connection with the rsETH incident. Since then, a Court order was issued authorizing the transfer of the frozen ETH to a wallet controlled by Aave LLC and for Aave LLC to hold this frozen ETH while the court continues to deliberate.

This amendment preserves the intent approved in the Temp Check to transfer the frozen ETH, but it updates the recipient and custody mechanics so that the onchain execution complies with the recent Court order.

If this Constitutional AIP passes, the payload will transfer 30,765.667501709008927568 ETH from 0x0000000000000000000000000000000000000DA0 to the Aave LLC-controlled receiving address listed below.

Aave LLC receiving address:

0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07

Court order: https://storage.courtlistener.com/recap/gov.uscourts.nysd.653423/gov.uscourts.nysd.653423.52.0.pdf

Background

On April 21, 2026, the Arbitrum Security Council executed an emergency action to immobilize ETH connected to the rsETH incident. The ETH was moved to 0x0000000000000000000000000000000000000DA0 pending a subsequent governance action.

Then, on April 25, 2026, Aave Labs and others posted an AIP to approve the release of the 30,765.667501709008927568 ETH that the Arbitrum Security Council froze following the April 18 incident. That AIP proposed to release the recovered ETH into an ongoing, coordinated recovery effort with the goal of restoring the economic backing of rsETH. This original proposal completed the Temp Check process with overwhelming approval and strong delegate support.

The standard Arbitrum governance process uses Snapshot for Temp Checks and Tally for onchain execution, with Constitutional proposals targeting Arbitrum Core. Arbitrum’s governance documentation also distinguishes between Constitutional and Non-Constitutional AIPs, and states that Constitutional proposals are submitted through Arbitrum Core on Tally.

After the Temp Check, plaintiffs holding judgments against North Korea served a restraining notice on Arbitrum DAO seeking to restrain the ETH immobilized as part of the recovery effort. Aave LLC filed an emergency motion to vacate the notice, and the Court held a hearing on May 6.

Following additional submissions from the parties, the Court accepted Aave LLC’s proposed path. The Court entered an order authorizing an onchain Arbitrum DAO vote to transfer the immobilized ETH to Aave LLC, with the restraining order following the ETH and attaching to Aave LLC upon transfer.

This amended AIP updates the court order’s execution path accordingly.

Motivation

The goal of the original proposal remains unchanged. The frozen ETH is part of the broader recovery effort following the rsETH incident, and Arbitrum Governance has already signaled support for releasing the ETH rather than leaving it immobilized indefinitely.

However, on the evening (New York time) of Friday, May 1, 2026, a law firm representing plaintiff-judgment creditors in a case called Kim v. Democratic People’s Republic of Korea, 25-MC-527 (S.D.N.Y.) served a restraining notice on “Arbitrum DAO” that threatened significant delay. Aave Labs acted as promptly as possible. On Monday May 4, 2026, Aave LLC, a US entity of Aave Labs, filed an emergency motion to vacate the restraining order. That motion was heard in oral arguments on May 6, 2026, and the substantive issues remain under consideration by the court. (We are grateful to the judge for her rapid response and thoughtful, ongoing consideration.)

On Friday, May 8, 2026, after an exchange of letters from the plaintiffs and Aave LLC, the court issued an order that the Restraining Notice issued to “Arbitrum DAO” is modified, so as to allow an on-chain vote to transfer the immobilized assets to a digital assets wallet controlled by Aave LLC. The judge specifically ordered that such a transfer process “will not be deemed to be a violation of the Restraining Notice,” and that “[a]ny party initiating that on-chain transaction, voting with regard to that on-chain transaction, or participating in the on-chain transfer of assets to Aave LLC shall not be in violation of the Restraining Notice.”

In other words, tokenholders are free to vote or otherwise participate in this process, without fear of violating the restraining notice. (Not legal advice; you are, of course, encouraged to consult your own attorney.)

The court reserved decision on all other matters in connection with the Restraining Notice and the Immobilized Assets, meaning that the central question on the merits – whether and when the funds will be released for use in the recovery effort – remains to be decided by the court.

After that transfer, and per the court’s order, Aave LLC will abide by the terms of the Restraining Notice as if the Restraining Notice had been issued to Aave LLC, until and unless the Restraining Notice is vacated or further modified by the Court, is withdrawn or modified by Plaintiffs, or expires by operation of law. In other words, Aave LLC will not sell, assign, transfer, or interfere with these funds, until the court allows such actions.

We view this order as very helpful for the Arbitrum community. It allows the ETH to be transferred to Aave LLC, so that assuming the court agrees with Aave LLC’s position that the funds may be used in the recovery efforts, that process will be logistically easier. Aave is grateful to the Arbitrum community for being a “Good Samaritan,” and we are eager to ease any further administration burdens on the Arbitrum community.

Amendment to the Prior Proposal

This AIP amends the prior proposal titled:

[Constitutional] AIP: Approve Release of Frozen ETH

We note that the court’s order forces a modification in the onchain AIP from the snapshot version. The original proposal was that the recipient address would be a 3-of-4 Gnosis Safe with signers from Aave, KelpDAO, EtherFi, and Certora. However, for administrative and legal convenience, and to be consistent with the court’s order, the onchain vote will be that the recipient address will be to a wallet controlled by Aave LLC.

Aave will continue to coordinate with the relevant parties, and the goal remains the same. The ETH is intended to be applied in a neutral and non-discriminatory manner toward restoring rsETH’s backing within the Kelp protocol. Every unit of ETH returned to the recovery effort narrows the backing shortfall and moves rsETH closer to full collateralization.

Accordingly, the amendment is limited to the recipient and custody mechanics.The original proposal requested release of the frozen ETH into the coordinated rsETH recovery effort. This amended proposal requests transfer of the frozen ETH to Aave LLC pursuant to the court order.

After the transfer, and per the court’s order, Aave LLC will abide by the terms of the restraining notice as if the restraining notice had been issued to Aave LLC, until and unless the restraining notice is vacated or further modified by the Court, is withdrawn or modified by Plaintiffs, or expires by operation of law. In other words, Aave LLC will not sell, assign, transfer, or interfere with these funds, until the court allows such actions.

Specification

This Constitutional AIP authorizes the transfer of 30,765.667501709008927568 ETH from:

0x0000000000000000000000000000000000000DA0

to the following Aave LLC-controlled receiving address:

0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07

The transfer is made pursuant to the Court order dated May 8, 2026, which authorizes an onchain Arbitrum DAO vote to move the immobilized ETH to Aave LLC and provides that the restraining order will follow the ETH and attach to Aave LLC upon transfer.

Aave LLC will comply with the restraining order while the Court continues to consider the matter.

This AIP does not authorize Aave LLC to distribute, transfer, pledge, encumber, stake, lend, swap, bridge, rehypothecate, or otherwise use the ETH unless permitted by the Court or applicable legal process.

This AIP does not request any new treasury allocation from Arbitrum DAO.

Implementation

If this AIP passes, the payload will execute a transfer of 30,765.667501709008927568 ETH from 0x0000000000000000000000000000000000000DA0 to 0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07.

The proposal will be submitted as a Constitutional AIP through Arbitrum Core. Arbitrum’s proposal submission guide states that Constitutional proposals target Arbitrum Core, while Non-Constitutional proposals target Arbitrum Treasury.

Payload Summary

Target source address:

0x0000000000000000000000000000000000000DA0

Recipient:

0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07

Amount:

30,765.667501709008927568 ETH

Action:

Transfer ETH to Aave LLC-controlled receiving address pursuant to Court order.

Additional actions:

None.

Treasury spend:

None.

Legal Posture

The restraining notice previously served on Arbitrum DAO sought to restrain the ETH immobilized as part of the rsETH recovery effort. The Court has now entered an order authorizing an onchain Arbitrum DAO vote to transfer the ETH to Aave LLC, with the restraining order following the ETH and attaching to Aave LLC upon transfer.

Aave LLC will comply with the restraining order while the Court continues to consider the matter.

This means the onchain vote is not asking delegates to disregard the restraining order. It is asking delegates to approve the transfer path authorized by the Court.

The Court order is attached here: https://storage.courtlistener.com/recap/gov.uscourts.nysd.653423/gov.uscourts.nysd.653423.52.0.pdf

Recovery Context

In parallel, the broader rsETH incident recovery plan continues.

On May 6, the identified thief positions on Aave V3 were liquidated. The retrieved rsETH collateral was transferred to the Recovery Guardian as specified in the preceding AIP approved by Aave DAO governance. Other users, including Umbrella stakers, were not impacted by this liquidation process.

The next phase of the plan focuses on restoring rsETH backing and returning affected markets to normal operation. On Arbitrum, the liquidated rsETH will be burned. Kelp will retire the corresponding LayerZero packet on Ethereum so that it cannot mint new rsETH on the receiving side. Together, those steps are intended to neutralize the inflated rsETH supply created by the exploit.

On Ethereum, the seized rsETH will be sent to the bridge lockbox. That ETH, together with committed ETH from the broader DeFi United coalition, is expected to restore the backing of the rsETH lockbox contract. Once the lockbox is backed, the bridge can resume normal operation.

Separately, replacement funds are expected to be borrowed as a contingency to reduce the timing impact on affected Aave users while the immobilized ETH remains subject to the Court process.

This section is provided for recovery context only. The onchain action authorized by this AIP is limited to the transfer of the frozen ETH to Aave LLC pursuant to the Court order.

Overall Cost

No new treasury allocation is requested.

This proposal concerns ETH already immobilized on Arbitrum One in connection with the rsETH incident. The direct budgetary cost to Arbitrum DAO is expected to be zero outside of normal governance execution overhead.

Risks and Considerations

This amendment is submitted to address the main risk of legal execution risk by aligning the transfer with the Court’s order and by having the restraining order follow the ETH to Aave LLC upon transfer.

The proposal does not ask delegates to determine final ownership of the ETH. The Court process remains ongoing.

The proposal does not authorize immediate distribution to affected users. Aave LLC will comply with the restraining order while the Court continues to consider the matter.

The proposal does not create new Arbitrum DAO treasury exposure. It only authorizes transfer of ETH already immobilized as part of the Security Council emergency action.

The proposal changes the recipient from the originally contemplated recovery structure to Aave LLC. Because that is a material execution-path change after the Temp Check, the original coauthors have been asked to support this amendment before onchain submission.

Next Steps

First, the final payload will be prepared and submitted onchain.

Second, the Constitutional AIP will proceed to onchain vote through Arbitrum Core.

Third, if the AIP passes and execution occurs, the immobilized ETH will be transferred to the Aave LLC-controlled receiving address, with the restraining order following the ETH and attaching to Aave LLC upon transfer.

Requested Action

Arbitrum delegates are asked to vote FOR this amended Constitutional AIP.

A FOR vote approves the court-authorized transfer of 30,765.667501709008927568 ETH from 0x0000000000000000000000000000000000000DA0 to the Aave LLC-controlled receiving address listed in this proposal.

A FOR vote does not authorize distribution or use of the ETH while the restraining order remains in effect.

A FOR vote preserves the recovery objective supported by the Temp Check while updating the execution path to reflect the Court’s order.

An AGAINST vote leaves the ETH immobilized at the current address unless and until another governance or legal path is approved.

2 Likes
38

Hi all,

The court has authorised the on-chain vote to transfer all frozen ETH to a wallet controlled by Aave LLC:

“The transfer process described in the prior paragraph will not be deemed to be a violation of the Restraining Notice. Any party initiating that on-chain transaction, voting with regard to that on-chain transaction, or participating in the on-chain transfer of assets to Aave LLC shall not be in violation of the Restraining Notice” - Court Order

The restraining notice will follow the assets to Aave LLC who have agreed to comply with it as confirmed in the updated proposal.

With this in mind, the Arbitrum Foundation believes the DAO should continue with the governance process.

The on-chain vote for the Constitutional AIP is now available.

37th GRC Call - Placeholder
39

How about instead of sending it to AAVE LLC, a much easier entity to control and sue, Arbitrum DAO just puts it into the rsETH bridge , rebacking the lost assets.

I guess it would look something like.

Send ETH to mainnet, buy rsETH, put it back in the bridges on mainnet.

Im not exactly sure the route, but i think the point it clear for kelp to best advise.