A significant legal development has just marked a new turning point in efforts to recover assets in the DeFi sector, as a US federal court allowed the Arbitrum DAO to transfer $71 million worth of ETH related to a hack allegedly orchestrated by North Korean hackers to a wallet controlled by AAVE . This ruling is XEM as a notable legal precedent for how the decentralized finance ecosystem handles stolen assets.
The decision, made by Judge Margaret Garnett of the Southern District of New York, allows for the modification of the previous freeze order that had kept the ETH "frozen" in the Arbitrum DAO. According to the new ruling, the community can proceed with on-chain governance voting to transfer the funds to wallets belonging to AAVE LLC. Notably, the court also emphasized that individuals involved in the asset transfer process will not be considered to have violated the freeze order.
However, the ruling does not mean AAVE has full control over the funds. The court still upholds the legal rights of the families of the terrorism victims to claim these assets. This means that if the court ultimately rules in favor of the plaintiffs, AAVE may still be forced to hand over all of the ETH.
This decision comes after Arbitrum delegates showed strong support through an off-chain Snapshot vote on the Snapshot platform, part of AAVE 's broader recovery plan following last month's rsETH mining incident involving the Kelp DAO. However, for the actual transfer to take place, the Arbitrum DAO still needs to pass a binding on-chain governance vote.
This legal development stems from AAVE 's urgent move to ask a New York court to overturn an injunction filed by Gerstein Harrow LLP. The law firm represents families holding $877 million in unpaid terrorism compensation from North Korea. They argue that the money hacked on April 18th belongs to their clients because North Korean hackers stole it.
AAVE strongly opposes this argument, emphasizing that a thief cannot become the legal owner of stolen assets. The protocol also warns that if the court upholds the freeze order, this could put asset recovery efforts in DeFi at significant risk, potentially setting a dangerous precedent for hackers to exploit legal ambiguities following attacks.
