Families holding unpaid terrorism judgments against North Korea have obtained a court order blocking Arbitrum DAO from releasing frozen ETH tied to the Lazarus Group’s $292 million Kelp DAO exploit.
Posted May 4, 2026 at 6:42 am EST.
The U.S. District Court for the Southern District of New York issued a restraining order on May 1 barring Arbitrum DAO from moving 30,766 ETH, worth approximately $71.1 million, that its Security Council had frozen in connection with the $292 million Kelp DAO bridge exploit. The order introduces a competing legal claim over assets that the DeFi industry’s largest-ever coordinated recovery effort had been counting on.
The plaintiffs are families holding three unpaid terrorism judgments against North Korea, with claims totaling more than $877 million, excluding interest. Among them are Han Kim and Yong Seok Kim, U.S. nationals whose relative was killed by Pyongyang. They won more than $300 million in damages in a 2015 ruling. Their lawyers argue the frozen ETH constitutes DPRK property because LayerZero attributed the April 18 hack to North Korea’s Lazarus Group. The legal theory rests on the Foreign Sovereign Immunities Act and the Terrorism Risk Insurance Act, which permit creditors to attach assets tied to state sponsors of terrorism.
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The freeze lands at a critical moment for the DeFi United recovery initiative led by Aave, Kelp DAO, and LayerZero. The coalition had assembled more than $311 million in pledges from contributors, including Consensys (30,000 ETH), Mantle (30,000 ETH), and Aave founder Stani Kulechov (5,000 ETH personally). The Arbitrum funds were meant to be the single largest contribution. A Snapshot vote opened April 30 showed 99% support for releasing the ETH, with a May 7 deadline.
Attorney Gabriel Shapiro reviewed the filing and said the freeze carries real legal weight. “Arbitrum DAO is not allowed to do anything with the KelpDAO funds for now, until a divestiture hearing,” Shapiro wrote on X. On-chain analyst ZachXBT called the legal strategy “predatory,” arguing the law firm is using publicly available blockchain analysis to assert priority over recently frozen assets.
The case highlights a structural tension in decentralized governance. When Arbitrum’s Security Council froze the ETH on April 20, the centralized emergency action brought the assets within reach of U.S. courts. That jurisdictional foothold is exactly what the plaintiffs’ lawyers used to file their claim. A divestiture hearing will determine final control of the funds.
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