U.S. Judge Delays Aave's Hearing to Unfreeze $71 Million Stolen ETH Application

BlockBeats News, May 14th - US District Judge Margaret M. Garnett on Wednesday postponed the ruling on Aave's emergency motion seeking to unfreeze $71 million worth of ETH related to the Kelp DAO hack, and requested both parties to submit supplemental briefs by June 5th ahead of a hearing. Aave is seeking to retrieve the frozen $71 million ETH on Arbitrum to assist in the asset recovery efforts following the hack on Kelp DAO, which suffered losses of up to $293 million, making it one of the most serious security incidents in the DeFi space this year. However, US law firm Gerstein Harrow LLP filed a restraining order with the court in early May claiming that their client has rights to the mentioned funds. Aave subsequently filed an emergency motion to lift the freeze, warning that failure to release the funds promptly would trigger user liquidations and potentially impact the entire DeFi market.

In her ruling, Judge Garnett noted that Aave had not sufficiently demonstrated how user funds would incur "compound losses" if the restraining order were to remain in place. She acknowledged the complexity of the case, the risks faced by victims, and requested both parties to provide further statements on six key issues, including: whether the hack transaction is subject to New York's shield doctrine, the legal distinction between fraud and theft and the rights the hacker has over the stolen assets, which law governs the priority of the frozen assets, whether the presumption of trust is an appropriate remedy, and whether Aave or Arbitrum can identify individual victims and proportionally return the assets. The parties are required to submit supplemental briefs by May 22nd.

Meanwhile, the overall compensation efforts for Kelp DAO are moving forward. Kelp and Aave announced on Tuesday that the hacker's holdings of rsETH have been burned on Arbitrum, and approximately $278 million in lost tokens will be recovered within the next two weeks through the Aave Recovery Guardian multisig wallet, once the related smart contracts are reactivated, all rsETH functionalities will be restored.