Aave advances its recovery from the April 18 Kelp DAO exploit that created unbacked rsETH and disrupted multiple markets. The protocol completed key liquidations and gained court approval to reclaim $71 million in frozen ETH.
- Aave secures federal court approval to reclaim $71 million in ETH previously frozen after the April 18 Kelp DAO bridge exploit.
- Protocol developers liquidate eight attacker positions on Aave V3 to restore the rsETH bridge lockbox with retrieved collateral and coalition funds.
- Aave LLC successfully challenges a restraining notice from terrorism judgment plaintiffs attempting to seize recovered assets from the Arbitrum DAO treasury.
On May 6, Aave liquidated the thief’s eight identified positions on Aave V3. The retrieved rsETH collateral moved to the Recovery Guardian as required by the approved governance proposal. Other users, including Umbrella stakers, remained unaffected.
A legal battle emerged over the $71 million in ETH frozen by Arbitrum’s Security Council. Plaintiffs holding judgments against North Korea served a restraining notice on Arbitrum DAO on May 1. Aave LLC filed an emergency motion to vacate the notice. During a May 6 hearing, the judge accepted Aave’s proposal and authorized an on-chain Arbitrum DAO vote to transfer the immobilized ETH to Aave LLC. The exchange borrowed separate funds as a contingency while the legal process continued.
Mantle DAO and Arbitrum DAO passed governance proposals with overwhelming support. Arbitrum voters approved the return of the stolen $71 million to Aave users. Mantle voters confirmed participation in the DeFi United recovery coalition.
The recovery plan advanced to restoring rsETH backing. Liquidated rsETH on Arbitrum was burned. Kelp retired the corresponding LayerZero packet on Ethereum to prevent new minting. Seized rsETH on Ethereum moved to the bridge lockbox. These assets, combined with committed ETH from the DeFi United coalition, restored the lockbox contract.
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👉 Submit Your PROnce fully backed, the bridge resumed normal operations and withdrawals. Aave began reverting temporary configuration changes and restored the Loan-to-Value ratio for WETH on Aave V3 Ethereum Core.
“We are grateful to the judge for the time, care, and thoughtful questions she brought to the May 6 hearing, and for the seriousness with which she is weighing the arguments before her. As the judge deliberates, and in the meantime as a contingency, separate funds will be borrowed to cover the difference until the immobilized ETH are rightfully restored to Aave users. We will provide further updates as we are able, and we’ll continue to work on the recovery plan in parallel,” Aave said.
Chain Street’s Take
Aave continues to make steady progress on a complex, multi-chain recovery. The liquidation of attacker positions, successful DAO votes, and court developments represent meaningful steps forward. While challenges remain, the coordinated effort across Aave, Kelp, Arbitrum, Mantle, and DeFi United shows how the ecosystem can respond when a major exploit occurs.
This case also highlights a growing reality in DeFi. On-chain assets are no longer invisible to traditional legal systems. Plaintiffs are increasingly using court orders to reach DAO treasuries and frozen funds. For protocols and users, this means operational security and legal preparedness have become just as important as smart contract audits.
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