DeFi lending platform Aave has filed an emergency motion to vacate a request to seize $71 million worth of ether rescued by Arbitrum’s Security Council following April’s $290 million Kelp DAO hack.
It claims the restraining notice “is causing immediate harm, right this very moment, to blameless third parties,” i.e. Aave users affected by the hack’s fallout.
Law firm Gerstein Harrow filed the restraining notice on May 1, claiming that the stolen funds seized by “potential garnishee” Artbitrum are, in fact, North Korean property.
The firm requested funds be turned over to “collect unpaid judgements” owed to their clients who had previously been awarded damages, which North Korea hasn’t paid.
Gerstein Harrow has previously taken action against a range of crypto projects, often seeking to stake a claim to North Korea-linked funds.
Read more: DeFi sector in $14B meltdown as $290M rsETH hack fallout burns Aave
Kelp DAO hack’s effects on Aave
April 18’s Kelp DAO hack exploited Layer Zero’s bridging infrastructure to fraudulently release $290 million rsETH tokens.
The hackers, suspected to be North Korea’s notorious Lazarus Group (due to on-chain connections to ByBit and BTC Turk hacks), borrowed $236 million of WETH against the stolen rsETH on Aave.
With outstanding loans made against partially unbacked collateral, Aave faced between $124 million and $230 million worth of bad debt.
Arbitrum Security Council’s rescue was the first step in a week-long effort to secure funding from across the DeFi ecosystem.
Read more: DeFi plays the blame game
DeFi United planned to use the funds to re-back rsETH, before force-liquidating the hackers’ positions via manual oracle adjustment.
That was until Gerstein Harrow threw a spanner in the works on Friday.
Aave has come out strongly against Gerstein Harrow’s theory that “momentary theft triggers possession rights.” It says the reasoning “defies logic, common sense, and the law.”
Comparing the argument to “the kindergarten adage ‘finders’ keepers’,” Aave points out that, even in that case, “the Arbitrum blockchain community has title, not North Korea.”
Judge Margaret Garnett has scheduled a remote court hearing for Wednesday, May 6 to discuss the developments.
Firm’s history of crypto lawsuits
Gerstein Harrow isn’t popular in the crypto community, to say the least.
Crypto security expert Taylor Monahan called the firm “worse than fucking ambulance chasers,” accusing it of attempting to secure a payday off other people’s work.
She points to a similar case involving $2.5 million of frozen USDC traced by fellow blockchain investigator ZachXBT.
ZachXBT also criticized the “predatory” firm for using his work to go after funds for a “victim from 26 years ago that has zero relation to crypto or exploits/hacks.”
Gerstein Harrow has previously brought legal action against DeFi and crypto projects related to PoolTogether, Railgun, Huobi and Nomad Bridge.
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Source: https://protos.com/aave-dismisses-restraining-notice-for-rescued-funds-as-finders-keepers/