The US-based law firm Gerstein Harrow has secured a court order preventing the transfer of frozen Ether connected to the Kelp hack, citing an outstanding $877 million compensation claim against North Korea. The official letter from the New York district court now blocks Arbitrum DAO from moving these Ether funds, which are currently frozen. According to Gerstein Harrow, their clients won three separate lawsuits against North Korea in 2010, 2015, and 2016, entitling them to a total of $877 million in damages. The firm also alleges that the frozen funds stem from hacker groups linked to the North Korean state.
Kelp hack and frozen assets
In April, Kelp DAO was hit by a massive $292 million exploit. The attack was reportedly carried out by TraderTraitor, understood to be a sub-group of the notorious Lazarus Group widely believed to operate with North Korean support. Immediately following the breach, the Arbitrum Security Council swiftly froze 30,766 Ether (worth about $73 million) stored in a wallet tied to the attack. A debate then began over how these frozen funds should be used or distributed.
Just five days after the attack, Aave Labs proposed to Arbitrum DAO that the frozen Ether be unfrozen and sent to a fund called “DeFi United,” to compensate rsETH holders who lost funds in the incident. However, competing legal claims regarding ownership of the frozen Ether soon complicated any decision on the assets’ fate.
US law firm cites compensation rights and seeks asset seizure
Gerstein Harrow asserts that because their clients have valid, court-awarded claims against North Korea from three resolved lawsuits, the frozen Ether should be considered a North Korean asset subject to seizure. Attorney Charlie Gerstein posted to the Arbitrum DAO forum, noting that the American court’s official order bars any transfer of the frozen ETH, warning that violations of this ruling would have severe consequences.
The announcement emphasized that the frozen Ether is treated as property tied to state-sponsored hacker groups and that their clients have a legitimate entitlement to these assets.
A member of the Arbitrum DAO community using the handle Zeptimus pointed out that if the law firm succeeds, liability for the North Korean debt could essentially be passed on to those victimized in the Kelp DAO hack.
Other DAO members question the fairness of the order, arguing that the real victims of the Kelp hack may face double losses if the assets are not released to them.
Legal disputes over crypto assets and past precedents
Gerstein Harrow has previously filed similar claims over frozen assets with suspected North Korean links, targeting funds held across various crypto exchanges and projects. In February, they submitted a claim for Tether assets frozen following the 2023 Heco Bridge attack. The firm is also actively involved in class actions related to the $1.5 billion Bybit hack and lawsuits against other DAOs.
Blockchain researcher ZachXBT has accused the firm of using his research as evidence during their legal campaigns. According to the company’s website, they currently have three active lawsuits relating to these matters.
North Korea-linked actors have consistently been named in reports of major crypto attacks. In April alone, several incidents involving these entities resulted in collective losses of at least $578 million across the digital asset ecosystem.
