On Monday, the Ethereum Layer 2 blockchain Arbitrum froze over 30,000 ETH held in a wallet associated with the recent Kelp protocol exploit, totaling approximately $71.2 million.
According to Arbitrum on Monday, its Security Council—a 12-member body elected by the Arbitrum community—took "urgent action" to freeze 30,766 ETH held in wallets associated with the Kelp attack.
Arbitrum added that these ETH have been transferred to "an intermediate frozen wallet," and the original wallet address holding the funds is no longer accessible; the assets can only be moved following further action by Arbitrum governance.
Kelp is a liquid staking protocol that was hacked on Saturday via its LayerZero-powered cross-chain bridge, resulting in losses of at least $293 million. LayerZero has accused North Korea of carrying out the attack.
This exploit has caused millions of dollars in "bad debt" within the highly interconnected crypto lending market, as the attacker used stolen Kelp tokens to borrow cryptocurrencies on the lending platform Aave.
Freezing crypto assets on a blockchain is a controversial measure in the crypto industry. Opponents argue that it contradicts the core principles of the technology, while supporters believe it enhances security and preserves network integrity.
Multiple users on X criticized Arbitrum’s freeze decision, questioning its decentralization in the context of the committee ordering the freezing of funds.
Griff Green, a member of the Arbitrum Security Council, posted on X that the organization "did not make this decision lightly, after countless hours of discussion encompassing technical, practical, ethical, and political dimensions."
Green added that nine out of the 12 committee members voted to freeze the funds, but did not provide further details.
Arbitrum stated that it acted upon information provided by law enforcement and "balanced its commitment to the security and integrity of the Arbitrum community without impacting any Arbitrum users or applications."