BlockBeats report: On May 14, U.S. District Judge Margaret M. Garnett in New York postponed her ruling on Aave’s emergency motion seeking to unfreeze $71 million in ETH tied to the Kelp DAO hack, and ordered both parties to submit supplemental briefs before the June 5 hearing. Aave is attempting to recover the $71 million in ETH frozen on Arbitrum to support asset recovery efforts following the hack, which resulted in losses of up to $293 million—among the most severe security incidents in DeFi this year. However, in early May, the U.S. law firm Gerstein Harrow LLP filed a restraining order with the court, asserting that its clients have rights to the funds. In response, Aave filed an emergency motion to lift the freeze, warning that failure to release the funds promptly could trigger user liquidations and potentially destabilize the broader DeFi market.
Judge Garnett noted in her ruling that Aave failed to adequately demonstrate how user funds would suffer "compounded losses" if the injunction remained in place. She acknowledged the complexity of the case and the risks faced by victims, and ordered both parties to submit supplemental briefs on six key issues: whether the hack transactions are subject to New York State’s protective principles, the legal distinctions between fraud and theft and what rights the hacker has over the stolen assets, which legal standards govern the priority of claims on frozen assets, whether a constructive trust is an appropriate remedy, and whether Aave or Arbitrum can identify individual victims and return assets proportionally. Both parties must submit their supplemental briefs by May 22.
Meanwhile, Kelp DAO’s overall compensation process is underway. Kelp and Aave announced on Tuesday that the rsETH held by the hacker has been destroyed on Arbitrum, and approximately $278 million in lost tokens will be restored over the next two weeks via the Aave Recovery Guardian multisig wallet. Once the relevant smart contracts are reactivated, all rsETH functionality will be fully restored.