A New York court has ruled that Arbitrum is barred from accessing 30,000 ETH frozen due to a hacking incident, as victims of North Korean terrorism claim the funds.
A U.S. District Court in New York has ruled that Arbitrum cannot access 30,000 ETH that were frozen following a hacking incident involving Kelp. This decision stems from a lawsuit filed by victims of North Korean terrorism, who assert that these assets should be allocated to them.
The plaintiffs in this case, including U.S. citizens Han Kim and Yong Sok Kim, previously won over $300 million in compensation from North Korea due to incidents related to kidnappings in 2015. They are now claiming the frozen funds as part of their ongoing legal efforts.
The court has classified the DAO Arbitrum as a general partnership and has temporarily designated it as the owner of the 30,000 ETH. According to the court's order, which is pending official delivery to Arbitrum's representatives, the organization is barred from moving or engaging with the frozen assets until further notice.
Simultaneously, a vote was initiated to transfer the 30,000 ETH to the DeFi United fund, with over 99% of participants currently in favor of the move. This voting process will continue until May 7.
Legal Implications
Attorney Gabriel Shapiro has confirmed the validity of the court ruling, emphasizing that the plaintiffs' claim is supported by asset seizure laws, which restrict the DAO's ability to redirect the funds independently. He stated, "Arbitrum currently has no right to do anything with the Kelp funds until a hearing on their sale."
“They must participate in the legal proceedings rather than making decisions independently,” he added.
According to insights from ImperiumPaper, head of the economic department at MegaETH, the court's order complicates the process for the affected protocol to recover its funds. The legal battle is being managed by Gerstein-Harrow, a firm recognized for its aggressive litigation against decentralized autonomous organizations (DAOs).
On-chain investigator ZachXBT criticized the legal strategies employed by the plaintiffs, describing them as predatory. He remarked that the firm often claims rights to assets following hacks by attributing them to unrelated past events involving North Korea.
In a related note, Arbitrum council member Griff Green had previously called for a boycott of USDC due to security concerns.
