Arbitrum delegates overwhelmingly backed a non-binding Snapshot proposal to release approximately $71 million in ether frozen after the Lazarus-linked rsETH exploit on Aave. According to the latest voting snapshot, 90.5% of votes—representing 173.9 million Arbitrum (ARB) tokens—were cast in favor of the proposal, while 9.4% abstained and less than 1% opposed. The phase one temperature check closed Thursday at 6:54 pm UTC, with the proposal now advancing to a binding on-chain governance vote. The vote represents a sentiment check rather than a binding governance decision, as any actual transfer would require a separate on-chain Constitutional Arbitrum Improvement Protocol.
The frozen ether are at the center of an escalating legal dispute in Manhattan federal court, where attorney Charles Gerstein, representing families holding roughly $877 million in unpaid terrorism judgments against North Korea, served a restraining notice on Arbitrum DAO claiming the frozen ETH constitutes North Korean property. As reported by CoinDesk, the restraining notice was triggered by the exploit's widespread attribution to Pyongyang's Lazarus Group. Aave moved earlier this week to vacate the restraining notice, arguing the assets belong to innocent users, while Gerstein countered that the exploit was fraud rather than theft, meaning attackers obtained legal title through deception.
The frozen ether are earmarked for a coordinated industry recovery effort led by Aave, KelpDAO, LayerZero, EtherFi, and Compound, aimed at making affected users whole. According to the latest developments, this group has pledged an additional 43,000 ETH—worth roughly $101 million—to mitigate broader DeFi contagion from the incident. The funds are intended to restore financial losses from the exploit that occurred when attackers used unbacked rsETH tokens as collateral on Aave to borrow roughly $230 million in ETH from the protocol. The recovery effort represents a collaborative approach among major DeFi protocols to address the exploit's impact on the ecosystem.
Any actual transfer would require a separate on-chain Constitutional Arbitrum Improvement Protocol, which can execute binding actions if approved by tokenholders. As reported by CoinDesk, even if approved, the proposed transfer would face Arbitrum's standard roughly eight-day L2-to-L1 withdrawal delay before any ETH could move, potentially giving the Manhattan court time to intervene. The draft snapshot proposal included indemnification protections for the Arbitrum Foundation, Offchain Labs, Security Council members, and governance delegates against certain claims arising from either freezing or releasing the ETH, though these protections would only take effect if later adopted through a successful onchain Constitutional AIP.
Speaking at Consensus Miami this week, Aave Labs Chief Legal and Policy Officer Linda Jeng emphasized that the exploit has forced the protocol to rethink its risk framework, expanding collateral standards beyond financial metrics to include cybersecurity, interoperability, and technical architecture reviews. According to CoinDesk, Jeng drew a contrast with traditional finance's taxpayer-backed rescues, stating that "in the financial crisis, we had to bail out the banks. Here, we came together as an ecosystem to bail ourselves out." The strong support shown in the sentiment check suggests delegates may favor advancing a formal AIP on the proposal, despite the ongoing legal uncertainties. Once approved, the funds will be transferred to a designated multi-signature wallet controlled by signers from Aave Labs, Kelp DAO, Certora, and EtherFi.
