Judge Allows Governance Vote on $71M Frozen ETH Transfer to Aave

• Judge Garnett modified the Arbitrum restraining notice to allow an on-chain transfer to Aave LLC.
• Anyone voting or participating in the on-chain transfer will not violate the restraining notice.
• Once transferred, Aave LLC must abide by the same restraining notice terms as Arbitrum DAO.

A Manhattan federal judge has modified a restraining notice that had frozen $71 million in Ether on Arbitrum, clearing the way for the funds to be transferred to a wallet controlled by Aave LLC.

Judge Margaret Garnett’s order, issued under New York Civil Practice Law and Rules Section 5240, modified the restraining notice previously served on Arbitrum DAO. The court’s language was precise on three points:

• First, an on-chain governance vote to transfer the frozen assets to Aave LLC is now permitted. 
• Second, nobody involved in that process faces legal exposure. The order states that any party initiating, voting on, or participating in the on-chain transfer will not be considered in violation of the restraining notice. 
• Third, once the transfer completes, Aave LLC steps into Arbitrum DAO’s position and must abide by the same restraining notice terms until the court vacates or modifies it, the plaintiffs withdraw it, or it expires by operation of law.

The court was equally clear about what the order does not do. It explicitly reserves judgment on all other matters connected to the restraining notice and the frozen assets. The terrorism creditors’ underlying legal claim on the funds remains entirely intact.

How the Standoff Developed

The funds were frozen following a North Korea-linked rsETH exploit widely attributed to Lazarus Group, the state-sponsored hacking unit backed by Pyongyang. Attorney Charles Gerstein, representing families carrying approximately $877 million in unpaid terrorism judgments against North Korea, argued the frozen ETH was a legitimate seizure target under those judgments.

His intervention created a direct conflict with Aave’s recovery effort. Arbitrum delegates had already voted overwhelmingly in favour of returning the funds through an off-chain Snapshot temperature check. That vote was non-binding. Judge Garnett’s order now provides the legal clearance for a binding on-chain governance vote to follow.

What Happens Next

The on-chain Arbitrum governance vote must still take place before any funds move. Once it does and the transfer completes, Aave LLC assumes legal responsibility under the restraining notice. The terrorism creditors retain their claim, and the court retains jurisdiction over all unresolved matters.

The order resolves the immediate procedural blockage. The underlying legal fight over who ultimately gets the $71 million is still open.

Related: Aave Begins Phase II Recovery After Liquidating Lazarus-Linked rsETH Positions