Court modifies Arbitrum DAO restraining order, allows rsETH authorization transfer to Aave LLC

According to Aave’s disclosure on X on May 12, the United States District Court for the Southern District of New York (SDNY) modified the prior restraining order issued to the Arbitrum DAO on May 8, authorizing the transfer of the frozen 30,765.667501709008927568 ETH to a receiving address controlled by Aave LLC via on-chain voting through the Arbitrum DAO.

Core Terms and Legal Background of the Court Order Amendment

According to Aave’s X platform statement and the AIP governance documents, this restraining order originated from the case “Kim v. Democratic People’s Republic of Korea” (case no. 25-MC-527, SDNY). On May 1, 2026, the creditor’s counsel law firm issued the restraining order to the Arbitrum DAO, attempting to prevent the use of ETH that was frozen due to work to recover the funds related to the rsETH incident.

On May 4, 2026, Aave LLC filed an emergency motion to revoke the restraining order, and the court held oral arguments on May 6, 2026. On May 8, 2026, after the parties exchanged letters, the court issued an order authorizing the completion of the transfer of the frozen ETH through on-chain voting by the Arbitrum DAO, and attaching the restraining order to Aave LLC after the asset transfer.

Pursuant to the court’s order, during the period in which the court continues to hear the case, Aave LLC may not sell, transfer, or otherwise dispose of the above-mentioned ETH unless approved by the court.

Changes to the Execution Path of the Revised AIP

According to a revised constitutional AIP jointly released by Aave Labs, KelpDAO, LayerZero, EtherFi, and Compound on May 11, 2026, this amendment only involves adjustments to the recipient and custody mechanism: the original proposal’s receiving address was a 3/4 Gnosis Safe wallet composed of Aave, KelpDAO, EtherFi, and Certora; after the amendment, per the court’s order, it was changed to an address controlled by Aave LLC (0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07). The quantity and purpose of the frozen ETH remain unchanged—still 30,765.667501709008927568 ETH—continuing to be used for recovery work related to the rsETH incident.

The AIP explicitly stipulates that this authorization does not allow Aave LLC to distribute, transfer, stake, lend, exchange, bridge, or otherwise use the above ETH without court approval.

Regarding this, the Arbitrum Foundation stated that it recommends the DAO to continue pushing forward with the governance process.

Progress on rsETH Incident Recovery

According to the AIP governance documents, on May 6, 2026, the stolen positions already confirmed on Aave V3 were fully liquidated, and the recovered rsETH collateral was transferred to the recovery guardians in accordance with the Aave DAO’s previously approved AIP. Other users (including Umbrella stakers) were not affected by this liquidation.

According to the documents, the subsequent recovery plan includes: destroying the liquidated rsETH on Arbitrum; Kelp disabling the corresponding LayerZero OFT on Ethereum to prevent new rsETH minting; the rsETH seized on Ethereum will be sent to the bridge timelock vault, and along with the ETH committed by the DeFi United alliance, will be used to provide funding support for the recovery timelock contract.

FAQ

What are the date and specific authorization contents of the U.S. court’s modification to the Arbitrum DAO restraining order?

According to Aave’s official disclosure on May 12, 2026, the SDNY court modified the restraining order on May 8, 2026, authorizing on-chain voting through the Arbitrum DAO to transfer the 30,765.667501709008927568 frozen ETH to Aave LLC. The court order clearly states that this transfer is not considered a violation of the restraining order.

How does the receiving address in the revised AIP differ from the original proposal?

According to the revised AIP documents, the original proposal’s receiving address was the 3/4 Gnosis Safe wallet held by four parties: Aave, KelpDAO, EtherFi, and Certora. After the revision, pursuant to the court’s order, it was changed to an address controlled by Aave LLC (0x3b87db6ded35eBD28EcbF8014fb325eef23f6C07). The amount and purpose of the ETH remain unchanged.

What legal restrictions apply to Aave LLC after it receives the frozen ETH?

According to the court’s order and the AIP documents, during the period in which the court continues to hear the case, Aave LLC may not sell, transfer, stake, lend, exchange, or otherwise dispose of the above ETH unless it receives explicit approval from the court or the restraining order becomes ineffective by operation of law.