US Law Firm Seeks to Block Transfer of Frozen Ether in Kelp Hack, Claims North Korea Link

A US law firm has taken legal action to block the transfer of Ether frozen in connection with the Kelp hack, a move that could delay compensation for victims.

Cointelegraph reported on May 4 that Gerstein Harrow LLP had applied for an injunction to prevent the movement of Ether frozen after the Kelp hack.

The firm said its clients had won $877 million in damages judgments against North Korea and argued that the hacked funds were assets linked to the country. On that basis, it said the frozen Ether could also be subject to those claims.

A federal district court in New York has approved an injunction restricting the transfer of the assets, along with a writ of execution, according to the report. That means Arbitrum DAO could face legal liability if it moves the funds.

Kelp DAO was hit by a hack worth about $292 million on April 18. Some analysts have said the attack may have been carried out by a unit affiliated with the Lazarus Group, a hacking organization linked to North Korea.

The Arbitrum Security Council later took emergency action to freeze about 30,766 ETH, worth roughly $73 million, held in wallets tied to the incident.

Some market participants have argued the funds should be used to compensate victims. On April 25, Aave Labs proposed that Arbitrum DAO release the frozen assets and transfer them to DeFi United, a recovery fund for victims.

Inside the DAO, however, concerns have emerged that the legal dispute could shift the burden onto victims. One participant said holding North Korea accountable was justified, but blocking the return of frozen funds could cause further harm.

Gerstein Harrow has filed similar suits before. In February, it asserted claims over hacked funds frozen by Tether. It has also pursued class-action litigation against several DAOs.

Separately, on-chain analysis estimated that about $578 million was stolen through major incidents in April.