A US law firm has filed a restraining notice to prevent frozen ether transfers from exploiting Kelp, arguing that its clients are owed more than $877 million in compensation and damages from North Korea.
The New York District Court signed a restraining notice and three enforcement orders preventing the DAO from transferring ether under threat of contempt of court, Charlie Gerstein, a lawyer for US law firm Gerstein Harrow LLP, said in a post on the Arbitrum DAO forum on Friday.
The law firm said its clients, who were not affected by Kelp’s exploits, won default judgments against North Korea in three cases in separate US courts in 2010, 2015 and 2016, and that they are collectively owed $877 million in compensatory and punitive damages, plus interest. It also argued that its clients had a claim to property in the DPRK. Gerstein said in the restriction notice that the stolen ether is “property” in which the DPRK has a stake because the hacker group is affiliated with the country.
The freeze may mean that those affected by the Kelp vulnerability will need to wait longer for their funds to be refunded. This is not the first time the company has tried to claim stolen cryptocurrency.
Kelp DAO was hit by a $292 million hack on April 18, which is believed to have been carried out by TraderTraitor, a subset of North Korea’s state-backed hacking unit, Lazarus Group.
Days later, Arbitrum’s security board took emergency action to freeze 30,766 Ethereum (ETH), worth more than $73 million, held in a wallet linked to the Kelp exploit.
Gerstein Harrow’s attorney, Charlie Gerstein, has posted a restraining notice seeking to prevent Arbitrum DAO from transporting frozen ether. source: Dow Arbitration
Funds were provided for kelp victims
Aave Labs proposed on April 25 that Arbitrum DAO unfreeze $73 million in ether linked to the Kelp DAO attack and direct those funds to “DeFi United,” a fund aimed at recovering rsETH and compensating its holders.
A member of Arbitrum DAO under the name Zeptimus said that if the action taken by the law firm is successful, the DPRK’s debts will not be transferred to Kelp DAO victims.
“Your clients’ losses are real and the DPRK must bear responsibility for them,” they said. “But the remedy required by the restriction notice, which is to prevent the stolen funds from being returned to their rightful owners, shifts the cost of the DPRK’s debt to a different group of victims who were themselves robbed. This compounds the original damage, not cures it.”
Gersten Harrow has made similar claims before
Gerstein Harrow has filed similar cases in the past, arguing that its clients have a claim on funds stolen by the DPRK and frozen by cryptocurrency companies. In February, the company filed a claim against funds frozen by Tether that were stolen in the 2023 Heco Bridge hack.
Related to: North Korean hackers used AI-powered social engineering in the Zerion attack
It has also filed class action lawsuits against several decentralized autonomous organizations (DAOs). Meanwhile, Onchain investigator ZachXBT accused the law firm of using his research into court documents to claim funds from the $1.5 billion Bybit hack.
The law firm has three direct cases against DAOs on its website. source: Gersten Harrow
North Korea-linked actors have been accused of stealing at least $578 million across major incidents throughout April, and have been linked to several of the industry’s largest hacks, including the Bybit exploit.
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