Fate of $71 Million Ahead of Arbitrum Governance Vote... Families of North Korean Terrorism Victims Seek Seizure of Kelp DAO Hack Funds

A New York federal court has issued an emergency order prohibiting the transfer of $71 million in Ethereum (ETH) assets against Arbitrum DAO. This action comes just as Arbitrum governance was set to vote on whether to release the frozen assets.

The plaintiffs are not victims of the Kelp DAO hack, but rather families who received a judgment for damages against the North Korean government for acts of terrorism. They intend to seize these assets, which are suspected to be linked to North Korean hackers, to recover compensation that has remained uncollected for years.

The U.S. District Court for the Southern District of New York regarded Arbitrum DAO as a "partnership organization" that can be held legally liable and approved a garnishment order to prevent the assets from being moved. The plaintiffs, Han Kim and Yong Seok Kim, were awarded a total of $330 million in damages by a U.S. court in 2015 for North Korea's terrorist acts.

This court decision is a strong signal that decentralized autonomous organizations can be treated as legal entities in federal debt collection proceedings.

Legal representatives for the families emphasized that the frozen assets managed by Arbitrum DAO are linked to North Korea's illicit activities and that they have the right to satisfy the outstanding judgment through them. This is expected to be recorded as an unusual case where the DeFi ecosystem, which advocates "Code is Law," directly clashes with the U.S. federal legal system.

Kelp DAO Hack and Arbitrum's Emergency Response

The root cause of this situation dates back to the Kelp DAO hack that occurred on April 20, 2026. At the time, an attacker exploited a vulnerability in the LayerZero bridge to steal approximately $292 million worth of rsETH, some of which was frozen on the Arbitrum network. Below are the key figures related to the Kelp DAO hack and the Arbitrum asset freeze.

• Total hack scale: $292 million (approx. 116,500 rsETH)
• Assets frozen by the Arbitrum Security Council: $71 million worth of ETH
• Time of freeze execution: April 20, 2026, at 11:26 PM (ET)
• Main protocols affected: Kelp DAO and LayerZero-based bridges

The Arbitrum Security Council identified the hacker's wallet and froze the assets based on information from investigative agencies. However, there were strong calls within the governance to release them for victim relief or ecosystem recovery. Market attention was focused on the fate of the assets as a governance vote named "DeFi United" approached.

Arbitrum governance had already resolved to release the frozen assets, but the court's garnishment order has halted the actual transfer of assets. This result directly contradicts the plan to recover funds through the "DeFi United" vote, creating a situation where the decision-making power of decentralized governance is restricted by judicial authority.

Market Turmoil and the Weight of Legal Precedent

In the 48 hours following the Kelp DAO hack, approximately $13 billion in TVL evaporated from the entire DeFi market. In particular, Aave's TVL plummeted by $8.45 billion, clearly demonstrating market instability, and the change in DeFi market TVL immediately after the hack showed a sharp decline.

The court's classification of the DAO as a "partnership organization" is expected to have a massive impact on the future cryptocurrency regulatory environment. This could lead to an interpretation that individual token holders may be held jointly and severally liable for the DAO's activities, raising concerns about a chilling effect on governance participation.

The Arbitrum Foundation is currently preparing an official position on the court order, and intense debate is taking place among governance participants regarding whether to take legal action. If the families' seizure claim is ultimately approved, it would be the first case where a third-party creditor, rather than the hack victims, takes possession of frozen assets.

Investors are closely watching the upcoming court hearings and whether Arbitrum will appeal. This incident suggests that decentralized protocols cannot be free from the influence of international disputes and international legal rulings, presenting a new challenge for legal risk management in the DeFi industry.