US Law Firm Files Restraining Notice to Block Kelp Exploit Funds From Reaching Victims, Claiming $877 Million From North Korea

[bonk]

A US law firm has inserted itself into the Kelp DAO exploit recovery process by filing a restraining notice that blocks the Arbitrum DAO from moving the 30,766 frozen ETH worth over $73 million that Arbitrum's Security Council seized following the April 18 hack. Gerstein Harrow LLP argued in a New York district court that its clients, who were not affected by the Kelp exploit, won default judgments against North Korea totaling over $877 million in compensatory and punitive damages across three separate US court cases in 2010, 2015, and 2016. The firm's argument is that because the Kelp exploit is attributed to TraderTraitor, a subgroup of North Korea's Lazarus Group, the stolen Ether constitutes DPRK property that its clients have a legal claim against. A New York district court signed off on the restraining notice and three writs of execution, threatening the Arbitrum DAO with contempt of court if the funds are moved.The intervention directly obstructs the recovery plan that Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound jointly proposed, which would direct the frozen funds to DeFi United for distribution to rsETH holders affected by the hack. Arbitrum DAO member Zeptimus captured the central ethical problem with the law firm's position clearly: the restraining notice asks to block the return of stolen funds to their actual owners, shifting the cost of the DPRK's debt onto a different set of victims who were themselves robbed. The firm's action does not pursue North Korea directly. It pursues funds that would compensate people who lost money in the same North Korean hack the firm is citing as the basis for its claim.

[madmax]

The ethical problem being that judgment enforcement costs fall on a different victim group than the one the judgments were meant to compensate is the central flaw that the legal creativity cannot resolve regardless of how valid the underlying judgments are.