Arbitrum DAO Votes to Release $71M Frozen ETH to DeFi United

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Arbitrum DAO Starts Vote to Release $71M in Frozen Kelp Hacker <a href="https://bbg-news.com/eth-usd/">ETH</a> to DeFi United

Show AI Summary
Voting on releasing 30,766 ETH begins with 16.9 million ARB tokens cast within the first hour.
The temperature check vote runs until May 7, 2026, before potentially advancing to an on-chain vote.
If approved, the proposal authorizes transferring funds to a new Gnosis Safe by April 25 authors.

The Arbitrum DAO is holding a preliminary vote to decide whether to release approximately $71 million in ETH (30,766 ETH) that was frozen from the person who exploited the Kelp DAO. Initial results show strong support for releasing the funds, marking a potentially significant step for the DeFi United project.

In the first hour of voting, around 16.9 million ARB tokens were used to support releasing the funds, and no votes were cast against it. This initial check continues until May 7, 2026. If it’s successful, the proposal will move to a final vote on Tally.

If approved, Arbitrum’s contribution would be the biggest single donation received so far for the DeFi United recovery effort. It would surpass the combined commitments of Consensys and Joseph Lubin (30,000 ETH), Mantle’s credit line (30,000 ETH), and the proposed contribution from Aave DAO (25,000 ETH).

What’s Being Voted On

The Snapshot proposal under temperature check is a Constitutional AIP filed on April 25 by Aave Labs as lead author, with Kelp DAO, LayerZero, Etherfi, and Compound as co-authors. Its purpose is narrow: to authorize the transfer of the 30,765.66 ETH currently held in the Arbitrum DAO-controlled wallet 0x0000000000000000000000000000000000000DA0 to a new 2-of-3 Gnosis Safe 0xf228130ce4fAB082C7D5522c90833cec83A9C15e, controlled by signers from Aave, Kelp DAO, and on-chain security firm Certora.

The Safe will only receive ETH that has been recovered and use it to strengthen the financial foundation of rsETH. If the recovery plan doesn’t work as expected, the proposal promises to ask Arbitrum’s governance system to decide how to use the funds instead.

The proposal includes a very extensive protection agreement. Aave Labs has promised to cover all legal and financial claims against the Arbitrum Foundation, Offchain Labs, and members of the Arbitrum Security Council that might result from freezing or releasing funds. This agreement is subject to New York law and has no limit on the amount Aave Labs will cover, including costs for legal defense, regulatory investigations, and any claims from token holders.

How the Funds Got Frozen

On April 21st at 11:26 PM Eastern Time, the Arbitrum Security Council quickly froze 30,766 ETH. This decision was made with a strong majority vote – 9 out of 12 elected members agreed. The Council stated they worked with law enforcement to identify the person behind the issue, and carefully considered how to protect the Arbitrum community and its users without causing disruptions.

As a crypto investor, I was relieved to hear that authorities managed to recover about 25% of the funds stolen in the Kelp DAO hack on April 18th. The official report explained that the attacker exploited a weakness in how LayerZero handles data, essentially forging information to create 116,500 new rsETH tokens on Ethereum without actually destroying an equivalent amount on Unichain. That 116,500 rsETH represented around 18% of all rsETH in circulation at the time, so it was a significant amount to lose.

The attacker then used 89,567 rsETH as collateral across Aave (on both Ethereum and Arbitrum), Compound, and Euler, allowing them to borrow around $236 million in assets like WETH and wstETH.

From my analysis, evidence is pointing towards the Lazarus Group, a North Korean hacking collective, as being responsible for this exploit. If confirmed, this would add to their established pattern of targeting large decentralized finance (DeFi) platforms, similar to the attacks on Ronin Network in 2022 and Bybit in 2025.

As I understand it, this proposal is currently slated for implementation around 49 days after it’s posted on the forum – putting us roughly in early to mid-June of 2026. However, that timeline immediately raised concerns within the forum discussion. Delegate Nicksta specifically questioned if we could speed things up, pointing out that some users have positions within Aave that could face issues if they have to wait almost two months.

Griff Green, a member of the Arbitrum Security Council and a public defender of their recent freeze decision, acknowledged that speeding up the process is a good idea. The voting requirements are clear: a simple majority of tokens must vote in the initial Snapshot poll, and at least 4.5% of tokens need to approve the proposal on-chain, following the established rules. With nearly 16.9 million ARB tokens already voted in favor within the first hour, the proposal is likely to easily meet the participation threshold, based on current voting trends.

The DeFi United Tally as of April 30

If the proposal for Arbitrum is approved and put into action, the plan to recover funds for DeFi United will be adjusted accordingly. So far, people have contributed or lent over $311 million in ETH and stablecoins. This is to cover a funding gap that started at around 163,200 ETH, but has since been significantly reduced.

Confirmed and pending pledges include:

  • Arbitrum DAO — 30,766 ETH (this proposal, if approved)
  • Consensys / Joseph Lubin — 30,000 ETH combined
  • Mantle — 30,000 ETH credit facility (Lido staking yield + 1%, 3-year term)
  • Aave DAO — 25,000 ETH treasury proposal (separate pending vote)
  • Stani Kulechov (Aave founder, personal)—5,000 ETH
  • LayerZero — 5,000 ETH directly + 5,000 ETH deployed on Aave (interest-accruing)
  • Etherfi — up to 5,000 ETH
  • Lido — 2,500 stETH
  • Kelp DAO — 2,000 ETH
  • Additional contributions from Golem, Ethena, and others

The funds allocated to Arbitrum are unique because they come from money that was previously lost due to hacks, not from new investments. This means releasing these funds doesn’t affect the protocol’s existing reserves or financial stability. In terms of financial recovery, it’s the most straightforward contribution possible.

The Centralisation Critique That Hangs Over the Vote

The recent decision by the Arbitrum Security Council to freeze funds – and the subsequent vote by the community on how to handle those funds – has been closely watched as a key test of how emergency governance works on layer-2 networks. While some have questioned the Council’s actions, pointing to concerns about central control and the lack of guaranteed protection for user funds through on-chain security, the vote itself was legally sound according to Arbitrum’s rules. However, the bigger issue remains: the precedent this sets for future situations.

Those supporting the Council’s action explain that this situation falls directly within their purpose: safeguarding the Arbitrum ecosystem from funds gained through attacks, especially when authorities have identified the attacker. The current vote essentially confirms the Council’s decision after it was already made – and the strong initial support (16.9 million ARB votes in favor with no opposition) indicates that most delegates agree with this confirmation.

The key issue is how this sets a future example. If this proposal is approved, it suggests the DAO supports the Security Council using similar emergency freezes in the future. However, if it doesn’t pass or faces strong opposition later, the Council’s ability to take similar actions in future emergencies will be limited.

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2026-05-01 13:26