A case making its way through a U.S. federal court could decide whether funds recovered after a hack can be diverted away from users.
“Since the exploit, teams from the Aave Protocol community, the Arbitrum community, and others in the DeFi community worldwide have worked frantically around the clock, in an effort that became known as “DeFi United,” to return the immobilized assets and other value to the Aave Protocol victims, to restore stability and security to the Aave Protocol and other protocols in the decentralized finance ecosystem, and to ensure that similar exploits do not occur in the future,” the filing said.
“Plaintiffs’ grievances against North Korea may well be righteous,” the filing said. “But AaveLLC emphatically rejects the notion that those grievances can be lawfully addressed by restraining and seizing assets that belong to completely blameless third parties—namely, users of the Aave software protocol (the “Aave Protocol”), who are wholly unconnected to any alleged wrongdoing,and who have no known relationship to North Korea.”
While it’s still unclear who carried out the hack, the impact spread fast. Users rushed to pull out their money, funds ran low, and key lending pools were quickly maxed out. Billions of dollars left the platform in a short time, and some users couldn’t access their deposits.
The filing also questions whether Arbitrum DAO can even be treated like a legal entity. Aave argues it isn’t a formal organization that can be served in the way the plaintiffs tried, which could complicate the case.
Beyond the legal dispute, Aave says the freeze is worsening the fallout from the Kelp DAO exploit.
“To be clear, the objective of the Restraining Notice against Arbitrum DAO is not to aid in the global recovery efforts to help the Aave Protocol victims,” attorneys for the plaintiffs wrote. “Instead, it does the opposite.”
