Lawyer says stolen crypto belongs to North Korea, not scam or hacking victims

An unusual case has emerged in the crypto world, where a legal battle over stolen millions has begun. A lawyer claims the funds belong to victims from an unrelated case.

This is all related to the $292 million Kelp DAO hack this past April, when more than $70 million in stolen crypto assets were frozen by the Arbitrum DAO team, which oversees development of the Arbitrum blockchain.

This blockchain's community started voting on returning the funds to the victims. However, attorney Charles Gerstein served a restraining notice on behalf of creditors holding around $877 million in claims against North Korea in terrorism cases.

Gerstein claims that the Arbitrum DAO now controls assets owned or believed to be owned by the country and the infamous North Korean hacking group Lazarus. Therefore, these funds can't be moved without permission from a sheriff or court.

The lawyer shared the news on the Arbitrum DAO's governance forum, where some participants pushed back, reminding Gerstein that he's talking about stolen property from other people.

However, as discussions on forums aren't likely to help in legal matters, the decentralized finance (DeFi) giant Aave stepped in, filing an emergency motion in federal court seeking permission to move the funds.

"A thief does not gain lawful ownership of stolen property simply by taking it, and the law is clear on this. Those assets were recovered to be returned to users victimized in the April 18th, 2026, exploit. Freezing them harms the very people this recovery effort is designed to protect," Aave said.

In the motion, their legal team compares the case to a jewelry store theft, where "a Good Samaritan bystander" grabbed one of the stolen diamonds from the thief before they escaped. And now, plaintiffs assert that the thief "owns" the diamond that should be returned not to the jewelry store but to the plaintiffs from an unrelated case.

"The plaintiffs’ theory defies logic, common sense, and the law," the motion concluded.

It was filed on May 4th, as Aave and other DeFi industry players coordinate their efforts and raise funds to prevent a larger crisis in the sector following the Kelp DAO hack, which sent financial shockwaves across the industry.

According to Aave, plaintiffs failed to mention that the theft has caused a myriad of direct and indirect harms that have rippled through the DeFi community, and it needs “to be mitigated and addressed immediately, with as much speed as possible."

Unlock more exclusive Cybernews content on YouTube.