Judge Clears Path for Aave to Move $71 Million in ETH Tied to North Korea Hack
A federal judge allowed Aave to move roughly $71 million in Ethereum tied to the North Korean-linked Bybit exchange exploit, a ruling filed May 9 that keeps the funds frozen in place under the original court order even as they change locations. Judge Margaret Garnett of the Southern District of New York ruled that the assets may transfer to the Aave protocol, but the legal freeze attaches to the funds and follows them.
Terrorism plaintiffs pursuing the stolen assets retain their claim regardless of where the ETH moves on-chain.
What the Ruling Means for Aave
The funds at the center of the dispute sit on Arbitrum (ARB), the Ethereum (ETH) layer-2 network. Arbitrum is a scaling system that processes transactions off Ethereum’s main chain and settles them on-chain in batches, reducing fees and wait times.
The ETH reached Arbitrum after hackers laundered a portion of proceeds from the February 2025 Bybit exchange breach, the largest single cryptocurrency theft on record at roughly $1.5 billion in total losses.
Aave is a decentralized lending and borrowing protocol that runs on Ethereum and several compatible networks. Users deposit assets into shared liquidity pools, earning interest, and others borrow against posted collateral without needing a counterparty or a traditional financial intermediary.
The ruling does not release the funds for general use.
Garnett’s order states that the legal freeze travels with the assets. Any movement Aave executes takes place inside the parameters the court set, and the terrorism plaintiffs retain full standing to pursue the ETH wherever it resides on-chain.
Background
The Bybit hack in February 2025 saw North Korea’s Lazarus Group drain roughly $1.5 billion in crypto assets.
A portion of those funds moved through mixing services and bridging protocols before landing on Arbitrum. Terrorism plaintiffs in a separate civil action obtained a freeze order over the identified ETH tranche, blocking Aave from touching the assets.
The May 9 ruling resolves the technical custody question without lifting the underlying freeze.
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What Comes Next
The terrorism plaintiffs retain their claim over the $71 million in ETH (ETH). Their suit continues in the Southern District of New York.
The Aave protocol can now manage the assets operationally within court-approved parameters, but no distribution to Aave users or the Aave treasury is possible while the freeze order stands. Legal observers say the case will set precedent on how U.S. courts treat crypto assets that move across chains during active litigation.
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