Rundown from about a week ago:
- North Korea stole $71m from DEFI protocol AAVE.
- Arbitrum DAO used multisig consensus to freeze the funds while in transit.
- The DAO planned to return the money to an AAVE-controlled wallet.
- A court order forbid the DAO from moving the money.
- Lawyers trying to freeze North Korean assets make the ridiculous claim that they get to confiscate this money because North Korea "owned" it.
https://x.com/aave/status/2051329772190347560
I was going to report on this issue in real time as it was happening, but I thought it would be interesting to wait and see how long this issue would play out. It's been over a week and the money still has not moved. I for one do not believe that AAVE users are going to get screwed over here in the long run, but they've already been completely screwed over in the short term, especially in terms of emotional distress.
Clearly it is unacceptable that any court or judge would allow recovered funds like this to be frozen at all. The pretenses are false and absurd red tape nonsense. It also shows the risk of how having doxed multisig-holders is a huge risk. Can't serve someone legal paperwork if you don't know where they live.
https://x.com/gabrielhaines/status/2051446369689166014
Judge clears path for Aave to move $71 million in ETH linked to North Korea hack
A couple days ago there was some movement on this issue.
Judge Margaret Garnett allowed frozen exploit funds on Arbitrum to move to Aave, but the legal freeze follows the assets as terrorism plaintiffs continue their claim.
The order also shields participants from liability under the notice, stating that anyone who initiates, votes on or participates in the transfer would not violate the freeze.
So the funds are still "frozen"
But moving the funds from one organization to the other is still allowed. To be honest this makes the situation even more complicated if you think about it. It allows the transfer of legal liability from Arbitrum DAO back to AAVE. Funny enough this proves that AAVE is so centralized that even a judge won't mind if legally frozen funds move into that wallet. Comical to say the least. Dark comedy.
The ruling resolves an immediate standoff that had threatened to derail a coordinated DeFi recovery effort after attorney Charles Gerstein, representing families holding roughly $877 million in unpaid terrorism judgments against North Korea, argued the frozen ETH could be seized because the exploit has been widely attributed to Lazarus Group, which is supported by Pyongyang.
The gall of these people to try and steal funds that have already been recovered to the rightful owners under the guise of recovering stolen money from another party. Amazing to be honest.
Conclusion
Clearly we should be working toward better solutions than this nonsense we are seeing today. Unfortunately this is easier said than done. If these networks were all fully decentralized and "code is law" then North Korea would indeed still be the rightful owner of all these funds. The spectrum of decentralizations is an interesting tightrope balancing act to say the least.