New York Judge Pushes Back Hearing for Aave’s Bid to Unfreeze $71M in ETH

A New York judge has delayed a decision on Aave’s emergency bid to unfreeze $71 million worth of crypto tied to victims of the $293 million Kelp DAO hack, asking for additional information ahead of a new hearing in June. 

Aave has sought to use $71 million in ETH that Arbitrum froze to assist with recovery efforts following the Kelp DAO hack, one of the worst DeFi hacks this year.

However, US law firm Gerstein Harrow LLP filed a restraining notice at the start of May, arguing its clients have a claim to the funds. Aave then filed an emergency motion to get the funds unlocked, arguing that user liquidations and potential DeFi market destabilization could occur if the funds are not unlocked soon.   

According to documents filed Wednesday in the Southern District of New York, Judge Margaret M. Garnett said Aave had not adequately outlined how “compounding losses” on user funds could “occur if the restraining notice remains in place” in its filing earlier this month. 

Judge requests more information from both sides 

Judge Garnett acknowledged that the case is complex and that there are risks for the victims, and called for additional briefings from both sides to further outline their cases.  

“The court recognizes the risk of potential near-term harm to Aave LLC and Aave Protocol users. Due to the complexity of the issues raised in the parties’ motions and at oral argument on May 6, 2026, and the extremely abbreviated timeline on which they were briefed, the Court orders the parties to submit supplemental briefing,” Judge Garnett said.  

The judge outlined six key points on which the court wants more information, including whether the hacking transactions are governed by New York’s shelter principle; the legal distinction between fraud and theft and what interest hackers have in stolen assets; which law controls creditor priority over the frozen assets; whether a constructive trust would be an appropriate remedy and whether Aave or Arbitrum can identify individual victims to return the assets on a pro rata basis.

Aave and Gerstein Harrow will now have until May 22 to submit their briefs, with the hearing scheduled for June 5.

Related: DeFi can freeze stolen funds, but not everyone agrees it should

The case comes amid broader Kelp DAO recovery efforts. Kelp and Aave announced Tuesday that they had taken important steps to restore the backing of rsETH. 

The hacker’s rsETH have been burned on Arbitrum, while the lost tokens, worth about $278 million, will be restored over the next two weeks via funds from the Aave Recovery Guardian multisignature wallet.  

Once the associated smart contracts are reactivated, all rsETH uses will return to normal. 

Source: Kelp DAO

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