Judge Seeks More Evidence in Aave $71M ETH Freeze
A New York federal judge paused Aave’s request to unfreeze an ETH freeze of about $71M tied to victims of the Kelp DAO hack. Judge Margaret M. Garnett said Aave did not adequately explain why keeping the ETH freeze in place would meaningfully worsen user losses.
The court ordered supplemental filings by May 22 and set a hearing for June 5. It also laid out six legal issues, including whether New York’s protective statutes apply, how fraud differs from theft in this context, what legal theory governs claims over the hacked assets, which jurisdiction controls creditor priority, whether a “constructive trust” is appropriate, and whether pro rata victim distributions are workable.
Separately, the later coverage highlighted restitution progress: hacked rsETH on Arbitrum was burned, and remaining unreturned rsETH is expected to be repaid within two weeks via Aave’s Recovery Guardian multisig wallet. Smart contracts are expected to reactivate once compensation is completed.
For traders, the near-term takeaway is uncertainty around when this ETH freeze could be lifted, while the restitution timeline improves visibility into the eventual unwind.
Bearish
Bearish for ETH in the short term because the judge’s pause extends uncertainty over an ETH freeze linked to a major hack. That delays potential liquidity/settlement catalysts and keeps market participants watching legal timelines rather than fundamentals. Even though restitution steps are progressing (burn of hacked rsETH and planned repayments), the court’s need for additional evidence means an earlier release is less likely in the immediate window.
Longer term, planned restitution via Aave’s Recovery Guardian multisig and expected contract reactivation could reduce tail-risk and improve sentiment around hack recovery, which may limit downside once traders gain clarity before the June 5 hearing.