Aave, Kelp and LayerZero Ask Arbitrum DAO to Free $71M in Frozen ETH

A coalition of large DeFi protocols has formally asked the Arbitrum DAO to release roughly $71 million in frozen ETH into a coordinated recovery effort for holders of rsETH, after a $292 million exploit gutted Kelp DAO's bridge earlier this month.

The proposal

According to The Block, the Constitutional AIP was filed on the Arbitrum forum on the morning of April 26. Aave Labs is listed as the lead author, joined by Kelp DAO, LayerZero, EtherFi and Compound. It seeks the release of 30,765.67 ETH that the Arbitrum Security Council froze and moved on April 21 after tracing the funds to addresses controlled by the exploiter. The capture itself completed at 11:26 p.m. ET on April 20.

Where the funds would go

Under the proposal, the recovered ETH would flow to a 2-of-3 Gnosis Safe co-signed by Aave, Kelp DAO and Certora, used solely to receive recovered ETH and apply it toward restoring rsETH's economic backing. The original exploit, dated April 18, drained 116,500 rsETH from Kelp's LayerZero-powered bridge.

What to Watch

This vote is a stress test for two unsettled questions in DeFi: whether L2 security councils should be using freeze powers in active exploit response, and whether DAOs can responsibly route recovered funds back to victims through multisigs they don't directly control. A clean approval would set a workable template; a contested vote would chill the next council that tries to act fast.

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