Jack Paul 
A New York judge has postponed a decision on Aave’s emergency request to unlock $71 million in cryptocurrency tied to victims of the massive $293 million Kelp DAO hack. The judge asked both sides for more information before a new hearing scheduled for June.
The funds, which are Ether held on Arbitrum, were frozen after the hack. Aave wants to use the $71 million to help with recovery efforts after one of the worst decentralized finance hacks this year. But a US law firm, Gerstein Harrow LLP, filed a restraining notice earlier this month. The firm argues its clients have a claim to the money. In response, Aave filed an emergency motion to unlock the funds. The company warned that if the funds stay frozen, it could trigger user liquidations and destabilize the DeFi market.
Judge wants clearer arguments from both sides
According to court documents filed on Wednesday in the Southern District of New York, Judge Margaret M. Garnett said Aave had not explained clearly enough how “compounding losses” on user funds would happen if the restraining notice remains. She acknowledged the case is complex and that victims face real risks. She called for additional briefings from both sides to outline their arguments more thoroughly.
“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.
Six key questions from the judge
Judge Garnett laid out six specific points where she wants more information. These include whether the hacking transactions fall under New York’s shelter principle, the legal difference between fraud and theft, and what interest hackers have in stolen assets. The judge also wants to know which law governs creditor priority over the frozen assets, whether a constructive trust would be an appropriate remedy, and if Aave or Arbitrum can identify individual victims to return the assets on a pro rata basis.
Both Aave and Gerstein Harrow now have until May 22 to file their briefs. The next hearing is set for June 5.
Broader recovery efforts continue
This court case is just one part of the wider recovery efforts after the Kelp DAO hack. Kelp and Aave announced on Tuesday that they had taken important steps to restore the backing of rsETH, a token affected by the hack. The hacker’s rsETH have already been burned on Arbitrum. The lost tokens, worth about $278 million, will be restored over the next two weeks using funds from the Aave Recovery Guardian multisignature wallet. Once the associated smart contracts are reactivated, all rsETH uses are expected to return to normal.