Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound have submitted a proposal to the Arbitrum DAO to release 30,765.6HT ETH currently tied to a recovery plan for the Kelp DAO exploit, according to crypto.news.
The frozen assets, valued at approximately $71 million based on Ethereum trading near $2,317, were previously locked by the Arbitrum Security Council due to links to the attacker. The proposal seeks to move these funds to a Gnosis Safe managed jointly by Aave, Kelp, and Certora.
These funds would be directed to DeFi United, a cross-protocol recovery initiative established following the $292 million Kelp DAO exploit. The primary goal of the recovered ETH is to restore the economic backing of rsETH.
Kelp DAO stated on X that "every ETH released moves rsETH holders closer to whole." The proposed Gnosis Safe would operate under a 2-of-3 multi-signature arrangement to ensure controlled access to the recovered assets.
Governance delays threaten recovery speed
Arbitrum delegates have expressed concern that the standard 49-day constitutional governance process could delay urgent recovery efforts. This timeline includes forum reviews, temperature checks, and onchain voting steps.
Delegate Nicksta warned that the delay could impact users with active lending positions, noting that "many parties have open positions on AAVE that might run into problem if they have to wait 49 days."
Arbitrum Security Council member Griff Green advocated for a faster community signal via Snapshot to confirm intent before final execution. Green also requested more specific details regarding the treatment of rsETH holders and Aave users under various recovery scenarios.
The proposal also clarifies the attacker's activity on the Aave protocol. According to the filing, the exploiter used 89,567 rsETH as collateral to borrow 82,650 WETH and 821 wstETH across Aave’s Ethereum Core and Arbitrum V3 markets.
Aave has confirmed that its smart contracts were not compromised during the incident. The company maintains the event was an external exploit affecting assets across DeFi markets rather than a direct failure of Aave’s internal lending systems.
