Victims of North Korean terrorism are intensifying their legal efforts to seize $71 million in frozen ether following the April 18 rsETH exploit. On Tuesday, lawyers altered their strategy by filing a new court brief asserting that the incident was fraudulent rather than theft, challenging Aave’s claim that a restraining notice should be voided.
In the opposition brief submitted in New York’s Southern District, it is argued that the exploit constitutes a deceptive lending transaction under U.S. law. This allows fraudsters who deceive property owners to gain legal title to that property, though such ownership can be reversed. “The principle is clear: a fraud victim transfers title—not just possession—to the fraudster… Charles Ponzi’s infamous scheme granted him ‘defeasible title’ over his victims’ funds,” the brief states.
This legal contention stems from an exploit last month on a cross-chain bridge that siphoned approximately $230 million from Aave, the largest decentralized lending protocol by total value locked. The attack is widely attributed to North Korea’s Lazarus Group by Chainalysis and TRM Labs, which observed minting unbacked rsETH tokens as collateral for borrowing real ether against the empty deposits.
Developers associated with Arbitrum blockchain intercepted about $71 million before it could be withdrawn.
The brief broadens the dispute beyond New York property law to include the Terrorism Risk Insurance Act (TRIA), a federal statute enacted post-9/11. This act permits court judgment winners against state-sponsored terrorism to claim judgments from any U.S.-held property belonging to those countries.
If accepted, this argument could diminish the relevance of Aave’s prior New York property law claims. The filing also questions Aave’s authority to contest the freeze, referencing its terms of service which assert no “possession, custody or control” over user assets—a central tenet in decentralized finance.
Additionally, lawyers noted that affected users might not require the frozen ether. DeFi United, an industry-led recovery fund with Aave as a participant, has amassed $327.95 million by Tuesday morning—more than quadruple the contested $71 million.
A hearing is set for Wednesday, May 6, in Manhattan federal court.