Arbitrum Freezes $71.5M in ETH Tied to KelpDAO's $292M Exploit

Arbitrum's Security Council has frozen 30,766 ether, worth about $71.5 million, that it says is linked to the KelpDAO exploit, according to CoinDesk. The council moved the assets to an intermediary wallet, describing the step as an "emergency action" taken after law enforcement provided information on the alleged scammers' identities. The council said the transfer makes the funds inaccessible from the original address, and that any further movement would require additional action by an arbitration body in coordination with relevant parties. Under Arbitrum's emergency framework for Layer 2 incidents, the Security Council can freeze and relocate assets to wallets that can only be accessed through subsequent governance votes. The seized funds remain parked at an intermediate address and would require community approval via Arbitrum governance to unlock. The move has reignited debate over Layer 2 governance, highlighting the tradeoff between fast incident response and decentralization, as Arbitrum's ability to freeze funds in emergencies draws both praise and criticism. KelpDAO, a liquid restaking protocol, was hit by a $292 million hack. On April 18, attackers stole 116,500 rsETH tokens. After the incident, LayerZero attributed the attack to North Korea's Lazarus Group, alleging the attackers compromised RPC nodes in the LayerZero network, launched a DDoS attack on a third node, and poisoned two others. LayerZero and KelpDAO have since disputed security configuration issues, publishing differing documentation standards for protocol setup. On-chain data shows funds tied to the exploit have begun moving. Blockchain investigators said a wallet identified as the KelpDAO hacker sent transfers of $57.93 million and $117.48 million on Tuesday morning. ZachXBT reported the attacker has started laundering about $1.5 million from Ethereum to Bitcoin via Thorchain, with an additional $78,000 laundered via Umbra.