Arbitrum DAO Approves Release of $71M Frozen ETH After Kelp DAO Exploit

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• More than 90.5% of votes supported releasing roughly $71 million in frozen ETH linked to the Kelp DAO exploit.
• The proposal seeks to unfreeze 30,766 ETH frozen by Arbitrum’s Security Council on April 21.
• The motion was co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound.
• Even if approved, rsETH backing still faces a shortfall of about 76,127 rsETH, valued at roughly $174.5 million.
• Arbitrum DAO is also expected to approve a separate proposal to allocate 6,000 ETH into treasury yield strategies.

Arbitrum DAO Vote Advances Kelp DAO Recovery Effort

A joint proposal to release approximately $71 million worth of Ether frozen after the Kelp DAO exploit is set to pass later on Thursday, according to Snapshot voting data. More than 90.5% of the votes supported the proposal, representing 173.9 million Arbitrum (ARB) tokens. Around 9.4%, or 18.1 million ARB tokens, abstained, while less than 1%, or about 1,700 tokens.

The proposal was co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound. It seeks to unfreeze 30,766 Ether (ETH) that was frozen by Arbitrum’s Security Council on April 21. The freeze took place days after an attacker drained approximately 116,500 restaked Ether (rsETH) from Kelp DAO, valued between $290 million and $293 million at the time.

The proposal marks the completion of the first round of voting in the “DeFi United” recovery effort and moves the process toward a binding onchain governance proposal. The development follows Aave Labs liquidating the Kelp DAO hacker’s remaining rsETH positions on Ethereum and Arbitrum.

Recovery Address and rsETH Shortfall Details

If the final governance proposal is approved, the frozen funds would be released to a designated recovery address identified as ‘0xf22’. The recovery wallet would operate as a 3-of-4 Gnosis Safe (SAFE) with signers from Aave Labs, Kelp DAO, Certora, and EtherFi.

Despite the proposed release of funds, rsETH backing would still face a shortfall of approximately 76,127 rsETH, currently valued at around $174.5 million. The proposal stated that partially restoring rsETH’s backing could help stabilize broader DeFi market conditions.

Arbitrum DAO Also Advances 6,000 ETH Treasury Yield Proposal

The Arbitrum DAO is also expected to approve a separate proposal to allocate 6,000 ETH, currently valued at about $14 million, from the DAO treasury into its Treasury Management Portfolio.

The proposal increased the planned allocation from 5,000 ETH to 6,000 ETH following feedback on the Arbitrum governance forum. It also includes a plan to transfer approximately $150,000 worth of idle USDC into the portfolio to generate additional yield. Based on the current 30-day average annualized rate and an assumed ETH price of $2,200, the 6,000 ETH allocation is projected to generate an additional 288 ETH, worth about $625,000, over the next year.

FAQs

1. What did the Arbitrum DAO approve?
The Arbitrum DAO approved a proposal to release approximately $71 million worth of frozen ETH linked to the Kelp DAO exploit recovery effort.

2. How much ETH was frozen after the Kelp DAO exploit?
A total of 30,765 ETH was frozen by Arbitrum’s Security Council on April 21 following the Kelp DAO exploit.

3. Which protocols supported the recovery proposal?
The proposal was co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound as part of a joint recovery initiative.

4. Is rsETH fully backed after the proposed ETH release?
No. Even after the release of the frozen ETH, rsETH still faces a shortfall of approximately 76,127 rsETH.