Arbitrum DAO Faces Legal Shockwave But Sleuth ZachXBT Calls Lawfirm ‘Pure Evil’

• A restraining notice named Arbitrum DAO in a case tied to the enforcement of a judgment against North Korea, according to PaperImperium.
• The dispute centers on $71 million in Ethereum frozen after the KelpDAO hack.
• The case stems from a decade-old court ruling awarding $330 million in damages, enabling efforts to seize North Korea-linked assets.

Arbitrum’s (ARB) Decentralized Autonomous Organization (DAO) was hit with a lawsuit in a US court this week, raising new questions following a recent hack, PaperImperium reported this week.

According to PaperImperium, the lead economist at MegaETH, an Ethereum (ETH) scaling project, reported a restraining notice identified Arbitrum DAO in a case linked to the enforcement of a judgment against North Korea. The US District Court for the Southern District of New York listed Arbitrum DAO as a “garnishee,” meaning it may be holding assets subject to seizure under an existing judgment.

The dispute involves roughly $71 million in Ethereum that the Arbitrum Security Council froze following the KelpDAO hack earlier this month. The council had announced that the funds could not be moved without a governance vote, effectively locking them.

The MegaETH economist also noted that the restraining order could complicate efforts to return funds to victims of the exploit, as multiple parties may now have legal claims over the same assets. 

Arbitrum’s price was down over 2% in the past 24 hours. On Stocktwits, the retail sentiment around ARB remained in the ‘bearish’ zone, while chatter around it stayed at ‘normal’ levels over the past day.

2015 Judgment Fuels Asset Seizure Push

The case relates to plaintiffs seeking to enforce a 2015 US court judgment against North Korea, in which a South Korean family was abducted in China and presumed tortured and killed in a North Korean prison camp, and was awarded $330 million in damages. This ruling allowed them to pursue assets linked to the North Korean state.

Gerstein Harrow’s Strategy Draws Scrutiny

On-chain investigator ZachXBT also weighed in on the development, criticizing the legal approach taken in such cases, calling it "pure evil”. He added that similar claims were made during the Bybit and Harmony cases, and that they depended on his investigation work after he had already obtained evidence to justify the asset freezes.

This is not the first time Gerstein Harrow LLP has pursued claims involving DAOs. The Washington-based boutique litigation firm filed a lawsuit against bZx DAO following a 2021 hack, arguing the DAO functioned as a general partnership.

The firm has also been involved in class action lawsuits targeting decentralized finance (DeFi) protocols, including Lido (LDO) and Compound (COMP), seeking to hold governance participants accountable under traditional legal frameworks.

The latest development builds on the tension between legal enforcement and decentralized governance, as large pools of crypto assets remain frozen following exploits tied to North Korea-linked groups such as Lazarus.

Ethereum’s price was trading at $2,321, up by 0.9% over the past 24 hours. On Stocktwits, the retail sentiment around ETH remained in the ‘bearish’ zone, while chatter around it moved to ‘low’ from ‘normal’ levels over the past day.

Read also: Tether’s Disney-Actor Co-Founder Brock Pierce In Spotlight Amid Past Controversies

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