Aave Backs Proposal to Release 30,765 ETH Frozen After rsETH Incident

• Aave said that service providers and partners submitted a proposal to the Arbitrum DAO to release 30,765.67 ETH that was frozen.
• The funds would go to DeFi United, a cross-protocol recovery effort aimed at restoring rsETH backing.
• The proposal said the Arbitrum Security Council froze the ETH on April 21 and moved it to a designated address.

Aave and several major DeFi groups have taken the rsETH recovery process to Arbitrum governance, asking the DAO to decide whether more than 30,765 ETH frozen after the exploit should now move into a coordinated remediation plan. The proposal shifts the next phase of the incident from emergency response to community decision-making.

Aave said in an X post that, after discussions with several stakeholders, service providers, including EtherFi, KelpDAO, LayerZero, and Compound, submitted a governance proposal requesting the release of the ETH frozen by the Arbitrum Security Council following the April 18 rsETH incident. According to Aave, the funds would be directed into DeFi United if released.

Where Could the Frozen ETH Go Next?

The proposal published by Aave Labs asks Arbitrum governance to approve the release of 30,765.67 ETH immobilized by the Arbitrum Security Council on April 21. Notably, those funds were moved to a designated address on Arbitrum One, and any release now requires a separate governance action.

Aave said the destination would be a coordinated recovery effort involving multiple ecosystem participants. Governance post-sited, the ETH would be sent to a 2-of-3 Gnosis Safe with signers from Aave, KelpDAO, and Certora. The recovery address would receive the funds solely for remediation tied to the rsETH incident.

Why the Proposal Targets DeFi United

Aave’s post said the release would “meaningfully advance the path to resolution” as other parties confirm their commitments. According to the proposal, the goal is to make affected rsETH holders whole and restore the asset’s backing through a neutral and non-discriminatory recovery process.

The governance text also said the exploit created a shortfall in rsETH backing. It cited an incident report stating that the KelpDAO rsETH route released 116,500 rsETH on Ethereum without a matching source-side burn. That left only 40,373 rsETH in the adapter as confirmed backing for 152,577 rsETH in remote-chain claims, creating an estimated shortfall of 76,127 rsETH.

How Aave and Users Were Affected

Notably, the proposal said the exploiter supplied 89,567 rsETH across Aave’s Ethereum Core and Arbitrum markets, then borrowed 82,650 WETH plus 821 wstETH against those positions. It also stated clearly that Aave’s smart contracts were not compromised and that the incident originated outside the protocol.

As per the proposal, returning the frozen ETH to the coordinated recovery effort would directly reduce the impairment to rsETH’s backing. Moreover, it would also reduce the impairment affecting the Aave V3 Arbitrum market and its users. 

The document added that increasing rsETH backing would help restore more normal conditions for Arbitrum users and DeFi participants more broadly.

What Happens Before Any Release

Meanwhile, the proposal sets out a governance path that begins with forum discussion and feedback. Additionally, it may include a Snapshot temperature check before moving on-chain as a Constitutional AIP through the Arbitrum Core governor.

According to the timeline in the post, the full process could take about 49 days from forum publication to execution. Meanwhile, Aave said the proposal is open for review and feedback from the Arbitrum community, making delegate response the next major step in deciding whether the frozen ETH will stay immobilized or enter the DeFi United recovery pool.

Related: Ethereum Foundation Dumps 10,000 ETH to BitMine