The Arbitrum Security Council recently took emergency action to transfer 30,766 ETH (approximately $71.2 million) from addresses related to the Kelp protocol vulnerability to an "intermediate freeze wallet." This decision was approved by 9 out of 12 council members after several hours of intense debate involving technical, practical, ethical, and political considerations. Council member Griff Green emphasized that this was not a decision made lightly.
The direct trigger for this action was an attack on Kelp (a liquid staking protocol) via its LayerZero bridge last Saturday, resulting in losses of at least $293 million. The attacker subsequently used the stolen Kelp tokens to borrow other cryptocurrencies on the lending platform Aave, causing bad debt for Aave and spreading risks to the broader crypto lending market. LayerZero publicly attributed the attack to a North Korea-linked organization.
This move has sparked strong backlash in the community, with some users questioning whether Arbitrum's freezing of funds under the council's order violates decentralization principles. Arbitrum stated that the council communicated with law enforcement before taking action and carefully weighed responsibilities to avoid affecting other users or applications running on the network. Currently, the massive amount of ETH remains frozen, and its subsequent handling will be determined by the Arbitrum governance layer.