The Arbitrum DAO is on track to approve a proposal that would release approximately $71 million in Ether frozen following the Kelp DAO exploit, marking a significant step in a cross-protocol recovery effort. With over 90% of votes cast in favor and the voting period closing on May 7, 2026, the Snapshot vote signals strong community support for moving the recovery forward.
Background of the Kelp exploit and frozen funds
On April 21, 2026, an attacker drained roughly 116,500 restaked Ether (rsETH) from Kelp DAO, valued at between $290 million and $293 million at the time. In response, Arbitrum’s Security Council froze 30,765 ETH, acting to contain the damage. The current proposal, co-authored by Aave Labs, Kelp DAO, LayerZero, EtherFi, and Compound, seeks to unfreeze these assets to partially restore rsETH’s backing and stabilize the broader DeFi ecosystem.
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How the recovery effort is structured
The proposal is part of a broader initiative called ‘DeFi United,’ which includes protocols like Mantle, EtherFi Foundation, Lido DAO, and Ethena, among others. These entities have pledged a cumulative 43,000 ETH to reduce the exploit’s contagion effects. If the current vote passes, the next step will be a binding onchain governance proposal via Tally as a Constitutional Arbitrum Improvement Proposal (AIP). The unfrozen funds would be directed to a 3-of-4 Gnosis Safe multisig wallet with signers from Aave Labs, Kelp DAO, Certora, and EtherFi.
What this means for rsETH holders
Even with the release of the frozen ETH, a shortfall remains. Approximately 76,127 rsETH, worth around $174.5 million, is still unbacked. The proposal argues that partial restoration of backing will help calm market conditions and prevent further contagion across DeFi lending platforms. Aave has already liquidated the hacker’s remaining rsETH positions on Ethereum and Arbitrum, moving the situation closer to resolution.
Separate proposal to deploy 6,000 ETH for yield
In a related development, the Arbitrum DAO is also expected to approve a separate proposal to move 6,000 ETH from its treasury into a Treasury Management Portfolio. The allocation was increased from 5,000 ETH after community feedback. The initiative aims to generate additional yield, with projections suggesting an extra 288 ETH (worth about $625,000 at current prices) could be earned over the next year. Over 99.9% of votes were in favor, with voting closing on May 8, 2026.
Conclusion
The Arbitrum DAO’s dual votes reflect a community focused on both crisis management and long-term treasury optimization. While the Kelp exploit has exposed vulnerabilities in restaking protocols, the coordinated ‘DeFi United’ response demonstrates the ecosystem’s capacity for collective action. The outcome of these votes will be closely watched by market participants as a test of decentralized governance in times of stress.
FAQs
Q1: What is the ‘DeFi United’ initiative?
It is a cross-protocol recovery effort involving major DeFi platforms like Mantle, Lido DAO, and Ethena, which have collectively pledged 43,000 ETH to mitigate the fallout from the Kelp DAO exploit.
Q2: How will the frozen ETH be released if the proposal passes?
The funds will be transferred to a 3-of-4 Gnosis Safe multisig wallet, requiring approval from signers representing Aave Labs, Kelp DAO, Certora, and EtherFi before any movement.
Q3: Will rsETH be fully restored after this vote?
No. The release of the frozen 30,765 ETH only partially addresses the shortfall. Approximately 76,127 rsETH remains unbacked, and further recovery steps may be needed.
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