TLDR
- Aave entered Phase II after liquidating eight attacker positions across Aave V3 on May 6.
- Recovered rsETH collateral moved to the Recovery Guardian under the approved AIP process for checks.
- Arbitrum DAO approved returning $71 million in recovered ETH to support affected Aave user claims.
- A court allowed restricted ETH transfer while legal claims over the recovered assets remain pending.
- Aave plans to burn liquidated rsETH and reopen bridge withdrawals through a staged recovery process
Aave has moved into Phase II of its rsETH recovery plan after the recent hack. The update follows the liquidation of attacker positions on Aave V3 on May 6. The plan also covers recovered ETH, legal limits, and rsETH supply repair.
Aave Confirms Phase II After May 6 Liquidations
Foresight News reported that Aave announced the next stage of its rsETH recovery process. The update followed the V3 technical recovery plan shared on April 28. Aave said work had moved ahead on Ethereum Core and Arbitrum.
By May 6, the recovery process had liquidated eight attacker positions on Aave V3. The recovered rsETH collateral then moved to the “Recovery Guardian” under the approved AIP. Aave said this step caused “no impact on other users.”
The liquidation marked a core step in the rsETH recovery. It helped remove the attacker’s Aave V3 exposure and secure collateral linked to the incident. The action also allowed the team to move toward supply repair.
Aave plans to burn the liquidated rsETH on Arbitrum. KelpDAO will also destroy the related LayerZero cross-chain message packets. Together, these steps aim to reduce the inflated rsETH supply.
Arbitrum DAO ETH Return Faces Legal Process
Arbitrum DAO approved a governance proposal linked to the recovery effort. The proposal allows $71 million in recovered ETH to return to Aave for user recovery. Mantle DAO also passed a related governance proposal.
The recovered ETH had faced legal limits due to a court action. Plaintiffs with a judgment against North Korea had frozen the assets for a period. This created a delay for the transfer to Aave users.
A court has now allowed Arbitrum DAO to move the restricted ETH to Aave LLC. The move still needs on-chain voting and a final ruling. The injunction will move with the assets during the transfer.
While the process continues, Aave plans to borrow funds to cover the gap. The team said this step should protect users from delays. The approach gives the recovery plan more time to meet legal rules.
Bridge Withdrawals Set For Gradual Restart
Aave also described the next steps on Ethereum and Arbitrum. On Ethereum, seized rsETH will move into the bridge lockbox. It will combine with ETH pledged by the DeFi United alliance.
After these steps, Aave plans to reopen rsETH withdrawals. The restart will happen through a controlled process. This allows the protocol to watch risk while normal activity returns.
Aave also plans to restore protocol settings changed during the liquidation stage. Those temporary settings helped close attacker positions. Once recovery steps progress, normal parameters will return.
The remaining affected positions will close with ETH raised for the recovery. Aave has also launched a compensation query tool for affected users. Users can check expected recovery amounts through that tool.
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