Aave Blocks Broad Court Freeze After Kelp Hackers Used Protocol to Launder $300M

Aave just won an emergency court hearing to block a restraining order that would have frozen the protocol's ability to process withdrawals and liquidations. The order came from a UK court after hackers used stolen rsETH from the Kelp DAO exploit as collateral to borrow against on Aave.

The exploit that triggered it

Attackers drained nearly $300 million in rsETH from Kelp DAO earlier this month, then deposited the loot on Aave to borrow more liquid assets against it. A UK court granted a freezing order targeting the hackers' addresses — but the wording was broad enough to potentially halt legitimate user activity across the protocol. Aave's legal team argued the order was "catastrophic" for a permissionless lending market that processes thousands of transactions per minute.

Why the judge listened

The emergency hearing focused on proportionality. Aave showed that the order's scope would have punished innocent users and disrupted a core piece of DeFi infrastructure, not just the attacker's positions. The court agreed to narrow the order so it targets only the specific addresses tied to the exploit, leaving the rest of the protocol running normally.

What this means for DeFi legal risk

This is one of the first times a major protocol has successfully pushed back against a broad judicial freeze in real time. It sets a practical precedent: courts can and will target illicit funds on-chain, but they'll need precision to avoid collateral damage to the protocol and its users. For builders, the lesson is clear — have legal counsel ready to move fast when a court order lands, and design your pause/guardian mechanisms so they can be scoped to specific addresses rather than killing the whole market.