Arbitrum Freeze Sparks $175 Million Laundering Frenzy on Ethereum

The attacker behind the $292 million KelpDAO exploit has begun laundering roughly 75,700 ETH, worth about $175 million, on Ethereum after the Arbitrum Security Council froze 30,766 ETH on Arbitrum One.

The freeze appears to have rattled the hacker into accelerating fund movements on the Ethereum mainnet.

Hacker Accelerates ETH Transfers Through UmbraCash

On-chain analyst EmberCN reported that several small ether (ETH) transfers have already gone through UmbraCash, a stealth address privacy protocol.

The fund-splitting strategy suggests the attacker is trying to obscure the trail before more assets can be frozen.

Arkham Intelligence data shows the hacker’s primary wallet still holds a significant ETH balance, with outflows routing through a secondary address tied to UmbraCash transfers.

Security Council Decision Draws Mixed Reactions

Offchain Labs co-founder Steven Goldfeder defended the council’s action, noting that the elected 12-member body required nine votes to act.

He stressed that the sequencer itself has no power to move funds and that the council operated independently from Offchain Labs and the Arbitrum Foundation.

However, some community members raised concerns. One user questioned whether a compromised council could seize any on-chain funds, highlighting the tension between emergency powers and decentralization.

“If i understand correctly, if the arbitrum security council gets compromised they can just do whatever they want to all of the funds on chain?” they posed.

In the same tone, crypto executive Justin Sun trolled the Arbitrum governance debate, highlighting the Tron DAO as the most decentralized blockchain.

Notwithstanding, KelpDAO thanked the council and credited SEAL 911 for coordinating the response. The protocol said its focus remains on supporting rsETH holders affected by the April 18 exploit.