Key Highlights
Arbitrum sequencer operators froze roughly $71 million in Ether linked to an exploit of the liquid restaking protocol Kelp DAO.
The funds were blocked at the sequencer level before the attacker could bridge them out of the network.
The intervention has reignited debate over centralized choke points on Ethereum layer-2s and the limits of decentralization.
Arbitrum has frozen about $71 million in Ether connected to an exploit of the liquid restaking protocol Kelp DAO, according to on-chain data and statements. The funds were held at an address flagged by Kelp's team shortly after the attack was detected.
The freeze was executed at the sequencer level by Offchain Labs, the company that operates Arbitrum's centralized sequencer, preventing the attacker from including transactions that would move or bridge the stolen EtherKelp DAO coordinated with Arbitrum, Seal 911 white-hat responders, and law enforcement within hours of the exploit.
Kelp DAO, which issues the rsETH liquid restaking token, said user deposits backing rsETH were unaffected and that the protocol remained solvent. The team is pursuing recovery of the frozen funds through off-chain legal channels, according to a statement posted on X.
The action has reopened a long-running argument over Arbitrum's decentralization. Critics note that a single entity's ability to censor transactions, even to protect users, contradicts layer-2's marketing as a trust-minimized network. Supporters point out that the sequencer's censorship resistance is still a work in progress, with decentralization plans outlined by the Arbitrum Foundation.
The episode lands amid a broader pattern of restaking, and DeFi exploits this cycle and adds to scrutiny of how L2 operators balance user protection against neutrality commitments.
