A New York federal court has paused ruling on Aave’s emergency bid to unfreeze approximately $71 million in ETH tied to the Kelp DAO hack, delaying a decision until a June hearing while the court seeks additional information from both sides. The dispute centers on whether Arbitrum’s freeze of the funds should be lifted to support ongoing recovery efforts after one of DeFi’s most significant exploits this year.

Aave contends that unlocking the funds is necessary to prevent forced liquidations and potential destabilization of DeFi markets, while a restraining notice filed by Gerstein Harrow LLP asserts that its clients have a claim to the assets. The Southern District of New York case under Judge Margaret M. Garnett has drawn attention for how courts balance crypto asset freezes against creditor interests and user protection.

Documents filed in the court indicate that Judge Garnett found Aave’s prior briefing insufficient to show how continuing the restraining notice would cause “compounding losses” to user funds if kept in place, signaling the need for more detailed briefing before any ruling. The judge described the matter as complex and vulnerable to near-term harm to Aave LLC and Aave Protocol users, and ordered both sides to provide supplemental submissions ahead of a June 5 hearing.

Key takeaways

• The court postponed ruling and ordered supplemental briefing, citing the case’s complexity and potential near-term harm to users.
• Briefs are due by May 22, 2026, with a hearing scheduled for June 5, 2026.
• The court identified six information gaps for clarification, including whether the shelter principle applies under New York law, the distinction between fraud and theft and the hackers’ interest in stolen assets, which law governs creditor priority over frozen assets, the potential use of a constructive trust, and whether Aave or Arbitrum can identify individual victims to enable pro rata restitution.
• Recovery steps for Kelp DAO: rsETH backing is being restored and the burned tokens will be reconciled; about $278 million in lost tokens will be restored over roughly two weeks from the Aave Recovery Guardian multisignature wallet, pending contract reactivation.
• The case highlights regulatory and policy considerations for DeFi asset freezes, creditor rights, and cross-border enforcement in the evolving landscape of crypto oversight.

Judicial probes into the Aave restraining notice

The SDNY proceedings center on Aave’s motion to unfreeze the ETH tied to the Kelp DAO exploit. Judge Garnett acknowledged the challenge of applying traditional remedies to a decentralized finance scenario and requested detailed briefing to better map the legal framework. In particular, she asked the parties to address how a shelter principle under New York law could interact with the restraining notice, and how such freezes should be reconciled with the transnational nature of crypto assets.

Among the issues identified for clarification are the legal distinction between fraud and theft and the extent to which hackers retain any interest in stolen assets, which law governs creditor priority over frozen property, whether a constructive trust would be an appropriate remedy, and whether either Aave or Arbitrum can identify individual victims to enable pro rata reimbursement. The court’s questions underscore the delicate balance between protecting users and honoring creditor interests in DeFi contexts, and the need for precise legal framing in this rapidly evolving space.

As noted in court filings, the parties have until May 22 to submit supplemental briefs, with the June 5 hearing set to adjudicate unresolved questions. The outcome could influence how future DeFi-related freezes are treated under U.S. law and may shape institutional approaches to recovery, enforcement, and compliance for lenders, exchanges, and wallets operating in cross-border environments.

Regulatory and policy context for frozen DeFi assets

Industry observers view the case as a focal point for broader regulatory and enforcement considerations surrounding DeFi asset freezes. While protocols may implement automatic or voluntary freezes to facilitate recovery, courts must determine how these actions align with doctrines on priority of claims, constructive trusts, and user protections. The proceedings touch on how regimes like MiCA and U.S. agencies—such as the SEC, CFTC, and DOJ—may evaluate asset freezes, civil actions, and enforcement associated with DeFi exploits.

Analysts also weigh implications for cross-border operations and banking compatibility, especially for entities seeking to safeguard customer assets while remaining compliant with AML/KYC requirements. The June decision could influence how exchanges and liquidity venues structure recovery processes and how courts treat frozen funds in multi-party incidents.

Kelp DAO recovery steps and broader implications for DeFi asset recovery

Parallel to the court proceedings, Kelp DAO and Aave have outlined concrete steps toward restoring the compromised rsETH backing. The hacker’s rsETH on Arbitrum has been burned, while the tokens lost in the incident—valued at approximately $278 million—are expected to be restored over the next two weeks from the Aave Recovery Guardian multisignature wallet. Once the related smart contracts are reactivated, rsETH usage is anticipated to return to normal, stabilizing the ecosystem’s collateral and liquidity framework on the affected chain.

These recovery actions illustrate a growing practice of coordinated asset restitution within DeFi ecosystems, while raising questions about victim identification and proportional compensation in decentralized environments. The Kelp‑Aave updates emphasize resilience and post-incident recovery even as legal proceedings unfold in parallel.

Source: Kelp DAO status and related announcements, with corroboration from court filings and industry reporting.

Related coverage: DeFi can freeze stolen funds, but not everyone agrees it should.

Watching the June proceedings will be essential for compliance, risk management, and governance considerations across DeFi protocols and their banking and legal counterparts.

The Clarity Act cleared the Senate Banking Committee 15 to 9 on Thursday, sending Bitcoin above $82,000 for the first time in weeks.

The Clarity Act advanced out of the Senate Banking Committee on Thursday in a 15 to 9 bipartisan vote, clearing a critical legislative gate for the most significant crypto market structure bill in US history. Bitcoin (BTC) climbed above $82,000 following the vote before retreating slightly to around $81,500, up approximately 2.5% on the day.

Two Democratic senators crossed the aisle to back the bill alongside all 13 Republicans on the committee. Chairman Tim Scott had described securing all 13 Republican votes as “the red zone,” with Senator John Kennedy having withheld support in the days leading up to the session.

Cody Carbone, who heads the Digital Chamber, told reporters the unresolved ethics provision around lawmakers trading crypto tokens remains the most likely obstacle before a floor vote. “I imagine the deal will be completed before this goes to the floor, because they’ll want to only bring it to the floor if they feel confident they’ve got 60,” Carbone said.

What the Clarity Act does

The Digital Asset Market Clarity Act, which already passed the House 294 to 134 in July 2025, would draw a statutory line between the SEC and the CFTC. Digital commodities would fall under CFTC oversight and digital securities would remain under the SEC, ending years of regulatory uncertainty that has suppressed institutional flows into US crypto markets.

The bill still needs 60 votes on the Senate floor, reconciliation with the Senate Agriculture Committee version, and alignment with the House text before reaching the president’s desk. The full 309-page bill text is available at congress.gov. Senators Lummis and Moreno have both warned that missing the Memorial Day recess deadline on May 21 could push the next viable legislative window to 2030.

White House adviser Patrick Witt has indicated the administration will not accept ethics provisions targeting the president specifically, adding a further layer of negotiation before the floor vote can proceed. Democratic senators have linked their support to broader ethics language covering all lawmakers and officials.

Coinbase VP Kara Calvert said at Consensus 2026 that bipartisan backing is non-negotiable and the bill needs at least 60 votes to advance. For Bitcoin, now trading around $81,500, the committee vote functions primarily as a confidence signal.

The bill’s relevance to BTC is less about its own commodity classification and more about what a settled US digital asset framework does to institutional risk appetite across the broader market.

The Tether freeze coalition known as T3 FCU has surpassed $450 million in blocked illicit USDT since launching in 2024.

The T3 Financial Crime Unit, a joint initiative backed by Tether, TRON, and blockchain analytics firm TRM Labs, has crossed $450 million in frozen assets linked to suspected criminal activity. The milestone was announced by Tether on Thursday, less than two years after the unit launched in 2024.

T3 FCU focuses on USDT activity on the TRON blockchain, where Tether’s dominant stablecoin circulates at scale. The unit has executed asset freezes within 24 hours of requests from global authorities, including during active kidnapping and extortion emergencies.

T3 FCU reported intercepting 43.9% more illicit proceeds in 2025 than the previous year. It has worked with law enforcement across 23 jurisdictions, including the United States, Spain, Germany, the Netherlands, and Bulgaria.

“This $450 million milestone is just the beginning of what T3 is capable of, as its impact will only continue to grow in scale and importance,” Tether CEO Paolo Ardoino said.

What T3 FCU targets

The unit’s caseload spans drug trafficking, exchange hacks, North Korea-linked activity, terrorist financing, and violent “wrench attacks” including kidnappings. The Financial Action Task Force this year designated T3 FCU an invaluable resource for law enforcement agencies worldwide.

The $450 million figure sits within a wider enforcement picture. As crypto.news tracked, Tether blacklisted 371 wallets and froze over $515 million in USDT in a single 30-day window this year, with Tron accounting for the majority of that activity.

The unit passed the $300 million mark in October 2025 following its role in Brazil’s Operation Lusocoin and a $19 million seizure tied to North Korea’s involvement in the Bybit hack. The jump from $300 million to $450 million in under seven months signals a significant acceleration in operational tempo.

TRM Labs estimates total illicit crypto flows reached $158 billion in 2025, a record. T3 FCU’s expanding role has sharpened the debate over how far centralised stablecoin issuers should go in policing decentralised networks. TRON has described itself as an agnostic technology provider, with enforcement capability sitting with Tether, TRM Labs, and law enforcement rather than at the protocol level.

Unlike decentralised assets such as Bitcoin, USDT carries issuer-level controls that allow wallets to be frozen at any time. Whether that capability represents a necessary safeguard or an unacceptable concentration of private power remains one of the most contested questions in stablecoin policy.

TLDR:

• Bitwise’s $BHYP ETF offers 100% direct spot HYPE exposure using in-house staking, not third-party providers.
  
• Hyperliquid controls roughly 60% of global onchain perpetual DEX open interest as of May 13, 2026.
  
• The fund carries a 0.00% expense ratio for the first month, then shifts to 0.34% for investors thereafter.
  
• $BHYP is not registered under the 1940 Act, meaning it lacks standard mutual fund protections for investors

Bitwise Hyperliquid ETF, trading under the ticker $BHYP, has officially entered the market. It offers investors 100% direct exposure to spot HYPE.

Unlike similar products, $BHYP uses in-house staking instead of a third-party staking provider. The fund began trading on May 15, 2026.

Bitwise positions this ETF as a low-cost entry point into Hyperliquid, a platform the firm views as central to the future of onchain capital markets.

Hyperliquid’s Growing Role in Global On-Chain Trading

Bitwise took to X on May 14, 2026, to announce the ETF and explain its rationale. The firm wrote: “We believe Hyperliquid is one of the most important onchain trading platforms in the world.” That statement came alongside the fund’s launch announcement ahead of its first trading day.

Hyperliquid currently holds approximately 60% of all onchain perpetual DEX open interest globally, according to DeFi Llama data from May 13, 2026.

That figure alone places Hyperliquid well ahead of competing platforms in the sector. Bitwise cited this directly in its announcement as a core reason for the product launch.

The platform also processes up to 200,000 orders per second, as tracked by Chainspect on the same date. This capacity supports high-frequency activity without the bottlenecks common to other decentralized exchanges. That kind of throughput draws institutional attention for good reason.

Bitwise also pointed to a specific moment as evidence of Hyperliquid’s real-world importance. When geopolitical conflict erupted in the Middle East on a Sunday morning, traditional markets were closed. Institutions, however, did not wait for Monday. They turned to Hyperliquid to execute trades in real time.

What $BHYP Offers Investors and How the Fund Works

The Bitwise Hyperliquid ETF starts with a 0.00% expense ratio for its first month of trading. After that initial period, the expense ratio moves to 0.34%.

Bitwise has agreed to waive the full sponsor fee on the first $500 million of trust assets during the opening month.

The fund intends to distribute net investment income, including staking rewards net of expenses, to shareholders on a periodic basis.

Staking rewards, however, are not guaranteed. They are subject to change and should not be treated as a performance indicator.

Additional costs such as brokerage and commission fees may also apply beyond the stated expense ratio. Investors are advised to read the prospectus carefully before committing capital. The current prospectus is available at bhypetf.com/welcome.

It is also worth noting that $BHYP is not registered under the Investment Company Act of 1940. As a result, it does not carry the same protections as mutual funds or ETFs that fall under that framework. The fund carries a high degree of risk and the potential for complete loss of investment.

A U.S. federal judge in Manhattan has handed down time served to Roni Cohen-Pavon, the former chief revenue officer of Celsius Network, after he pleaded guilty to manipulating the price of Celsius’s CEL token and committing fraud on the now-defunct platform. Judge John Koeltl ordered that Cohen-Pavon serve time already spent in custody, followed by one year of supervised release.

The sentencing marks another milestone in the criminal proceedings surrounding Celsius’s collapse in 2022, which left billions of dollars in losses for investors and users. Cohen-Pavon initially entered a not-guilty plea to four charges when he was arrested in September 2023, but he flipped to a guilty plea about a week later.

The former Celsius executive was indicted in July 2023 alongside Celsius founder Alex Mashinsky after the firm’s 2022 shutdown. At the time, Celsius’s sudden downfall sent shockwaves through the crypto ecosystem, underscoring the broader risk to retail investors in speculative lending platforms.

Cohen-Pavon, an Israeli citizen who had been outside the United States when prosecutors filed the indictment, later reentered to face charges. He posted a $500,000 bond in September 2023 and has remained free on travel restrictions.

As part of the broader Celsius saga, Mashinsky – who has already been sentenced to 12 years in prison after pleading guilty – faces a parallel set of penalties. In addition to his custodial term, Mashinsky was ordered to forfeit $48 million. Cohen-Pavon agreed to pay more than $1 million and was assessed a $40,000 fine. The sentencing proceedings and related agreements reflect the government’s continued focus on accountability for executives tied to failed crypto ventures.

Before his sentencing, Cohen-Pavon submitted a memorandum to the court in which he expressed remorse and a pledge to change. “Whatever sentence the Court imposes, the deeper obligation will remain the same,” he wrote. “I will have to spend the rest of my life becoming, through my conduct, the husband, father, and man my family had every right to expect from me all along.”

For readers tracking the Celsius case, the broader context includes ongoing actions against Celsius’s leadership and related civil or regulatory settlements. Earlier coverage highlighted that Mashinsky had reached a settlement with the Federal Trade Commission, including a $10 million payment as part of a broader resolution.

Related documents and filings cited in the case show the procedural path the court has followed as it winds down one of the most high-profile crypto company struggles of the era. See the court docket and sentencing materials for details.

Key takeaways

• Roni Cohen-Pavon received time served plus one year of supervised release in the Southern District of New York for CEL token price manipulation and platform fraud.
• He had originally pleaded not guilty, then changed to guilty about a week after his September 2023 arrest.
• Alex Mashinsky, Celsius’s founder, is already serving a 12-year sentence and faces a $48 million forfeiture; Cohen-Pavon agreed to pay over $1 million and a $40,000 fine.
• The Celsius case remains a benchmark for executive accountability in distressed crypto projects, with enforcement activity continuing on multiple fronts, including related regulatory settlements.
• A parallel case remains unresolved: Tornado Cash co-founder Roman Storm faces possible retrial in SDNY after a hung jury on money-laundering and sanctions-conspiracy charges.

The Celsius trajectory and what it signals for crypto enforcement

The Celsius unraveling in 2022 exposed how quickly a large crypto lending operation can deteriorate into a complex legal quagmire. With Cohen-Pavon’s sentence, the courtroom focus shifts from the mechanics of Celsius’s business to accountability for individuals who allegedly manipulated markets and misled users. The outcome aligns with a broader trend of prosecutors pursuing cases tied to crypto companies that failed to safeguard investors or comply with applicable laws, even as the industry pushes for clearer regulatory guidance.

In Mashinsky’s case, the combination of a lengthy prison term and substantial forfeiture underscores the government’s willingness to pursue substantial penalties where fraud and mismanagement are shown to have harmed a broad base of users. The additional settlements connected to Celsius’s executives, including the FTC action referenced in related reporting, illustrate that the legal process in crypto collapses often spans criminal and civil dimensions.

Roman Storm and the unresolved Tornado Cash questions

Beyond Celsius, the legal landscape for crypto infrastructure and anonymity tools remains unsettled. Roman Storm, the co-founder of the crypto mixing service Tornado Cash, faced a jury that did not reach a verdict on two counts related to money laundering and sanctions violations. Prosecutors have requested a retrial in October, while Storm remains free under a $2 million bail package restricting movements to certain states. Earlier this week, a federal judge granted him permission to attend his niece’s high school graduation in California, a narrow easing of travel restrictions as the case progresses.

The Tornado Cash matter highlights ongoing tensions between privacy-enhancing tools and enforcement priorities, including sanctions compliance and anti-money-laundering obligations. As prosecutors push for a retrial, observers will be watching how the SDNY handles future rulings on the balance between user anonymity and regulatory enforcement in crypto networks.

For readers, the evolving enforcement environment will continue to shape how projects plan governance, transparency, and compliance strategies. The Celsius and Tornado Cash cases could influence future corporate behavior, investor expectations, and the legal risk profile for executives operating in or around crypto markets.

What comes next remains uncertain: whether the Tornado Cash retrial proceeds in October as prosecutors have requested, and how additional settlements or rulings will influence crash-era narratives around Celsius. Investors and users will want to monitor any further court filings, regulatory actions, or settlements tied to these cases, as they could redefine acceptable risk and governance standards within the crypto sector.