The starting point of the story is not glamorous: Binance once experienced a heat wallet theft incident that was not fully disclosed, in which some assets were improperly transferred by attackers, with a portion landing on Arbitrum One. After the security incident broke out, the Arbitrum Security Council exercised emergency powers to directly freeze the relevant assets on-chain and transfer them to a specific secure address—approximately 8,425.997 ETH and 74,559,805.2 ARB, with an estimated total value of over $31 million from a single source. Fast forward to now, Binance has brought this on-chain "emergency" operation to the governance table: It submitted a proposal in the form of a constitutional draft on the Arbitrum governance forum, requesting ArbitrumDAO to unfreeze and return the aforementioned assets to a recovery address controlled by Binance. The text of the proposal is quite clear that the funds will be used to compensate affected users, replenish the SAFU fund, and cover the reserves previously utilized to compensate users, emphasizing that no additional funds will be requested from ArbitrumDAO. Currently, this constitutional-level proposal remains in the forum discussion stage, with the relevant ETH and ARB still locked in the secure address. The decision of whether to "let them go home" no longer rests solely on a technical action by a security committee, but has transformed into a political choice involving the disposal rights of on-chain assets, participated by both centralized exchanges and decentralized DAOs.

Security Council Locks Funds After Wallet Theft

After the hot wallet was attacked, some of the improperly transferred assets flowed into Arbitrum One, with funds that originally belonged to Binance being redistributed across multiple addresses on-chain in a short period of time, their identity changing from "exchange-held assets" to "unknown funds recorded on the Arbitrum ledger." With risks not fully clarified, the Arbitrum Security Council intervened directly in the disposal of the assets related to this incident, using the emergency powers obtained under its governance framework, not simply tagging them but substantively freezing these tokens and unifying their transfer to a specified secure address to prevent them from being further fragmented or mixed into other on-chain activities.

According to a single source, the scale of the locked assets is considerable, approximately 8,425.997 ETH plus about 74,559,805.2 ARB, with an estimated total value exceeding $31 million at that time. These funds have remained stationary in the secure address and have not returned under Binance's control. In other words, from the time the hot wallet was stolen to the Security Council's intervention, Arbitrum has been using technical authority to "hit the pause button" on these abnormal assets while also laying the groundwork for the DAO's future decision-making on whether to agree to unfreeze them and determine the ultimate ownership of the assets, which is significant enough to cause governance disputes.

Binance Submits Freeze Unfreeze Application to ArbitrumDAO

After the funds were "paused," Binance chose to elevate the issue to the highest governance level of Arbitrum: according to public materials, it has submitted a proposal on the Arbitrum governance forum in the form of a "constitutional draft," directly requesting ArbitrumDAO to unfreeze the previously frozen 8,425.997 ETH and 74,559,805.2 ARB on Arbitrum One and return these assets from the secure address back to a designated recovery address controlled by Binance. By using the label "constitutional-level," this controversy around unfreezing is elevated to a fundamental rules issue regarding how the protocol uses emergency powers and handles the ownership of abnormal assets, rather than just an ordinary technical operation approval.

In terms of specific narrative, Binance deliberately clarifies the uses of the funds: in the proposal text, the returned assets are positioned for compensating affected users, replenishing the SAFU fund, and refilling the reserves previously used to pay user compensation, rather than entering a vague pool of self-funds. At the same time, Binance emphasizes in the same proposal that it only requests to unfreeze and return the already frozen assets themselves, and does not ask ArbitrumDAO for any additional funds. Through this design, it positions itself as the victim and protector of users who "advance the payment first and then pursue compensation," while also trying to cut off the moral hazard association of "making the public DAO pay for centralized exchanges," strategically pre-empting community resistance from both procedural and public opinion perspectives. As of now, this proposal still remains in the forum discussion stage, with the frozen ETH and ARB continuing to be locked in the secure address. The ability to persuade the DAO to accept this narrative will directly determine whether the funds paused will ultimately return to Binance.

Governance Game from Emergency Freezing to On-chain Unfreezing

This incident has brought Arbitrum's "dual power structure" into the spotlight: one level is the Security Council, which can quickly intervene at the time of the attack, transferring around 8,425.997 ETH and 74,559,805.2 ARB to a secure address by virtue of its emergency powers; the other level is the ArbitrumDAO, which must ultimately give a collective judgment afterward. Only if the DAO explicitly agrees to unfreeze and return, can the Security Council justifiably trigger another on-chain transfer. Emergency freezing is a quick decision made by a few, while unfreezing is designed to be a slow deliberation by the majority. This connection uses the mechanism to underpin "procedural justice": ensuring that no party can excessively expand discretionary power under the guise of "firefighting."

In terms of specific procedures, Binance's request is still at the governance forum stage. The proposal is marked as "constitutional draft," meaning that if it moves to formal on-chain voting, it theoretically requires a higher level of discussion density and voting thresholds. Only after the DAO formally passes this constitutional-level proposal on-chain can the Security Council or an authorized executor rely on the new collective resolution to transfer the frozen assets back to the designated recovery address of Binance. In other words, the Security Council's first action is "to preserve the assets first, then hand them over to community judgment," and the second action can only take place after community authorization is granted. This entire procedure from emergency freezing to on-chain unfreezing, if successfully processed, will set a clear precedent for handling similar security incidents in the future: defining who can act decisively in crises and who must explain to the ecosystem post-crisis, thus more specifically delineating the boundaries of governance on-chain.

Trust and Responsibility Boundaries Between Exchanges and DAOs

From Binance's perspective, this proposal is essentially requesting an on-chain settlement for a loss that has already been "advanced." The proposal text states that some or all user compensations have already been paid in advance by Binance. Future if ArbitrumDAO agrees to unfreeze and return this approximately 8,425.997 ETH and 74,559,805.2 ARB assets (worth over $31 million according to a single source), it will be used to replenish the SAFU fund and related reserves. For users, this is a "first trouble, then settle" position: the exchange first protects the rights of affected users and then views the frozen funds as recoverable assets. For Binance's balance sheet, the funds still locked in the secure address represent a pending status between "lost" and "still to be recovered." The DAO's vote will directly determine whether this gap is ultimately filled or recognized as a cost for the exchange.

From the position of ArbitrumDAO, the boundary of responsibility becomes an open multiple-choice question: on one hand, they hold the direction of the frozen assets and need to make a collective decision on whether to unfreeze and return; on the other hand, the current public materials have not yet seen clear statements from community representatives or major token holders. The outside world does not know whether they prefer to position themselves as "arbiters assisting in recovering stolen assets," or insist on avoiding supporting any centralized institution's security incidents. For ordinary users, decisions about on-chain freezing and unfreezing will shape their expectations about whether there is still a safety net after "being stolen" over a longer period. If a large exchange is attacked, and the DAO can subsequently facilitate the return via governance procedures after an emergency freeze, ecological participants may view this as a reliable institutional arrangement; conversely, if the DAO tends to remain strongly neutral and only takes action in extreme cases, the image of on-chain governance will then appear to be more focused on maintaining the protocol itself, rather than assuming additional responsibilities for individual institutions, this will further clarify the boundaries of trust and responsibility posed by this event on-chain.

Proposal Direction and Next Steps in On-chain Security Governance

Moving forward, the direction of the proposal will largely define the boundaries of this "safety net." If ArbitrumDAO ultimately agrees to unfreeze in the on-chain vote, sending approximately 8,425.997 ETH and 74,559,805.2 ARB back to Binance's designated address, this process of "first emergency freeze by the Security Council, then authorization to unfreeze by the DAO" may well be seen as a template for mainstream L2's handling of security incidents involving centralized institutions. In the future, when similar attacks occur, various parties will instinctively refer to this case's path and thresholds. Conversely, if the proposal remains in the governance forum for long periods without progressing toward on-chain voting or forming a clear consensus, and if the assets locked in the secure address remain immobile, Arbitrum's neutral image will be strengthened, but questions regarding the extent of the DAO's responsibility for third-party risks will also be prolonged in uncertainty. This incident has clearly mobilized two layers of structure: the Security Council is responsible for immediate technical handling, while the DAO community takes on the task of subsequent institutional characterization, with the center of discussion being how to redefine the power and responsibility between large centralized exchanges and mainstream L2s. Key variables to observe going forward include whether forum discussions can converge on consensus between "return" and "strict neutrality," whether sufficient support emerges to push this constitutional-level proposal into formal on-chain voting, whether the voting results authorize the execution of unfreezing operations, and whether, in the future, when similar asset freezing cases arise, Arbitrum will adopt, revise, or even negate the disposal path taken this time. The evolution of these variables will determine how the $31 million incident is ultimately inscribed in the history of Arbitrum's security governance.

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