There is a third way: Private adjudication. I see no reason why the crypto community couldn't run its own private court system, similar to what e.g. Randy Barnett describes in chapter 5 of Anarchy and the Law.
(Obligatory, I don't work in crypto or have any special connection to it, I just think people forget this third option even exists when it's really the most common way most private industries actually resolve disputes most of the time.)
It already does run its own private court system, it's the consensus process that is used to upgrade the protocol. If there was enough consensus there could be a fork that returned the funds, but that will never happen.
Sure, but suppose people decide that's not good enough.
what "people"?
simple, those who lose to the system they’ve supported until it bleed up in their face
Private court system? How does it work? Regular court system works because the government has the threat of violence, has the muscle and rights to hunt, capture and detain. if "private court" rules against me and I refuse to obey, how will they make me obey? There is no "or else" embedded in it so it will be useless.
its a cryptocurrency, the courts legitimacy would likely come from the community forking as necessary to resolve issues as identified by the court, in the same way the us judicial branch gets its legitimacy from the us executive branch employing force as necessary to resolve issues as identified by that court.
its a broader group to convince, sure, but there is a clear 'or else' from which the court can get that legitimacy. 'return the money or else we will return it for you' is a meaningful or else
There's a service called Kleros that does exactly this