DeFi
Multichain crypto bridge owes Fantom $2M for exploit – DL News
- Crypto bridge Multichain suffered a mysterious $125 million exploit last year.
- A Singapore court has ruled that Multichain owes the Fantom Foundation nearly $2.2 million.
- The foundation believes the judgment could lead to the appointment of a liquidator and the restitution of stolen property.
A court ruling in Singapore could pave the way for the eventual return of tokens that were stolen when the Multichain crypto bridge suffered a mysterious exploit last July.
Mohamed Faizal, Judicial Commissioner of the High Court of Singapore governed As of Monday, Multichain owes the Fantom Foundation, the organization that manages the Fantom blockchain, nearly $2.2 million.
That’s the amount the foundation said it lost in the July 2023 exploit.
“While this judgment only addresses Fantom’s losses, the purpose of the Foundation’s litigation was to cause the liquidation of Multichain and the court’s appointment of a third-party liquidator—which the Fantom Foundation will partially fund—to help recover and distribute missing or frozen assets for all parties affected by the Multichain exploit,” the Fantom Foundation said in a statement. statement.
According to Faizal, Multichain did not attempt to defend itself during the proceedings.
An inside job?
Bridges are software programs that allow users to move cryptocurrencies between otherwise incompatible blockchains. A user on one blockchain deposits cryptocurrencies onto the bridge, which then generates new tokens on a per-block basis on a different blockchain.
On July 7, 2023, after weeks of technical issuesMultichain, which was once valued at over $1 billion, has experienced what it called abnormal fund movements: About $125 million in cryptocurrencies had been withdrawn from its wallets. This left the assets linked to Fantom effectively uncollateralized, causing their value to plummet.
Crypto value in Fantom’s DeFi ecosystem plummeted after Multichain exploit.
About a week later, Multichian posted a shocking statement:Zhaojun He, the company’s founder, had been detained by Chinese police since May. His “computers, phones, e-wallets and mnemonic phrases were confiscated by authorities,” the statement said.
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Moreover, despite Multichain’s assurances that the company was decentralized, control rested solely with Zhaojun. The company was going to have to close.
Disheartened Multichain users have organized on the messaging app Telegram, trading theories about where their money is going.
For some, the Multichain story was a warning about operational security failure and running a business in a crypto-hostile police state.
Others questioned the company’s story and speculated that the “hack” was actually an inside job.
The Fantom Foundation was among the entities that had deposited tokens on Multichain. CEO Michael Kong hired a leading law firm in China to find out what happened to the company.
In an interview last July, Kong said DL News that Multichain may have been the victim of a racket by local police, and he dismissed speculation that Zhaojun had absconded with the money.
“There’s no real motive for this,” Kong said. “The Multichain team was running what many people considered to be a completely legitimate project.”
This assessment has changed.
Singapore Decision
In his ruling, Faizal noted that the Fantom Foundation had sued two entities: Multichain Foundation Ltd, which ran the crypto bridge, and Multichain Pte Ltd.
This is because of the “sudden incorporation” of Multichain Pte Ltd “just before the July 7 security breach” and the foundation’s “belief that the siphoned assets could have been illegally diverted” to the entity, Faizal wrote.
But the Commissioner made it clear that this allegation fell outside the scope of his decision.
“I do not comment on the merits of these claims regarding the involvement of [Multichain Foundation] And [Multichain Pte]”I am not convinced of the validity of these claims,” he wrote.
In January, the Fantom Foundation won its case against Multichain. But it still had to prove the amount of its losses and prove that those losses were attributable to fraud within Multichain.
The foundation argued that the loss was only possible because Zhaojun had complete control of Multichain.
Faizal noted that Multichain had “admitted this” to X, formerly Twitter.
“This contravened what the [foundation] claims to be the key term of the user agreement, which stipulated that the multichain bridge was controlled by a safe and secure decentralized system [multi-party computation] “Nodes that cannot be controlled by one person,” Faizal said.
According to Faizal, the Fantom Foundation has provided a conservative estimate of the amount lost in the exploit.
The foundation presented the court’s decision as a victory for those who lost money when the bridge was closed last year.
“We will continue to pursue the matter until a liquidator is appointed, which is expected to happen in the coming months, and we will pass on all our knowledge and investigative material to the liquidator to facilitate and support his recovery efforts,” the Fantom Foundation said in its statement.
“The liquidator will then carry out an independent valuation of the assets, followed by the processes of claim, recovery and distribution.”
Aleks Gilbert is DL News” DeFi correspondent based in New York. You can contact him at aleks@dlnews.com.