Fantom Secures $2.1M From Multichain After Hack

Last updated: July 9, 2024

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Fantom Secures $2.1M From Multichain After Hack

Highlights:

Multichain must pay $2.1 million to Fantom Foundation for 2023 hack losses.
A Singapore court ruling found Multichain’s CEO controlled the assets, enabling the breach.
Fantom aims to appoint a liquidator to recover assets for all affected parties.

The High Court of Singapore has ordered the Multichain Foundation to compensate the Fantom Foundation with $2.1 million for losses incurred during a 2023 hack. This decision follows a default judgment issued against Multichain on January 30, with an assessment of damages hearing held on June 3.

Eli Bernstein, general counsel for Fantom Foundation, and Miao Gu, a valuation expert from Secretariat International, presented evidence during the June 3 hearing. Notably, representatives from Multichain were absent from the proceedings. Judicial Commissioner Mohamed Faizal ruled in favour of Fantom Foundation, awarding $2.1 million for losses incurred.

Fantom Foundation Update on Judgment Against Multichain.

🔗 https://t.co/Pi5RXJmhNW pic.twitter.com/ooseYW0NC2

— Fantom Foundation (@FantomFDN) July 8, 2024

Court Ruling Details

The judgment highlighted that Multichain’s leadership, specifically CEO Zhaojun He, had ultimate control over the cryptocurrency assets in the Multichain Bridge. This contradicted the User Agreement’s terms, which stated decentralized MPC nodes controlled the bridge. Following the exploit, Multichain publicly acknowledged the breach on social media.

The broader goal of the Fantom Foundation’s litigation is to initiate the winding up of Multichain and appoint a third-party liquidator. This liquidator, partially funded by Fantom Foundation, will aim to recover and distribute the missing or frozen assets for all affected parties.

Evidence and Findings

On July 6, 2023, Multichain witnessed several large outflows from its cross-chain bridges, including the Fantom bridge. This exploit resulted in the loss of over $210 million worth of cryptocurrency assets. Additionally, multiple chains were affected, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam. Subsequently, the Fantom Foundation secured a default judgment against Multichain on January 30, 2024.

Multichain likely hacked. Exit all multichain assets. Good idea to revoke approvals to multichain bridge if you had any

— Curve Finance (@CurveFinance) July 6, 2023

Fantom presented evidence supporting its claims during the June 3 hearing. The foundation argued that losses occurred because Multichain’s CEO had complete control over the assets stored in the Multichain Bridge. A day after the exploit, Multichain issued a statement confirming that the firm’s CEO had been in Chinese police custody for months. This revelation contradicted their claims of decentralization.

The High Court ruling is a significant victory for the cryptocurrency community. Nicolas Tang, Fantom Foundation’s lawyer, stated:

We are thrilled with the High Court decision, representing a significant victory for our client and the cryptocurrency community. This ruling reinforces digital assets’ legitimacy and legal standing, ensuring a fair and just environment for innovation and growth in this rapidly evolving sector.

The ruling from Judicial Commissioner Faizal allows the Fantom Foundation to recover the assets it lost in the exploit last July. Multichain will pay the Fantom Foundation approximately $2.2 million, which the foundation reported as lost.

Next Steps for Fantom Foundation

Fantom Foundation plans to continue its efforts until a liquidator is appointed, which is anticipated in the coming months. It will provide all necessary knowledge and investigative material to facilitate the liquidator’s recovery efforts. Furthermore, it will independently assess assets and subsequent claims, recovery, and distribution processes.

The ruling adds that Fantom had taken Multichain Foundation Ltd, which ran the crypto bridge, and Multichain Pte Ltd to court. Multichain Pte Ltd’s sudden incorporation right before the exploit suggests an attempt to divert the stolen assets to the entity illegally. Fantom plans to continue its legal efforts until a liquidator is appointed. The High Court’s decision is crucial to recovering the lost assets and providing justice to the affected parties.

Author

Raymond Munene

Raymond Munene is a crypto content writer who contributes to Crypto2Community. With over three years of experience, he is interested in Bitcoin, Blockchain, and Technical Analysis. Focusing on daily market analysis, his research helps traders and investors alike. His particular interest in cryptocurrency and blockchain aids his audience.

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