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Fantom Foundation Scores Legal Win Against Multichain in Singapore Court

Last Updated July 9, 2024 3:33 PM
Teuta Franjkovic
Last Updated July 9, 2024 3:33 PM

Key Takeaways

  • The High Court of Singapore ordered Multichain to pay Fantom for losses incurred in the 2023 crypto hack.
  • Evidence presented by Fantom revealed centralized control over Multichain’s bridge assets by its CEO, contradicting claims of decentralization.
  • While the judgment falls short of full recovery, Fantom aims to achieve broader goals.

The High Court of Singapore has mandated  that the Multichain Foundation pay $2.18 million in damages to the Fantom Foundation following substantial losses from a significant cryptocurrency hack in July 2023.

This ruling by Judicial Commissioner Mohamed Faizal is a pivotal development in addressing one of the largest crypto thefts in recent memory.

Fantom Wins $2.1 Million Judgment Against Multichain in Bridge Hack Case

On July 6, 2023, a hack resulted in the theft of more than $210 million in cryptocurrency from various blockchains, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam.

The Fantom Foundation, which manages the Fantom blockchain, was notably affected by this breach. In response, it initiated legal proceedings against Multichain and secured a default judgment on January 30, 2024. Since then, the Foundation has been diligently working to liquidate Multichain Foundation’s assets to recover the stolen funds. This recent court decision marks a significant step forward in their efforts.

The company has then described the situation as potentially being a “rug pull.”

Multichain’s smart contracts utilized a multiparty computation (MPC) mechanism, similar to a multi-signature wallet. Over $125 million in Bitcoin was transferred out of Multichain, with the Fantom bridge alone witnessing a loss of approximately $120 million. The stolen assets included wrapped Ether (wETH), wrapped Bitcoin (wBTC), and USDC. Additionally, $6.8 million was taken from the Moon River bridge, consisting of USDC and Tether, and $666,000 was taken from the Dogecoin bridge, resulting in an 85% loss of all deposits.

Highlighting Centralized Control and Securing Partial Compensation

At a hearing on June 3, Fantom presented evidence to back its claims, arguing that their losses were due to Multichain’s CEO, Zhaojun He, having full control over the cryptocurrency assets in the Multichain Bridge. This directly contradicted Multichain’s assertions of being a decentralized platform, which many users trusted.

The court concluded that Multichain had effectively acknowledged this centralized control in public statements  on social media platform X.

This admission went against what Fantom argued was a crucial term in the User Agreement, which stipulated that the Multichain Bridge was governed by decentralized, secure multiparty computation nodes, ensuring no single individual could have control.

The compensation awarded was less than the total amount Fantom claimed to have lost. Nonetheless, the Foundation considers this ruling a major win, not only for itself but for all entities impacted by the Multichain exploit.

Pushing for Liquidation of Multichain to Recover Assets After Court Ruling

Following the court ruling, the Fantom Foundation expressed  that while the judgment pertains specifically to their own losses, their litigation aimed to achieve broader objectives. The FFoundation’sprimary goal was to initiate the winding up of Multichain and to secure the court appointment of a third-party liquidator. This liquidator, partially funded by Fantom, would be responsible for recovering and distributing the missing or frozen assets to all parties affected by the Multichain exploit.

The Foundation emphasized its commitment to continuing its legal efforts until a liquidator is appointed, which they expect to happen in the coming months. Once appointed, the liquidator will undertake an independent evaluation of the assets. This will be followed by a structured process for claims, asset recovery, and distribution, ensuring that all affected parties have the opportunity to reclaim their losses.

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