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

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.

Key Takeaways

The High Court of Singapore has ordered the Multichain Foundation to pay $2.18 million to the Fantom Foundation for substantial losses incurred during a major cryptocurrency hack in July 2023.

This judgment by Judicial Commissioner Mohamed Faizal is a crucial development in addressing one of the largest crypto thefts in recent history.

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

On July 6, 2023, a hack led to the theft of over $210 million in cryptocurrency from several blockchains, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam.

The Fantom Foundation, which governs the Fantom blockchain, was notably impacted by this breach. It subsequently filed a lawsuit against Multichain and obtained a default judgment on January 30, 2024. Since then, the Foundation has been actively pursuing the liquidation of Multichain Foundation’s assets to recover the stolen funds. This recent court decision marks a significant step in their efforts.

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

Multichain’s smart contracts employed 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 suffering a loss of about $120 million. The stolen assets included wrapped Ether (wETH), wrapped Bitcoin (wBTC), and USDC. Moreover, $6.8 million was taken from the Moon River bridge, consisting of USDC and Tether, and $666,000 was lost from the Dogecoin bridge, which suffered an 85% depletion of its total deposits.

Highlighting Centralized Control and Securing Partial Compensation

At a hearing on June 3, Fantom presented evidence to support its claims, arguing that their losses were caused by Multichain’s CEO, Zhaojun He, having sole authority over the cryptocurrency assets in the Multichain Bridge. This directly contradicted Multichain's claims of being a decentralized platform, which many users trusted.

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

This admission clashed with what Fantom claimed was a key term in the User Agreement, which stated that the Multichain Bridge was governed by decentralized, secure multiparty computation nodes, ensuring that no single person could have control.

The compensation awarded was less than the total amount Fantom claimed to have lost. However, the Foundation views this ruling as a major victory, not only for itself but for all entities affected by the Multichain exploit.

Pushing for Liquidation of Multichain to Recover Assets After Court Ruling

Following the court ruling, the Fantom Foundation stated that while the judgment pertains specifically to their own losses, their litigation had broader aims. The Foundation’s primary goal was to initiate the winding up of Multichain and to obtain the court's appointment of a third-party liquidator. This liquidator, to be partially funded by Fantom, would be tasked with recovering and distributing the missing or frozen assets to all parties affected by the Multichain exploit.

The Foundation highlighted its commitment to continuing its legal efforts until a liquidator is appointed, which they expect to occur in the coming months. Once appointed, the liquidator will conduct an independent assessment 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 recoup their losses.

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