TLDR
- The Singapore High Court ordered Multichain Foundation to pay $2.1 million to Fantom Foundation for losses from a 2023 hack.
- The hack resulted in over $210 million in asset losses across multiple blockchain networks.
- Fantom Foundation argued that Multichain’s CEO had ultimate control over the assets, violating the user agreement.
- Crypto losses from hacks and scams more than doubled in Q2 2024 compared to Q2 2023.
- The cryptocurrency market showed resilience by recovering 77% of stolen funds in Q2 2024.
The High Court of Singapore has ruled that Multichain Foundation, a cross-chain router protocol, must pay $2.1 million to Fantom Foundation for losses incurred during a major hack in July 2023.
This decision comes as part of a larger story of cryptocurrency security and legal accountability in the blockchain world.
The hack, which occurred in July 2023, resulted in unusually large outflows from Multichain’s cross-chain bridges.
The attack affected multiple blockchain networks, including Fantom, Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam. In total, over $210 million worth of cryptocurrency assets were lost.
Fantom Foundation, a layer-1 blockchain platform, was among the victims of this hack. They reported their financial losses to the Singapore High Court, seeking compensation for the damages incurred.
During a court hearing on June 3, 2024, Fantom’s representatives presented evidence to support their claim. Notably, Multichain’s representatives were absent from the proceedings.
The core of Fantom’s argument was that the breach occurred because Multichain’s CEO, Zhaojun He, had ultimate privileges and control over the cryptocurrency assets stored in the Multichain Bridge.
Fantom Foundation Update on Judgment Against Multichain.
🔗 https://t.co/Pi5RXJmhNW pic.twitter.com/ooseYW0NC2
— Fantom Foundation (@FantomFDN) July 8, 2024
This arrangement, according to Fantom, violated a key term in the User Agreement, which stated that the Multichain Bridge was supposed to be controlled by decentralized, secure multi-party computation nodes that couldn’t be controlled by a single person.
Adding to the complexity of the case, it was revealed that Multichain’s CEO had been in the custody of Chinese police for months before the hack.
This information contradicted Multichain’s claims of being a decentralized project and raised questions about the project’s governance and security measures.
The court found that Multichain had essentially admitted to the claim, having made statements to this effect on social media platform X (formerly Twitter).
As a result, on July 8, 2024, the court awarded Fantom Foundation $2.187 million in compensation for their losses.
This ruling comes at a time when the cryptocurrency industry is facing increased scrutiny over security issues. According to research from blockchain security platform Immunefi, losses from hacks and scams in the second quarter of 2024 more than doubled compared to the same period in 2023.
In Q2 2024, over $572 million was lost to hacks, compared to $220 million in Q2 2023. The majority of these losses were attributed to centralized exchange hacks.
However, the cryptocurrency market has shown resilience in the face of these challenges. Hacken’s Web3 Security Report for Q2 2024 revealed that the market achieved a record recovery rate of 77% for stolen funds. Out of the total $512.9 million lost, $347.4 million was successfully recovered or frozen.
The Multichain-Fantom case highlights the ongoing challenges of security and accountability in the cryptocurrency space.
It underscores the importance of robust security measures and the need for clear governance structures in blockchain projects.
The case also demonstrates the role that traditional legal systems can play in addressing disputes and losses in the cryptocurrency industry.
As the blockchain and cryptocurrency sectors continue to evolve, cases like this may set important precedents for how similar situations are handled in the future.
They also serve as a reminder of the risks involved in cryptocurrency investments and the importance of due diligence when choosing platforms and protocols to use or invest in.
