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Fantom Foundation pursues legal action against Multichain Foundation over $122M exploit

source-logo  cryptopolitan.com 05 March 2024 13:13, UTC

The Fantom Foundation has taken significant steps in its legal battle against the Multichain Foundation following a breach of contract and alleged fraudulent misrepresentations resulting in the loss of $122 million in July 2023. In a recent development, the High Court of Singapore granted Fantom a default judgment ruling on Jan. 30 in its favor. This ruling paves the way for Fantom to pursue further legal action to recover its losses and potentially seek the declaration of bankruptcy for Multichain.

Fantom’s legal action against Multichain stemmed from claims of breach of contract and fraudulent misrepresentations, leading to the loss of $122 million. With the recent default judgment ruling by the High Court of Singapore, Fantom now seeks to leverage this victory to petition the court for the bankruptcy of Multichain Foundation. This would involve the appointment of a liquidator to aid in recovering and distributing missing or frozen assets, equivalent to a Chapter 7 bankruptcy in the U.S.

Since the July 2023 Multichain exploit, Fantom Foundation’s management and legal team have been working tirelessly across multiple jurisdictions to chart a path forward that enables victims to partially recover assets lost. We have an important update in this regard.

After all… pic.twitter.com/pUxyalPdMD

— Fantom Foundation (@FantomFDN) March 4, 2024

Fantom recovery efforts underway

Fantom plans to utilize the court’s judgment to recover its losses and facilitate a path for all users affected by the exploit to lodge their claims against Multichain. The court will assess damages owed to Fantom, and if Multichain fails to comply with repayment demands, Fantom will request the appointment of a liquidator. The liquidator could take over Multichain Foundation’s assets, recover missing assets, and repay creditors.

Multichain’s response and further investigations

Multichain Foundation has not yet responded to requests for comment on the court judgment. The blockchain security firm Beosin and Fantom estimated the total losses from the exploit to be $210 million. The exploit occurred in July last year and involved unauthorized withdrawals from Multichain’s protocol, facilitating fund bridging across multiple blockchains, including Fantom, Ethereum, and Polygon.

Chainalysis, a blockchain analytics firm, speculated at the time that compromised administrator keys might have facilitated the exploit, suggesting a potential “inside job.” In addition to legal action, Fantom has been actively involved in other efforts to recover the lost assets, including filing a report with the Singapore police and initiating legal proceedings against Multichain.

Furthermore, Fantom filed a police report in China, where Multichain Foundation is incorporated, and its co-founder Zhaojun He is reportedly subject to an active investigation. He was arrested on undisclosed charges two months before the exploit in May 2023. While his Telegram account was found to be active in January, his involvement in the ongoing situation remains unconfirmed.