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Multichain Hack Part II: New Factsby@sirfedos
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Multichain Hack Part II: New Facts

by Sir FedosJuly 17th, 2023
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A few days after my article about the Multichain hack, we have some updates on the situation. In this part of the investigation, we will look at the updates from Fantom Foundation. We will also discuss information about the arrest of Multchain’s CEO, and much more.
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A few days after my article about the Multichain hack, we have some updates on the situation. In this part of the Multichain investigation, we will look at the updates from Fantom Foundation, discuss information about the arrest of Multichain’s CEO, and much more!

How Fantom Foundation Managed the Situation

Fantom Foundation kept being the only one who managed to talk to the community. Unfortunately, what they are saying and doing don’t correspond with being community-oriented.

Here is an official Twitter thread from Fantom for you to read:


Here are the main points from it:


  • We know that you guys lost money 🙃


  • There wasn’t an “official” bridge on the Fantom chain, hence, we take no responsibility.


  • “The Fantom Foundation will look to seed both Axelar and LayerZero asset pools to encourage protocol liquidity and confidence.” Read as “No refund for depegged stables, as all money went on new protocol’s liquidity”


Stargate: “Sir, Do You Want a Free NFT?”


Another try of Fantom to gain new liquidity on the chain (except one that they added on their own), is a marketing campaign with Stargate. You can get a useless priceless NFT after bridging $100+ on the Fantom chain.

Fantom Ecosystem Projects Reaction

Many DEXes and LP farming projects on the Fantom chain now actively integrate with LayerZero/Axelar to get part of the new liquidity in the form of commissions and total value-locked increases.


SpookySwap supports Axelar bridge and farms for both axl-wrapped and lz-wrapped tokens. BeethovenX has added pools to lz-wrapped tokens. WigoSwap has added a pool to axlUSDC.


As we could see, projects are adopting, but that’s liquidity on the bones of previous Fantom users, who lost their money on the depeg of stablecoins.

Update From Multichain (Finally)


Finally, after a week of silence, we got an extremely intriguing story from the Multichain team! And I think Netflix could make a movie plot just from that thread. Here is the link to Tweet:


In a few words, we got the following:


  • Multichain CEO Zhaojun was arrested on May 21, 2023.


  • The “Decentralized” bridge actually was centralized around CEO’s private servers that only he had access to.


  • On July 7, user assets locked on the MPC addresses were taken away.


  • Zhaojun’s sister said that an IP address from Kunming was found on the cloud server platform.


  • She decided to move the rest of the user funds to her own wallets, for safety lol.


  • On July 13, Zhaojun’s sister had already been arrested, and the rest of the funds are locked in her wallets.


    I’ve created a dashboard on the Arkham platform monitoring the addresses mentioned by Multichain, so you can monitor them as well: Arkham Dashboard Link.


  • The multichain team doesn’t even have access to their website admin panel. They are asking the domain provider to shut down the website. I think every scammer should know how to shut down the website.


    And I’ve read a few comments on Twitter from people that weren’t aware of the situation and sent money through the Multichain. Multichain is not operational anymore, don’t use it, or your money will be stuck!


Fun Fact: if we look back in May, Multichain Team called the arrest of their CEO a “force majeure” first. And they kept working on their own since the arrest of Zhaojun?


Fantom’s Reaction to Multichain’s Update

Fantom is disappointed; they said again that part of the assets that got frozen and that they will make further announcements about various activities on the Opera Chain to help the community and builders going forward.


Conclusion

To sum up, I don’t think that affected users would get any kind of a refund, as Fantom Foundation has shown us that they support and incentivize new liquidity for the chain, not the old users that lost their money.


I’ve transferred all of my funds out from the Fantom chain, with a loss of about $1500 caused by depeg.


You decide whether to ape in Fantom right now to get a free NFT or nasty APY on lz-wrapped/axl-wrapped tokens, but you can be sure that Fantom chain won’t be responsible for any possible depeg or issue that could happen.