A Singaporean high court has decided that the Multichain Foundation must compensate the Fantom Foundation for losses from a 2023 hack.
The court, led by Judicial Commissioner Mohamed Faizal, ruled that Multichain should pay Fantom about $2.2 million, which is the amount Fantom reported losing in the attack last July.
Fantom Wins $2.2 Million Compensation from Multichain After 2023 Hack
On July 6, 2023, Multichain experienced significant outflows from several of its cross-chain bridges, including the Fantom bridge. This exploit led to the loss of over $210 million in cryptocurrency assets across various chains, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam.
Following the incident, the Fantom Foundation secured a default judgment against Multichain on January 30, 2024. The foundation has been seeking the liquidation of Multichain to recover the lost funds. During a June 3 hearing, Fantom presented evidence that the losses were due to Multichain’s CEO, Zhaojun He, having full control over the assets stored in the Multichain Bridge.
A statement from Multichain after the hack revealed that the CEO had been in custody of the Chinese police for several months. It was later confirmed that the project was not as decentralized as it had claimed, and the CEO had been in control of the assets.
Court Ruling: Fantom to Receive $2.2 Million from Multichain After 2023 Hack
The recent court ruling decrees that Multichain Foundation Ltd and Multichain Pte Ltd are to compensate the Fantom Foundation for losses incurred during a 2023 hack. Fantom had taken legal action against both entities, arguing that the creation of Multichain Pte Ltd shortly before the exploit might have been an attempt to divert the stolen assets. Although this specific allegation was not considered, Judicial Commissioner Mohamed Faizal noted that Multichain had admitted to the issue on social media.
Faizal highlighted that the breach was facilitated by the CEO of Multichain, who had ultimate control over the cryptocurrency assets in the Multichain Bridge. This was contrary to the User Agreement, which promised decentralized control through secure multi-party computation nodes.
The compensation awarded is less than the amount initially claimed by Fantom. The foundation intends to continue its legal efforts until a liquidator is appointed. This ruling comes amid a significant rise in funds lost to crypto hacks, with a 70.3% increase reported in the second quarter of 2024. Since 2011, over $19 billion has been lost to such incidents, according to security firm Crystal Intelligence.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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