The Fantom (FTM) Foundation, in July 2023, underwent a huge crisis that led to a loss of $210 million. It happened when Multichain officially announced the termination of its operations after reports of the arrest of CEO Zhaojun by Chinese authorities, coupled with questionable transfers amounting to $210 million just before the formal declaration.
These developments sparked speculation among the community about a possible “Rug Pull” scenario related to the project. Since 2023, Fantom’s legal team has been working day and night in various jurisdictions to help victims recover the loss as much as possible.
For this, the foundation also filed a petition at the Singapore court to hire a Multichain liquidator to recover the loss. In response to this, the court issued a preliminary ruling for the organisation.
Background of the Case
Multichain, a protocol facilitating the transfer of tokens between disparate blockchains, was compromised in July, shortly after its CEO disappeared under mysterious circumstances. This event followed a series of issues, including technological failures and unauthorised modifications to critical nodes vital for the platform’s security.
Fantom disclosed that it suffered losses equivalent to a third of the total amount purloined in the Multichain breach. Additional losses were distributed across various blockchains, such as Ethereum (ETH) and Binance (BNB) Chain. However, the foundation acknowledges that it lacks the authority to reclaim the funds on behalf of affected users directly. Still, it aims to pave the way for victims to pursue their recovery efforts through legal ways.
Innovations in Blockchain Technology by Fantom
Fantom introduces a groundbreaking approach to blockchain architecture, employing a unique layer-1 framework. At the core of this framework is a unified consensus layer known as Lachesis, which supports the creation of various execution environments. This cutting-edge consensus model, developed and introduced by the Foundation, is referred to as the “Lachesis Protocol”.
The foundation offered an innovative 370 million FTM tokens incentive program aimed at developers and teams. This initiative is designed to reward those who contribute to maintaining and increasing their Total Value Locked (TVL) within the ecosystem.
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Fantom’s Response to the Exploit
In the aftermath of significant financial exploitation, the leadership team has taken decisive steps to address the repercussions of the loss. The team is proactively seeking a declaration of bankruptcy for the Multichain Foundation from the Singapore High Court, a measure that demonstrates their commitment to rectifying the situation.
This legal action is not merely about recovering the lost millions but also about signalling the foundation’s resolve in confronting challenges that threaten its financial stability. The decision to initiate bankruptcy proceedings against the Multichain Foundation is a reflection of the serious impact the incident has had on the Foundation’s operations and its broader implications for the ecosystem’s security.
Recovery Initiatives Following Security Breach
Following the security incident, Fantom has been actively seeking methods to retrieve the compromised assets. This included filing a report with the police in Singapore, where the Multichain Foundation is registered, and initiating legal proceedings against the company.
Additionally, a police report was filed in China, highlighting that Multichain and its co-founder, Zhaojun He, are under active investigation there. Zhaojun was arrested on unspecified charges two months before the breach, in May 2023.
Moreover, this initiative by the foundation is intended to set a strong precedent within the digital asset market for how to effectively deal with similar breaches of trust and security in the future.
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The Multichain Liquidation Strategy
@beincrypto Multichain still has a lot of explaining to do🕵️♂️ #multichain #blockchainnews #rugpull #cryptok ♬ Retrowave 2 – hENKA
Fantom has initiated legal proceedings in Singapore, seeking the appointment of a liquidator for Multichain to reclaim funds that were previously lost. The foundation emphasises that a court-appointed liquidator would bring essential expertise and legal authority to the complex process of tracing and recovering assets.
It is confident that securing a legal victory over Multichain will enable the engagement of specialists who are adept at recovering and reallocating assets to rightful owners. This step turns out to be an effective strategy for safeguarding assets and ensuring the integrity of foundation operations against future vulnerabilities.
Court’s Preliminary Ruling on the Dispute
Singapore Supreme Court, on January 30, 2024, delivered a preliminary ruling in favour of Fantom. Over the forthcoming months, the court will evaluate the financial losses inflicted by Multichain, to determine appropriate compensation. The foundation is expected to seek a cross-chain compensation amounting to $65 million for the damages incurred.
However, given Multichain’s persistent evasion of accountability, it plans to urge the court to mandate the dissolution of the Multichain Foundation. The goal is to appoint a liquidator for asset recovery. Following this legal success, it is anticipated that a Singaporean court will designate a liquidator to evaluate the damages incurred due to the security breach at Multichain.
Impact on the Fantom Ecosystem and Holders
Over the next few months, the foundation is dedicated to steering the process forward until a liquidator is successfully appointed. The foundation is committed to offering all necessary information and investigation findings to aid the liquidator in the recovery of assets, showcasing its proactive approach to safeguarding the ecosystem’s integrity.
The anticipation surrounding market performance remains highly positive, with analysts predicting substantial growth in the forthcoming period. Currently, Fantom’s token exhibits a remarkable upward trend, trading at $0.66, which indicates an impressive surge of over 90% in the last month alone.
Securing Assets and Building Trust
The Foundation is pursuing the liquidation of the Multichain Foundation to hasten the retrieval of funds. The issuance of a default judgment not only affirms the Foundation’s plea but also marks a significant step forward in tackling the issue. Visit here to learn ways to recover cryptocurrency scams.
The series of strategic decisions and positive market movements are poised to have a profound impact on the ecosystem and its holders. Lowering the barriers to entry for validators and ensuring robust mechanisms for asset recovery, is not only enhancing network participation but also reinforcing investor confidence.