A Singaporean high court has ruled that the cross-chain router protocol Multichain Foundation owes compensation to the Fantom Foundation, a layer-1 platform, for losses incurred in a 2023 hack.
The ruling from Judicial Commissioner Mohamed Faizal makes way for the Fantom Foundation to recover the assets it lost in exploit last July. Multichain will pay the Fantom Foundation approximately $2.2 million, the amount that the foundation reported as lost.
On July 6, 2023, Multichain witnessed several large outflows from several of its cross-chain brides, including that of the Fantom bridge. The exploit resulted in over $210 million worth of cryptocurrency assets lost from multiple chains, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam.
Subsequently, the Fantom Foundation secured a default judgment against Multichain on Jan. 30, 2024. It has since been pushing for the liquidation of Multichain Foundation to recover the lost funds.
Fantom presented evidence supporting its claims during a June 3 hearing. It claimed that losses incurred were due to Multichain’s CEO, Zhaojun He, having complete control “over the cryptocurrency assets stored in the Multichain Bridge.”
According to a statement issued by Multichain a day after the exploit, the firm’s CEO had been in the custody of the Chinese police for months. It was thereafter confirmed that the project was not decentralized as it claimed, and he had been in control.
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Further, the ruling adds that Fantom had taken Multichain Foundation Ltd, which ran the crypto bridge, and Multichain Pte Ltd to court. It argued that the “sudden incorporation” of Multichain Pte Ltd right before the exploit could be seen as an attempt to illegally divert the stolen assets to the entity.
While Faizal did not consider this allegation, he noted that Multichain had “admitted as much” on X.
“The [foundation’s] position is that the breach was possible because the CEO of the First Defendant had ultimate privileges and control over the cryptocurrency assets stored in the Multichain Bridge [..] This contravened what the [foundation] contends to be the key term in the User Agreement, which stated that the Multichain Bridge was controlled by decentralised safe and secure [multi-party computation] nodes that are incapable of one-person control,” the commissioner stated.
The recent compensation is less than what Fantom had initially claimed to have lost. As of now, Fantom plans to continue its legal efforts “until a liquidator is appointed.”
The ruling comes as the crypto industry saw a 70.3% surge in funds lost to hacks in the second quarter of 2024. Security firm Crystal Intelligence claims that since 2011, over $19 billion has been lost.
Read more: Fantom (FTM) Foundation secures default judgment against Multichain Foundation