Multichain Debacle Deals Major Blow to Fantom

Andre Cronje, co-founder of Fantom, described Multichain’s debacle as a “major setback” for the smart contract platform, which has experienced a steep decline in activity in recent weeks due to Multichain’s issues.

According to DefiLlama data, Fantom’s total value locked (TVL) decreased from more than $364 million at the beginning of May to approximately $70 million on July 14. In 2022, Fantom’s TVL surpassed $7.5 billion at its zenith.

Fantom’s native currency fell in value from $0.41 to $0.28 during the same time. “Multichain was a major setback,” Cronje wrote in a Fantom forum thread, adding that he “had received numerous assurances from the [Multichain] team regarding server decentralization, access, and geolocation distribution.

I tell myself, “Do not rely instead, confirm.” Cronje’s remarks follow Multichain’s announcement on July 14 that it would cease operations due to the arrest of its CEO in May, who was the only individual with access to the company’s servers.

Fantom’s Total Value Locked . Source: DefiLlama.

Multichain was exploited on July 6 when over $125 million worth of cryptocurrencies were withdrawn from multiple wallets,1 affecting the Ethereum side of the Fantom, Moonriver, and Dogechain bridges.

This occurred after the arrest of its leadership and the escalation of technical challenges. These withdrawals represented the preponderance of each bridge’s available funds.

All of Multichain’s private key fragments were stored in a “cloud server account” under the sole control of the company’s CEO. Someone subsequently used this cloud server account to drain funds from the protocol.

Due to the exploit’s losses, Geist Finance was compelled to cease operations permanently. Before the breach, contracts on the Fantom network contained crypto assets worth over $29 million.

Thus, the demise of Geist had a significant impact on Fantom’s TVL. As a result of the vulnerability, stablecoin issuers Circle and Tether have frozen over $65 million in assets associated with the attack.

Fantom is reportedly collaborating with both firms for native issuance and evaluating rollups for native bridge infrastructure.

“At this time, we are exploring all available options and collaborating with relevant parties to recover the assets,” Croje explained.