Multichain Failure Hits Fantom DeFi: Assets Depeg Amid TVL Decline

The cross-chain protocol Multichain experienced a major setback that has significantly disrupted decentralized finance (DeFi) activities on Fantom. Since the onset of Multichain's issue in May, Fantom Foundation has been striving to reassure users about its association with the protocol.

Timeline of Fantom, Multichain

Andre Cronje, the co-founder of Fantom, painted a grim picture of the state of the smart contract platform, following the controversial demise of Multichain. He labelled Multichain's downfall as a “massive setback” for Fantom, which has recently witnessed a significant decrease in activity due to Multichain's issues.

Fantom Foundation is acting in a proactive manner following the latest update from the embattled Multichain protocol. According to Fantom Foundation, it has requested the top stablecoin issuers, including Circle (USDC), Tether Holdings Ltd.

Cross-chain protocol Multichain (MULTI) is ceasing operations because CEO Zhaojun and his sister were “taken away” by the Chinese police, according to a July 14 statement on its official Twitter handle.

In an unforeseen chain of events that unfolded between May and July 2023, the CEO of Multichain, Zhaojun, was apprehended by Chinese authorities, destabilizing the blockchain project. The situation escalated when user assets began to be transferred to unknown addresses.

Multichain (CRYPTO: MULTI) CEO Zhaojun has been detained by Chinese authorities, just days after the company issued an urgent warning that approximately $126 million worth of cryptocurrencies were drained from its platform. Zhaojun's sister was also detained.

Multichain, a bridging protocol, has confirmed that it has ceased operations as CEO Zhaojun's sister was arrested recently by the Chinese police while holding $220 million of the protocol's funds.

In a tale that seems ripped from the pages of a suspense thriller, the Multichain project shared a chilling narrative involving Chinese police, asset seizure and operational shutdowns. The CEO of Multichain, known as Zhaojun, was taken into custody by Chinese authorities on May 21, 2023, setting off a chain of events that have rattled the project to its core.

The CEO's sister was arrested in China days after she moved $220 million in user funds to wallets under her control. Multichain's team also confirmed the news that CEO Zhaojun was arrested by China police in May.

The Multichain hack could potentially be a “rug pull,” as an additional $103 million in funds were recently drained. Multichain, which is described as a cross-chain bridge protocol, reportedly saw another $103 million transferred to other blockchain addresses.

The ongoing disruption of the Multichain protocol through hacks and forces majeure is pushing the Fantom Foundation to explore alternative chains to power its operations. Taking to its official Twitter handle, Fantom Foundation said it acknowledges the difficult position that the current hack on Multichain has put Liquidity Providers (LPs), token holders and general users of the protocol in.