Key Points

  • The crypto community has expressed disdain over poor management and centralization in the Multichain crypto ecosystem.
  • Multichain experienced a series of ‘hacks,’ which have all been confirmed to be inside jobs, resulting in a series of companies being forced to close down. 

Multichain Bridge ‘hack’ has sent a ripple of distrust in the crypto industry after what investors thought was a hack was revealed to be an inside job. Multichain is forced to close down as it does not have operational funds to continue operating since all control was under an arrested CEO, and all validators have been kicked out of the MPC node servers. 

Multichain Bridge mismanagement stirs the pot

The crypto community is not buying into the Multichain hacking and CEO disappearance story, as the industry is counting losses from the misfortune. According to the company, Multichain Bridge CEO Zhao Jun was arrested in May 2023.

Since his disappearance, Multichain Bridge has been left with crippled systems. Its MPC node validators were kicked out of the servers, and no one else had access to them or Jun’s cloud server, or so it was thought. This state of operation was the case until it was discovered that Jun’s sister was transferring investor funds from MPC accounts to a personal EOA address.

She was also arrested by the same Chinese authorities that reportedly took Zhaojun. Now, Multichain has to wind down its operations. This misfortune has sent a wave of distrust and disdain across the crypto space. Multichain was one of the largest bridges and had thousands of users. 

Talking to Fintech Express, DeFi solutions provider Bracket Labs called on DeFi projects to recheck their decentralization approaches and avoid falling for a similar centralization of power as seen in the Multichain saga. 

“It is extremely disappointing to hear that the disappearance of the Multichain founder could lead to a shutdown of the protocol because of centralized back-end infrastructure. Even though the MPC nodes themselves are running properly, the fact that they are node servers running on the founder’s personal cloud server account is concerning. 

This is a wakeup call for all DeFi projects to verify that they do not rely on any single individual or infrastructure provider/vendor,” Bracket Labs said.

Aftershock events of the Multichain Bridge meltdown

As a result of poor management in the ranks of Multichain Bridge, multiple investors have been affected. Some projects will even be forced to close down. Such a project is Geist Finance. Geist Finance is a lending protocol that held its assets on Multichain. However, it has no choice but to wind up its operations permanently following the misfortune.

The Ripple effect has also hurt the Fantom network, as the blockchain harbored Multichain. Multichain was its largest bridge, meanings its shutdown resulted in lower network usage. In a July 17 update, Fantom expressed that it was disappointed to hear about Multichain but had found a solution.

“We are deeply disappointed to hear about the latest Multichain news. It is a difficult situation for everyone impacted, on a brighter note we have found an alternative to swap Multichain Assets using our inbuilt Dex Aggregator. USDC holders can now swap their funds to $FTM at $1 price using the Dex Aggregator,” the tweet read.

Since the beginning of July, the total value locked (TVL) in the Fantom network had been on a sharp dive owing to the Multichain saga. The TVL had fallen by 67% on July 16 in July only. This makes it one of the biggest hits in the network’s operational history.

Keep watching FinTech Express for more updates on this and other fintech-related developments.