Fantom Foundation Awarded Default Judgement Against Multichain

In July 2023, an exploit on the Multichain bridge saw the depletion of over $210 million in assets across various chains, including Fantom, Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam. Fantom’s ecosystem losses amounted to approximately one-third of total losses. 

After all attempts to engage with the former directors and key personnel of the Multichain Foundation failed, Fantom filed an action against the Multichain Foundation for breach of contract and fraudulent misrepresentations for losses sustained by Fantom. 

We are pleased to announce that on January 30, 2024 (effective as of November 30, 2023), the Honorable Registrar Tan Boon Heng of the General Division of the High Court of Singapore granted a default judgment ruling in Fantom’s favor.

Background

While Fantom is neither responsible, nor liable, for the actions of third-party infrastructure partners, the Fantom Foundation’s management and legal team have been working ever since the exploit across multiple jurisdictions (including the US, China, and Singapore) to chart a path forward that enables victims to partially recover assets lost.

This investigation was affected by a number of factors, the most important of which was the fact that Fantom had no legal right to recover funds on behalf of users. Further, the absence and lack of cooperation by the Multichain team since the exploit, a range of cross-jurisdictional issues, the opaque nature of key police investigations, and a general lack of legal precedent and understanding about bridges, digital assets, and stablecoins created added complexity to addressing the exploit. As such, the Fantom Foundation: 

• Filed a police report in Singapore, where the Multichain Foundation is incorporated, and in Kunming, China where Multichain and its founder are subject to an active investigation.
• Engaged legal counsel in the USA, China, Hong Kong, and Singapore to advise on legal avenues and approaches in each jurisdiction.
• Partnered with leading blockchain intelligence firm TRM to conduct a forensic analysis of the flow of assets.
• Engaged with relevant exchanges and issuers.
• Commenced legal action against Multichain Foundation in Singapore for losses sustained by the Foundation due to Multichain’s breach of contract and fraudulent misrepresentations.

Moving Forward

Given the recent ruling, we will use the Fantom Foundation's own financial losses to petition the court to wind up the Multichain Foundation and appoint a liquidator (equivalent to a Chapter 7 bankruptcy in the US)  to help recover and distribute missing or frozen assets.  

A court-appointed liquidator will have the expertise required to aid in the tracing and recovery of assets; unique legal powers (such as the authority to retrieve or dispose of property, claw back fraudulent transactions, commence investigations, and bring or defend legal actions, among others); a duty to act in the interests of all creditors and the court-mandated authority to act and communicate to issuers, exchanges or third-parties on behalf of Multichain Foundation.

While this does not mark the end of the Multichain saga, it does close an important chapter of the proceedings. The default judgment ruling validates the team’s strategy and efforts and is an important milestone in rectifying this wrong. We note that while the current judgment relates only to Fantom Foundation’s own losses, the Foundation plans to use this legal victory to pave a path for all users to lodge their claims against Multichain and have suitably qualified experts recover and distribute assets.

Over the next few months, we will progress the matter until a liquidator is appointed. We will pass all our knowledge and investigative material to the liquidator and continue to work to facilitate and support their efforts of recovery.