Another Fantom project winds down citing Multichain exposure

Over $1.5 billion of users’ and enterprises’ assets were held on Multichain prior to the arrest of its CEO Zhaojun He.

SpiritSwap, a decentralized exchange (DEX) built on smart contract platform Fantom, will wind down operations from Sept. 1, citing exposure to troubled Chinese cross-chain protocol Multichain.

In the Aug. 9 announcement via Discord, developers revealed that the Multichain hack left SpiritSwap’s entire treasury drained and, therefore, “without the means to finance essential aspects of our operation,” including operational costs, salaries and marketing. The team says it is looking for “a team to take over” the DEX by Sept. 1. If no change of ownership occurs by then, the DEX says it will cease operations entirely. 

Founded in 2021, SpiritSwap had been one of the popular DEXs on Fantom before the onset of the cryptocurrency bear market. Its total value locked (TVL) reached an all-time high of $374 million in January 2022 but now stands at $2.92 million at the time of publication, having fallen further due to the Multichain incident.

After months of speculation, Multichain developers disclosed that co-founder and CEO Zhanojung He was arrested by Chinese police in May on unknown charges. He allegedly held all access to Multichain private keys and servers when he was detained. Despite a lack of information on his detention, funds belonging to Multichain and its users have been swapped for stablecoins as well as private coins and transferred out of the protocol. Some victims have since alleged that the Chinese police are involved in an elaborate embezzlement scheme involving users’ funds. 

Multichain was Fantom’s cross-chain protocol of choice before the incident. A mix of seized funds and capital flight caused Fantom’s TVL to drop from $364 million in early May to $72 million at the time of publication. Previously, Fantom’s lending protocol Geist Finance announced it would shut down due to exposure to Multichain. 

End of an era as @Spirit_Swap calls it quits; the very first place I landed on #Fantom 828 days ago

They’re looking for a team to hand things to; otherwise operations will cease on September 1; a guide to help users withdraw $SPIRIT dregs as they unlock will be developed pic.twitter.com/Syu2wqNlAY

— The Fantom Ecologist (@ftm_ecologist) August 9, 2023

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