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Another Fantom project winds down citing Multichain exposure

August 9, 2023 Coin Telegraph

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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Fantom (FTM) Founder Andre Cronje Says Multichain Hack Was a ‘Big Blow’ to Ethereum Rival’s Ecosystem

July 17, 2023 The Daily Hodl

‘Multichain was a big blow’, says Andre Cronje as Fantom TVL slumps

July 15, 2023 Coin Telegraph

Coin Telegraph

Fantom's TVL dropped from over $364 million in early May to about $70 million on July 14. At its peak in 2022, Fantom's TVL topped $7.5 billion.

Fantom's co-founder Andre Cronje classified Multichain's debacle as a "big blow" to the smart contract platform, which saw a sharp decline in activity in the past weeks as a result of Multichain's problems.

According to data from DefiLlama, Fantom's total value locked (TVL) dropped from over $364 million in early May to about $70 million on July 14. At its peak in 2022, Fantom's TVL topped $7.5 billion. The price of its native coin Fantom (FTM) declined from $0.41 to $0.28 over the same period.

"Multichain was a big blow, Cronje wrote in a Fantom's forum thread, adding that he "had a lot of assurances from the [Multichain] team around the server decentralization, access, and geolocation distribution. Don’t trust, verify (saying this to myself)."

*Fantom's Total Value Locked . Source: DefiLlama.*

Cronje comments follow Multichain's announcement on July 14 that it was shutting down operations following the arrest of its CEO in May, the only person in control of Multichain's servers.

With its leadership arrested and technical challenges mounting, Multichain was exploited on July 6, with over $125 million worth of cryptocurrencies withdrawn from multiple wallets, affecting the Ethereum side of Fantom, Moonriver and Dogechain bridges. These withdrawals represented the majority of funds held on each bridge.

Multichain was storing all shards of its private keys in a “cloud server account” under the sole control of its CEO, Cointelegraph reported. This cloud server account was later used by someone to drain funds from the protocol.

The ripple effect of Multichain's issues also affected the lending protocol Geist Finance, which was forced to shut down permanently due to losses from the exploit. Prior to the hack, over $29 million worth of crypto assets were locked in contracts running on the Fantom network. As such, Geist closing had a massive impact on Fantom's TVL.

In response to the exploit, stablecoin issuers Circle and Tether have frozen over $65 million in assets tied to the attack. Fantom is said to be engaging with both companies for native issuance and reviewing rollups for native bridge infrastructure. "We are exploring all options at this point, working with relevant organizations to try and recover assets," Cronje noted.

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Crypto lender Geist Finance shuts down permanently over Multichain hack

July 14, 2023 Coin Telegraph

Coin Telegraph

The $29 million TVL lending platform is shutting down because its oracles are misreporting Multichain token values after the exploit.

Lending protocol Geist Finance is shutting down permanently due to losses from the Multichain exploit, according to a July 14 social media post from the app’s development team. Geist contracts were paused on July 6, then resumed in “withdraw and repay only” mode on July 9. The latest post confirms the team does not plan to reopen lending and borrowing on Geist.

1/2 After confirmation from Multichain that the funds will not be recovered, we are announcing that Geist will not reopen. Because Chainlink oracles are tracking the value of real USDC, USDT, WBTC or ETH, they are not aware of the real value of Multichain assets.
— Geist Finance (@GeistFinance) July 14, 2023

Geist is a lending protocol running on the Fantom network. It had over $29 million worth of crypto assets locked in its contracts before the Multichain hack. Before the hack, Geist allowed users to borrow, lend or use bridged tokens from the Multichain platform as collateral, including bridged versions of USD Coin (USDC), Tether (USDT), Bitcoin (BTC) and Ether (ETH). It used Chainlink oracles to track the prices of these assets to determine their collateral and loan values.

According to the post, these oracles have stopped producing reliable information. They are now listing the values of the non-bridged, or “real,” versions of each coin, which are more than four times the value of their Multichain derivatives, as the team explained:

“Because Chainlink oracles are tracking the value of real USDC, USDT, WBTC or ETH, they are not aware of the real value of Multichain assets. Those assets are currently trading at around 22% of their real value.”

This makes it “impossible” to reenable lending, as doing so would result in bad debt for holders of non-Multichain coins such as Magic Internet Money (MIM) or Fantom (FTM), the team stated. As a result, Geist will not be able to reopen.

*Geist Finance interface in “withdraw and repay only” mode. Source: Geist Finance*

The team clarified it is not blaming Chainlink oracles for Geist’s closure, as these oracles “worked as they should.” Instead, “Nobody is to blame except @MultichainOrg here.”

Blockchain analytics experts first reported the Multichain hack on July 7. Over $100 million had been withdrawn from the Ethereum side of Multichain bridges, including those for Dogechain, Fantom and Moonriver. The Multichain team called the transactions “abnormal” and warned users to stop using the protocol. However, the team stopped short of calling it a hack or exploit.

On July 11, on-chain sleuth and Twitter user Spreek reported that an unknown individual was draining funds from the protocol and sending them to fresh wallet addresses using a fee-based exploit.

On July 14, the Multichain team confirmed that the withdrawals from July 7 had been the result of a hack. The network had been storing all shards of its private keys in a “cloud server account” under the sole control of the team’s CEO, who was arrested by Chinese authorities. This cloud server account was later accessed by someone and used to drain funds from the protocol. The team previously stated in the protocol’s documents that no single server had access to all of the shards of a key.

According to the July 14 post, the July 11 fee-based attack was a counter-exploit initiated by the CEO’s sister at the behest of the Multichain team in an attempt to recover funds. The sister was later arrested, and the status of the assets she recovered is “uncertain.”

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Stablecoin Issuers Circle and Tether Freeze Stablecoins Tied to Multichain Exploit: On-Chain Data

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Multichain attack triggers Twitter phishing scheme for FTM distribution

July 9, 2023 Coin Telegraph

Coin Telegraph

A phishing link was included in the tweet and shared with the affected users of the hack, leading them to believe it is associated with Fantom Foundation.

Hackers continue their relentless activities, displaying no signs of slowing down. Shortly after the Multichain hack, these malicious individuals once again launched an attack. Their latest tactic involves spreading a phishing link through Twitter.

A fraudulent distribution of Fantom (FTM) to users, falsely linked to the Multichain attack, is rapidly spreading on Twitter, attracting significant attention. This post has garnered numerous retweets, views and even bookmarks from Twitter users.

In the disguised tweet, the malicious individuals stated thus;

“Due to the Multichain hack, Fantom Foundation is issuing an emergency FTM distribution to all users. All users who have interacted with the FTM chain are eligible to claim.”

A phishing link was included in the tweet and shared with the affected users of the hack, leading them to believe it is associated with Fantom Foundation, the non-profit organization responsible for the Fantom (FTM) protocol.

Due to the Multichain hack, Fantom Foundation is issuing an emergency FTM distribution to all users.

All users who have interacted with the FTM chain are eligible to claim.

Receive Now ➡️ https://t.co/UUOBcycz8t #Fantom #Multichain #FTM #FTMUSDT #FantomHackathon $USDC,…
— Fantom Foundation (@FantomFNlD) July 7, 2023

On July 6th, Multichain encountered an alarming situation when significant outflows were detected on its platform. In response, Multichain suspended operations to investigate the issue. By the end of the day, approximately $125 million worth of Multichain assets had been illicitly transferred to various wallets. The most targeted asset was the Fantom bridge, with approximately $122 million worth of wBTC, USDC, USDT and other altcoins being stolen from its holdings.

Looks like another hack happened on Multichain. This DOES NOT affect users on @Binance or @Binance itself. We have swapped all assets out and closed deposits a while back. Regardless, we offer our assistance in helping with the situation.

Stay #SAFU. https://t.co/GGInbxFkic
— CZ Binance (@cz_binance) July 7, 2023

In light of these events, users were strongly recommended to halt all activities on the Multichain protocol and revoke any contract approvals associated with Multichain. This precautionary measure was advised until investigations were concluded and a comprehensive explanation was provided.

During the ongoing investigation, Changpeng 'CZ' Zhao, the CEO of Binance, utilized Twitter to inform his followers that the prominent digital asset service provider remained unharmed by the attack, reassuring them that all funds were secure. Additionally, he verified that Binance had already executed an asset swap and ceased accepting deposits from Multichain some time ago.

Instances of Twitter hacks like these are increasingly prevalent within the crypto industry. It is crucial for users to exercise caution and refrain from clicking on unfamiliar links.

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Circle, Tether freezes over $65M in assets transferred from Multichain

July 8, 2023 Coin Telegraph

Circle, Tether freezes over M in assets transferred from Multichain

Coin Telegraph

Multichain has suspended its operations after an unexplained transfer of crypto assets worth millions of dollars took place on July 6.

Stablecoin issuers Circle and Tether have frozen over $65 million in assets tied to the suspected exploit of cross-chain router protocol Multichain. The move follows unexplained large outflows from the Multichain MPC bridge on July 6.

According to the knowledge graph protocol 0xScope, three addresses that received at least $63.2 million in USD Coin (USDC) from Multichain are now frozen. Another report from the Fantom Foundation notes that more than $2.5 million in Tether (USDT) had also been frozen from two addresses listed by Etherscan as "Multichain Suspicious Addresses".

Over $125 million worth in cryptocurrencies were withdrawn from multiple wallets on July 6, affecting Multichain’s Fantom bridge, as well Dogechain, Moonriver, Kava and Conflux's ecosystems. The cause of the abnormal transfer of assets remains unclear.

Update: Tether has frozen these accounts with >2.5m USDT on Ethereum transferred from Multichain:https://t.co/bFYACtQ7t6 https://t.co/zlRybitcJC

Thank you @Tether_to and the team for your quick response.
— Fantom Foundation (@FantomFDN) July 8, 2023

On Twitter, Multichain announced it was suspending current services, without specifying a return date. "Please don’t use the Multichain bridging service now," it warned, adding that "all bridge transactions will be stuck on the source chains."

Fantom protocol CEO Michael Kong reportedly said that the transfer of funds "does not appear to be a normal hack", since the assets sent to the alleged attacker's wallets were not transferred elsewhere. Investigations are still ongoing.

Multichain allows users to transfer tokens between different networks. It has been facing technical and operational challenges since its leadership vanished a few weeks ago. Bridges like Multichain are among the most vulnerable targets for crypto hackers, with several incidents reported in 2022.

A recent report from blockchain security firm SlowMist revealed that since 2012, over $30 billion in crypto assets has been hacked in hundreds of incidents. The top five most common hacks are smart contract vulnerabilities, rug pulls, flash loan attacks, scams and private key leaks.

The total number of incidents consisted of 118 exchange hacks, 217 Ethereum ecosystem hacks, 162 BNB Smart Chain ecosystem hacks, 119 EOS ecosystem hacks, and 85 hacks involving nonfungible tokens (NFTs). A total of over $10 billion has been lost in crypto exchange hacks over the past decade.

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