Fantom Ramps Up Legal Battle, Seeks Multichain Foundation Liquidation

The Fantom Foundation, a prominent player in the decentralized finance (DeFi) space, is throwing down the gauntlet against Multichain Foundation. In a recent blog post, Fantom announced its intention to petition a Singapore court to liquidate Multichain, a measure aimed at recovering assets lost in a July 2023 exploit.

The exploit on Multichain‘s cross-chain bridge inflicted a huge blow, draining a staggering $210 million across various blockchains. Fantom’s ecosystem absorbed a significant portion of this loss, estimated to be around one-third of the total stolen funds. However, a recent legal victory offers a potential path to recoup these losses.

In January, the High Court of Singapore issued a default judgment in favour of Fantom in its lawsuit against Multichain. The lawsuit alleged that Multichain had engaged in both breach of contract and fraudulent misrepresentations.

This judgment paves the way for the Singaporean court to appoint a liquidator. This court-appointed official would be tasked with assessing the damages suffered by Fantom as a result of the security breach. The liquidator would also play a crucial role in facilitating the recovery and distribution of any missing or frozen assets.

While the default judgment empowers the court to appoint a liquidator, Fantom acknowledges the possibility that Multichain may continue to remain unresponsive. In case this occurs, Fantom has indicated its intent to petition the court to formally dissolve the Multichain Foundation altogether and appoint a liquidator to oversee the dissolution process.

According to Fantom, this legal action is a last resort after multiple attempts to engage with key personnel at Multichain proved futile. These failed attempts to establish communication likely fueled Fantom’s decision to pursue legal avenues for recovery.

The ramifications of this case extend beyond Fantom. The default judgment in Fantom’s favour could offer hope for other Multichain users who lost assets in the exploit. This judgment has the potential to pave the way for them to pursue claims for their own lost funds, potentially through similar legal actions.

Fantom’s blog post included an additional noteworthy piece of information – the founder of Multichain is reportedly under investigation in Kunming, China. It also revealed that Fantom has opened a proposal for a class action lawsuit against Multichain, allowing affected users to band together in a collective legal effort to recover their losses.

The coming months will be critical as the legal battle between Fantom and Multichain unfolds. The court’s decisions will determine the fate of Multichain, the potential recovery of lost assets, and could set a precedent for future legal actions arising from DeFi exploits.

This case serves as a stark reminder of the critical importance of robust security measures within the DeFi space and underscores the potential legal alternative available to victims of exploits. By closely following the developments in this case, other DeFi projects can gain valuable insights and prioritize strengthening their security protocols to mitigate the risk of similar attacks.