...and is definitely not an enormous grift that's pouring lighter fluid on our already smoldering planet.
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SpiritSwap was previously one of the most popular DEXes on Fantom, boasting an all-time-high of $374 million in January. It now has less than $3 million TVL, thanks in part to the Multichain collapse and to the broader cryptocurrency bear market.
SpiritSwap is only the most recent project to announce its closure as a result of the Multichain fiasco. In July, Geist Finance and Hector Network also announced they would be shutting down due to Multichain contagion.
On July 14, a community manager wrote on Discord that "Hector Network ha[d] suffered significant damage to its ability to operate" after the Multichain collapse, and that the project faced a choice between liquidating the treasury and winding down or migrating to a new blockchain and trying to rebuild. The community chose the former.
According to a post on Discord, the winding-down process will likely take 6 to 12 months as the project appoints a liquidator, legal counsel, and auditor.
Geist paused their smart contracts on July 6, then reenabled the withdraw and repay functions on July 9, while waiting for news from Multichain. Now that Multichain has confirmed that the missing hundreds of millions will not be recovered, Geist has announced they will not reopen. If they were to do so, the platform would almost immediately take on bad debt as people exploited the price discrepancies.
Multichain added, "Just to be clear this is in no way an attempt to blame Chainlink oracles which worked as they should. There are no oracles for the Multichain assets themselves because there was the expectation to exchange them 1:1. Nobody is to blame except Multichain here."
The Multichain project claimed in a lengthy Twitter thread that the team attempted to keep the project running by using stored credentials on Zhaojun's home computer, thanks to access provided by his sister. However, they say that the July 6–7 movement of $130 million out of the project was an "abnormal" transfer by an unknown party. They claim that the July 9–10 transfer of around $107 million was his sister attempting to preserve assets by moving them into wallets she controlled. According to the team, his sister also was arrested on July 13, and "the status of the assets she has preserved is uncertain".
"Due to the lack of alternative sources of information and corresponding operational funds, the team is forced to cease operations," they wrote. They also claimed that they don't have control over the domain pointing to the frontend of the project, and so are unable to take the project offline, and resorted to pleading with GoDaddy for help in doing so.
"Honestly he deserves jail for this level of cryptography incompetence alone," wrote crypto personality 0xfoobar on Twitter.
People are becoming increasingly suspicious that the Multichain thefts may be an inside job, not least because Multichain's CEO suddenly disappeared in late May and hasn't been located since.
Several hours later, Multichain wrote that they had stopped service, and that "all bridge transactions will be stuck on the source chains. There is no confirmed resume time."
In May, Multichain suffered a bizarre slew of issues, culminating in the project team admitting that their CEO had gone missing and could not be contacted. So far, they have not reported his return.
This is also not the first hack suffered by Multichain. In January 2022, the project, bafflingly, publicly announced a security vulnerability that was affecting their tokens, without first instructing users to safeguard their tokens. Attackers quickly followed the instruction manual provided to them by Multichain, making off with around $3 million in assets.
Meanwhile, rumors swirled that the Multichain team had been arrested by Chinese police, though there doesn't seem to be much corroborating evidence of this.
The issues and the rumors sparked a drop in token price of around 30%. Several large parties also appeared to distance themselves from the project and its token, including the Fantom Foundation, which withdrew 449,740 MULTI (~$2.4 million) in liquidity on SushiSwap.
On May 31, Multichain issued a statement that "we are currently unable to contact CEO Zhaojun and obtain the necessary server access for maintenance", and wrote that even more bridges were being impacted by the same issues as in the previous week.
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