A Singaporean high court has determined that the cross-chain router protocol Multichain Foundation owes compensation to the Fantom Foundation, a layer-1 platform, for losses incurred during a 2023 hack.

The ruling by Judicial Commissioner Mohamed Faizal allows the Fantom Foundation to recover assets lost in the exploit last July. Multichain will pay approximately $2.2 million, the amount reported as lost by the foundation.

On July 6, 2023, Multichain experienced significant outflows from several of its cross-chain bridges, including the Fantom bridge. The exploit resulted in over $210 million worth of cryptocurrency assets lost across multiple chains, including Ethereum, BNB, Cronos, Polygon, Arbitrum, zkSync, Optimism, and Moonbeam.

Subsequently, the Fantom Foundation secured a default judgment against Multichain on Jan. 30, 2024, and has been advocating for the liquidation of Multichain Foundation to recover the lost funds.

Fantom provided evidence supporting its claims during a June 3 hearing. It argued that the losses were due to Multichain’s CEO, Zhaojun He, having complete control over the cryptocurrency assets stored in the Multichain Bridge.

According to a statement issued by Multichain a day after the exploit, the firm’s CEO had been in the custody of the Chinese police for months. It was later confirmed that the project was not decentralized, as claimed, and he had been in control.

Further, the ruling mentions that Fantom had taken Multichain Foundation Ltd, which operated the crypto bridge, and Multichain Pte Ltd to court. Fantom argued that the sudden incorporation of Multichain Pte Ltd right before the exploit could be seen as an attempt to illegally divert the stolen assets to the new entity.

While Faizal did not rule on this allegation, he noted that Multichain had admitted on social media that its CEO had ultimate control over the cryptocurrency assets stored in the Multichain Bridge. This contravened the key term in the User Agreement, which stated that the Multichain Bridge was controlled by decentralized, secure multi-party computation nodes incapable of one-person control.

The recent compensation is less than what Fantom had initially claimed to have lost. Currently, Fantom plans to continue its legal efforts until a liquidator is appointed.

This ruling comes as the crypto industry saw a 70.3% surge in funds lost to hacks in the second quarter of 2024. Security firm Crystal Intelligence claims that since 2011, over $19 billion has been lost.

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