The recent downfall of Multichain has had a significant impact on the smart contract platform Fantom, according to co-founder Andre Cronje. In the past few weeks, Fantom has seen a decline in activity as a result of Multichain’s problems. Data from DefiLlama reveals that Fantom’s total value locked (TVL) dropped from over $364 million in early May to about $70 million on July 14. At its peak earlier this year, Fantom’s TVL reached a staggering $7.5 billion. Similarly, the price of Fantom’s native coin, FTM, declined from $0.41 to $0.28 during the same period.
Cronje expressed his disappointment in Multichain’s actions, labeling it as a “big blow” to Fantom. In a forum thread, he mentioned that he had received assurances from the Multichain team regarding server decentralization, access, and geolocation distribution. However, the events that unfolded proved otherwise, leading him to remind himself to “don’t trust, verify.”
The aforementioned setbacks can be attributed to Multichain’s announcement on July 14, stating that it would cease its operations due to the arrest of its CEO back in May. With the CEO being the sole controller of Multichain’s servers, the company faced technical challenges and a loss of leadership, resulting in vulnerabilities. On July 6, Multichain was exploited, leading to the withdrawal of over $125 million worth of cryptocurrencies from multiple wallets. This exploit had a major impact on Fantom, particularly affecting the Ethereum side of bridges such as Fantom, Moonriver, and Dogechain.
Cointelegraph reported that Multichain stored all shards of its private keys in a cloud server account solely under the control of its CEO. Unfortunately, someone later used this account to drain funds from the protocol, further exacerbating the situation. This not only affected Fantom but also had a ripple effect on Geist Finance, a lending protocol that was forced to shut down permanently due to losses from the exploit. Prior to the hack, Geist Finance had over $29 million worth of crypto assets locked in contracts running on the Fantom network. Consequently, the closure of Geist Finance had a massive impact on Fantom’s TVL.
In response to the exploit, Circle and Tether, two stablecoin issuers, froze over $65 million in assets linked to the attack. Fantom is currently engaging with both companies for native issuance and reviewing rollups for native bridge infrastructure. Cronje highlighted that they are exploring all options and working with relevant organizations to recover the assets.
In conclusion, Multichain’s downfall has significantly affected Fantom, leading to a decline in activity and a decrease in total value locked. The exploitation of Multichain resulted in the withdrawal of millions of dollars worth of cryptocurrencies, impacting not only Fantom but also other projects such as Geist Finance. The aftermath of the exploit has prompted Fantom to collaborate with stablecoin issuers and seek ways to recover the assets lost. Despite this setback, Fantom remains determined to navigate through the challenges and find viable solutions to secure its platform and assets.