Multichain, a cross-chain bridge protocol, has announced that it will cease operations due to lack of funds and contact with its CEO, who is in Chinese police custody.
The announcement comes after a massive exploit that drained over $125 million from the protocol, which some experts suspect to be an internal rug pull.
Multichain is a protocol that allows users to transfer assets across blockchains, such as Ethereum, Binance Smart Chain, Fantom, and Dogecoin.
However, on July 6, the protocol experienced unusually large and unauthorized withdrawals from its smart contracts, resulting in more than $125 million in losses.
According to blockchain security and analytics firm Chainalysis, the exploit could have been an internal rug pull by insiders who gained control of Multichain’s multi-party computation (MPC) keys, which are used to secure the protocol’s smart contracts.
Chainalysis also noted that the hacker did not swap the stolen assets for centrally controlled ones like USDC and Tether, which the issuers can freeze.
Circle and Tether have since frozen several addresses holding about $65 million in assets stolen from Multichain.
Multichain’s CEO Goes Missing
Multichain’s CEO, known as “Zhaojun,” has been AWOL since late May, when Chinese police reportedly detained him.
The global Multichain team has not had contact with him since then and has learned from his family that the authorities seized his computers, phones, wallets, and mnemonic phrases.
The team said that all operational funds and investor investments have been under Zhaojun’s control since the project’s inception.
This also means that all the team’s funds and server access are with Zhaojun and the police.
The team added that Zhaojun’s sister notified them of an asset preservation act, transferring some funds to addresses under her control.
However, this was followed by Zhaojun’s family notifying the team that Zhaojun’s sister was also taken into custody by the police and is now out of contact.
Multichain’s Fate Following the Hack
As a result of the need for alternative sources of information and corresponding operational funds, the team announced on July 14 that it is halting its operations.
The announcement was made on Multichain’s official Twitter account, which has since been deleted.
The team apologized to the community and investors for the inconvenience and losses caused by the exploit and the arrest of their CEO.
They also said they would cooperate with any investigations and legal actions related to the incident.
The Multichain hack is one of the biggest crypto hacks on record and has raised questions about the security and trustworthiness of cross-chain bridge protocols.
It also highlights the risks of operating in jurisdictions with uncertain or hostile regulatory environments for crypto projects.
