In a turn of events that has stunned the crypto world, Multichain, a prominent cross-chain protocol, is ceasing operations. The unexpected shutdown follows the arrest of its CEO, Zhaojun, in China, an incident that has sent uncertainty through the global cryptocurrency community.
The apprehension of Zhaojun, which occurred on May 21, 2023, sparked a series of operational disruptions. Subsequently, all active funds and access keys to Multichain’s Multi-Party Computation (MPC) node servers were seized under Zhaojun’s control.
The Multichain service stopped currently, and all bridge transactions will be stuck on the source chains.
There is no confirmed resume time.
Please don’t use the Multichain bridging service now.
— Multichain (Previously Anyswap) (@MultichainOrg) July 7, 2023
Despite these monumental challenges, the dedicated Multichain team attempted to maintain project operations as best as possible. This effort was conducted via access to the remaining non-MPC servers that hadn’t been revoked.
User assets vanish in the wake of the arrest
However, the situation took a drastic turn on July 7. Unexpectedly, user assets locked in the MPC addresses were transferred to anonymous destinations. To secure the remaining assets, Zhaojun’s sister, who managed to gain access to the cloud server platform, swiftly moved the funds to her personally controlled End-Of-Address (EOA).
Yet, the crisis deepened further on July 13. Zhaojun’s sister was also detained, increasing uncertainty regarding the preserved assets. Consequently, the beleaguered Multichain team had no choice but to halt operations due to a lack of alternative sources of information and operational funds.
7.
At present, Zhaojun's sister has also been arrested, and out of contact.
Please stop using Multichain services and revoke all contract approvals related to Multichain.https://t.co/WDpewRjke9
— Lookonchain (@lookonchain) July 14, 2023
In the aftermath of this incident, stablecoin issuers Circle and Tether reacted swiftly to freeze over $65 million in assets. This decision was taken following the abnormal withdrawals from Multichain on July 6. Blockchain analytics firm Chainalysis categorized these withdrawals as a possible rug pull, suggesting an internal operation.
As a result of this situation, Multichain‘s native token, MULTI, saw a substantial drop in value, plunging by 15%. Meanwhile, several other protocols, including Binance and the Fantom Foundation, took preventive measures. Deposits for bridged tokens were suspended, and many MULTI tickets were withdrawn from liquidity.
With such events unfolding, it’s crucial to remind everyone in the crypto community about the importance of decentralization and secure private key management. The Multichain saga is a stark reminder of the need for multiple entities to control keys and access to prevent a similar future occurrence.
Limitations and call to the community
Hence, this event underscores the imperative nature of transparency, security, and decentralization in the rapidly evolving crypto landscape.
The current status of Multichain remains to be determined and users are urged not to use its services. The team remains hopeful, turning to the community for support and spreading the news regarding the cessation of operations. The future of Zhaojun and his sister, as well as the retained cash, are still mysteries.
This entire incident should warn about the risks hiding in the crypto domain. Such tests may seem like a waste of time, but in the end, they help the industry grow and provide better, more secure products for clients. As the situation develops, all eyes are on Multichain and the unfolding drama around its detained CEO.
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