In a significant development, a New York bankruptcy court has ruled in favor of Multichain liquidators, extending a freeze on wallets containing approximately $63 million in stolen USD Coin (USDC). This decision is part of ongoing efforts to recover assets lost during the July 2023 hack of Multichain’s cross-chain bridge protocol, according to Cryptonews.
Judge David S. Jones of the U.S. Bankruptcy Court for the Southern District of New York issued the order, which mandates stablecoin issuer Circle to maintain a freeze on three Ethereum wallets implicated in the hack. This action ensures that the stolen funds remain inaccessible and prevents any unauthorized movement.
This court order is grounded in Section 1519 of the U.S. Bankruptcy Code, providing temporary relief pending formal recognition of the foreign case under Chapter 15. This framework facilitates cooperation between U.S. and foreign courts in insolvency proceedings.
The Multichain breach, one of the largest decentralized finance (DeFi) exploits of 2023, resulted in over $210 million being siphoned off from its bridge contracts. The hack affected assets on several networks, including Fantom, Moonriver, and Dogechain. Despite extensive investigations, the perpetrators remain unidentified.
Following the breach, Circle initially froze the wallets at the request of the U.S. Department of Justice (DOJ), which later lifted its warrant due to challenges in identifying the hackers. The new court ruling reinstates Circle’s authority to keep these wallets locked.
Singapore-based liquidators from KPMG Services Pte. Ltd., tasked with overseeing Multichain’s dissolution, have argued that lifting the freeze could lead to irreparable harm by allowing stolen assets to be moved beyond recovery. The court’s decision supports their efforts to maintain control over the funds until further legal proceedings determine the case’s status as a “foreign main proceeding.” This designation is crucial for pursuing asset recovery across jurisdictions.
The court’s ruling also impacts a separate class action lawsuit filed by U.S. investors against Circle in New York State court. This case, seeking control over the stolen USDC, has been paused following the federal court’s decision.
Once a leading cross-chain bridge protocol, Multichain’s troubles began with the 2023 hack, compounded by the arrest of its CEO, Zhaojun, in China. Legal actions initiated by affected projects, such as Fantom Foundation, have resulted in a winding-up order against Multichain Foundation Ltd. by the Singapore High Court.
The ongoing asset recovery efforts are part of a broader dissolution process managed by KPMG’s liquidators. The frozen $63 million in USDC is a portion of the total funds stolen, with liquidators continuing to work towards recouping these assets.
This recent court ruling is a pivotal step in the cross-border legal strategy to recover the stolen funds and underscores the complexities involved in navigating international insolvency laws.
