Lending protocol Geist Finance has announced its permanent closure due to significant losses resulting from the Multichain exploit, according to a social media post from the development team on July 14.
The protocol, which operated on the Fantom network, temporarily paused its contracts on July 6 and then resumed limited functionality, allowing only withdrawals and repayments, on July 9.
However, the latest announcement confirms that Geist Finance will not reopen for lending and borrowing activities.
Before the exploit occurred, Geist Finance had locked over $29 million worth of cryptocurrency assets in its contracts.
The lending protocol permitted users to borrow, lend, and utilize bridged tokens from the Multichain platform as collateral, including tokens such as USD Coin (USDC), Tether (USDT), Bitcoin (BTC), and Ether (ETH).
Chainlink oracles were employed to track the prices of these assets and determine their collateral and loan values.
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The recent social media post revealed that the Chainlink oracles had ceased to provide reliable information.
They were now listing the values of the non-bridged, or “real,” versions of each coin, which were more than four times the value of their Multichain derivatives.
As a consequence, reopening lending activities would result in bad debt for holders of non-Multichain coins, rendering it impossible to resume operations.
Geist Finance clarified that it did not hold Chainlink oracles responsible for its closure and placed blame on Multichain.org.
Blockchain analytics experts initially reported the Multichain exploit on July 7. Over $100 million had been withdrawn from the Ethereum side of Multichain bridges, affecting platforms like Dogechain, Fantom, and Moonriver.
While the Multichain team labeled the transactions as “abnormal” and advised users to stop utilizing the protocol, they refrained from explicitly referring to it as a hack or exploit.
Further investigations by on-chain sleuths and Twitter user Spreek on July 11 unveiled an unknown individual draining funds from the protocol using a fee-based exploit.
On July 14, the Multichain team confirmed that the withdrawals on July 7 resulted from a hack.
It was discovered that all shards of the network’s private keys were stored in a cloud server account controlled solely by the CEO, who had been apprehended by Chinese authorities.
Subsequently, the cloud server account was accessed by an unauthorized party to siphon funds from the protocol.
In an attempt to recover the assets, the Multichain team engaged in a fee-based counter-exploit initiated by the CEO’s sister on July 11.
However, she was later arrested, and the status of the assets she recovered remains uncertain.
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