Multichain, a Chinese decentralized cross-chain bridge protocol, recently announced its closure after the arrest of its co-founder and CEO, Zhao Jun, and his sister.
Zhao Jun, the alleged sole holder of the private keys to over $1.5 billion in users’ cryptocurrencies stored on Multichain, was reportedly arrested in May, although this information was not initially disclosed by the protocol’s staff.
In late May, Multichain users reported delays in receiving funds, to which the admins attributed a backend node upgrade.
Co-founder Alfred Xu attempted to dispel rumors and assure users that operations were proceeding normally.
However, concerns escalated when it was revealed that Zhao Jun was unreachable, leading to suspicions of a hack or inside job.
On July 7, users discovered unauthorized withdrawals amounting to over $100 million from Multichain’s Fantom Ethereum bridge and other sidechains.
Tether and USD Coin froze around $65 million after the transactions sparked fears of a hack.
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Developers found evidence suggesting abnormal transfers of user assets and discovered that Zhao Jun’s sister had moved the remaining assets to her controlled addresses as an “asset preservation action.” Subsequently, Zhao Jun’s sister was also arrested.
The arrest of Zhao Jun and his sister has left Multichain in disarray, as they were the only ones with access to operational funds, user assets, servers, and even the project’s website.
With no access to crucial resources, the project’s development team can no longer function effectively.
The reasons behind Zhao Jun’s arrest and the charges against him remain unknown, but under Chinese law, seized funds may be considered proceeds of crime, potentially leading to their seizure by the state. Multichain’s users now face uncertain prospects, and the platform’s TVL (Total Value Locked) has plummeted to $139 million.
In a separate incident, cryptocurrency exchange Binance faced its own challenges. On its sixth anniversary, Binance announced layoffs of up to 1,000 employees, primarily in the global and customer service sectors, as part of ongoing reorganization.
The exchange attributed the layoffs to the challenges posed by an ongoing U.S. Department of Justice investigation.
Binance’s CEO, Changpeng Zhao (CZ), responded to the layoffs by stating that the company was still hiring and that the numbers reported by the media were exaggerated.
However, on July 17, it was reported that Binance had stopped employee reimbursements for various expenses, citing the current market environment, regulatory climate, and the need to reduce expenses.
Binance is currently engaged in litigation with the U.S. Securities and Exchange Commission and the U.S. Commodities and Futures Trading Commission over allegations of offering unregistered securities and operating an unregistered exchange in the U.S.
Both Multichain and Binance’s recent troubles highlight the risks and challenges faced by cryptocurrency projects and exchanges, emphasizing the need for transparency, security, and regulatory compliance in the industry.
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