Multichain halts operations amid lack of funds
July 16, 2023 8:01 AM
The CEO of Multichain, Zhaojun, is currently in Chinese police detention, and the team has stated that all company cash and server access are currently in Zhaojun's possession.
Multichain, the Cross-Chain Protocol reported that it has been "forced to halt operations" owing to a lack of operational funds. The disclosure comes in the wake of research from blockchain analytics firm Chainalysis, which stated that withdrawals appear to be a "rug pull" by insiders.
Multichain announced its shutdown on July 14 via its official Twitter account. Its "lack of alternative sources of data and equivalent operational funds" caused it to cease operations, the team added.
It further stated that the worldwide Multichain team has not communicated with their CEO, identified as Zhaojun, since he was arrested by Chinese authorities. The team contacted the CEO's family and learned that the authorities had taken Zhaojun's laptops, phones, wallets, and mnemonic phrases. They stated:
"Ever since the project's inception, Zhaojun has had complete authority over all operating funds as well as investor contributions. This also implies that all of the team's cash and server access are in the hands of Zhaojun and the police."
Zhaojun's sister informed the team of an asset safeguarding act, moving some funds to addresses within her control, they added. However, the Multichain CEO's family then notified the team that Zhaojun's sister had also been detained by authorities and was no longer in communication. As a result, the team has stated that it will be ceasing operations.
The Multichain saga began in May, when Multichain routes were blocked due to an update, resulting in longer-than-expected fund transfers. As a result of the protocol's uncertainty, crypto exchange Binance suspended deposit and withdrawal functionality for several Multichain bridging tokens.
Large outflows on the Multichain MPC bridge→ platform have fueled concerns of an exploit, which is bad news for the ecosystem overall. On July 6, on-chain witnesses assessed that the protocol had been hacked after more than $100 million in assets were removed from its Fantom bridge on the Ethereum side.