The Fantom Foundation has been awarded a default judgment ruling in its legal action against Multichain for breach of contract and fraudulent misrepresentations following a major exploit in 2023.
Fantom had filed for legal action against Multichain after several attempts to engage with key personnel and directors of the Multichain Foundation proved futile.
Fantom Granted Default Judgment
Fantom announced the favorable ruling in a blog post published on the 4th of March, stating that the High Court of Singapore had granted it a default judgment ruling in its legal action against cross-chain protocol Multichain, claiming it lost $122 million of Fantom’s funds during a July 2023 exploit.
“Since the July 2023 Multichain exploit, Fantom Foundation’s management and legal team have been working tirelessly across multiple jurisdictions to chart a path forward that enables victims to partially recover assets lost. We have an important update in this regard. We are pleased to announce that on the 30th of January, 2024 (effective as of the 30th of November, 2023), the Honorable Registrar Tan Boon Heng of the General Division of the High Court of Singapore granted a default judgment ruling in Fantom’s favor.”
Fantom had accused the Multichain team of a lack of cooperation following the exploit, which was one of the factors that led to the Fantom Foundation filing a police report in Singapore, where Multichain is incorporated, and in Kunming, where Multichain and its founder are the subject of an active investigation. Following this, Fantom initiated legal action against Multichain for losses sustained by Fantom due to the former’s breach of contract and fraudulent misrepresentations.
Fantom Seeks Liquidation
Following the judgment, the Fantom Foundation wants the High Court of Singapore to declare the Multichain Foundation bankrupt. This, according to Fantom, could allow the firm to recover the $122 million stolen from Multichain’s Fantom Bridge during the 2023 exploit. The Fantom Foundation stated in its blog post,
“Given the recent ruling, we will use the Fantom Foundation’s own financial losses to petition the court to wind up the Multichain Foundation and appoint a liquidator (equivalent to a Chapter 7 bankruptcy in the US) to help recover and distribute missing or frozen assets.”
Fantom stated that the court would assess the damages suffered and then issue Multichain a Statutory Demand to pay the sum assessed by the court. However, Fantom stated that it does not expect Multichain to pay the sum, following which it would petition the court to appoint a liquidator. The liquidator will have the authority to take over the Multichain Foundation’s assets and recover them to pay back creditors it allegedly owes.
“Acting on behalf of all affected parties, the liquidator will possess specialized expertise in tracing and recovering assets, as well as the legal powers to claw back and recover bridge assets, assess and manage claims, and distribute any recovered funds.”
Setting A Precedent
Fantom reiterated that the court’s judgment was related only to its own losses. However, it plans to use this legal victory to create an avenue for all affected users to lodge their respective claims against Multichain. Multichain has not commented on the judgment so far. Blockchain security firm Beosin stated that the total losses suffered by Multichain during the exploit amounted to $210 million. At the time of the exploit, blockchain security firm Chainalysis speculated that the exploit could have occurred due to compromised administrator keys, speculating it could have been an inside job.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
