Multichain Crisis Deepens: Inside the $1.5 Billion Debacle

Fresh details have emerged surrounding the tumultuous unraveling of the Multichain saga, a Chinese cross-chain protocol responsible for a whopping $1.5 billion in assets. Not long ago, reports confirmed the apprehension of the enigmatic CEO, "Zhaojun He," by the Chinese authorities in Kunming during May. This was followed by the shocking arrest of the core Multichain team based in Shanghai.

Despite earlier affirmations about the decentralized nature of their operations, shocking revelations indicate that Zhaojun had sole control of critical protocol elements, including its multi-party computation servers and private keys. In a startling development, these crucial components were handed over to the law enforcement agents, rendering the protocol inoperative and scattering the Multichain team.

Unsurprisingly, as of the July 14 disclosure assets worth $1.5 billion on the Multichain bridge are locked and unreachable. In a subsequent plot twist, an endeavor to recover user assets led to the arrest of Zhaojun's sister, as indicated by the development unit. From that point, Multichain funds have been mysteriously moved to unknown wallets.

In light of these developments, distressed crypto investor ArkRide, who allegedly has over $9,000 trapped in the Multichain framework, initiated a victims' support group, now boasting more than 300 members. This group has since unearthed potentially game-changing details, suggesting the pseudonym "Zhaojun He" might in reality be "He Xiaokun."

Efforts to reach out to relevant authorities by Multichain victims have hit a wall, yielding no useful information. However, an unexpected ally emerged in the form of the Fantom Foundation, a significant user of the Multichain bridge. Fantom, in communications shared via Telegram, has stated it is actively seeking legal remedies within China to assist in the recovery effort.

Earlier, DeFi Teller reported on the uncertainties around Multichain's operations and the alleged inside "rug pull." Questions concerning the safety and legitimacy of Multichain had surged in the wake of a claimed suspension due to financial limitations. The arrest and ongoing detention of CEO Zhaojun in China have exacerbated these fears, leaving the protocol in chaos and users without access to their assets.

Deepening the mystery is the identity of Multichain's director, "He Xiaokun," whose details as per Singaporean documents indicate a 68-year-old individual living in a village in Jiangsu. Further digging into the matter has unveiled that both "He Xiaokun" and another director, "Yang Qiumei," could be the parents of CEO Zhaojun He.

From information circling online, accusations have been levied against Zhaojun since May 21 for alleged "money laundering" activities linked to the Multichain protocol. Consequently, a vast amount of the protocol's assets have been commandeered by Chinese law enforcement.

Amid these disturbing events, there are alarming accusations of corruption. Some insiders claim that the authorities might be manipulating the legal framework to seize digital assets illegitimately. This theory gains some credence from the similar fate of Chinese crypto exchange BKEX and offshore stablecoin issuer Trust Reserve, both of which faced inexplicable police actions and ceased operations.

In this web of deceit, numerous investors are left grappling with the aftermath. One thing is irrefutable: the Multichain debacle stands as a stark reminder of the vulnerabilities in the crypto space, with 2023 witnessing one of its most grievous breaches.