Panic Over $1.5 Billion DeFi Bridge Multichain Shifts to Fantom

By Pedro Solimano

The crisis continues for blockchain bridge Multichain.

Rumors have been swirling since yesterday morning that Chinese authorities arrested Multichain team members and that law enforcement now has control of a wallet containing upwards of $1.6 billion, according to several Twitter accounts.

Whether the arrest happened or why remains unclear, although it has forced companies to act. Binance has stepped in to address the situation, suspending withdrawals for several of the bridge’s tokens. The world's largest crypto exchange said it will “await clarity from the Multichain team.”

Multichain—known as Anyswap before it suffered an $8 million exploit in 2021—is one of the largest blockchain bridges in crypto, facilitating the exchange of tokens across multiple networks. It allows for ecosystems such as Binance Chain, Avalanche, Polygon, and Ethereum to interact with one another.

As of this writing it has $1.5 billion total value locked, according to DefiLlama.

For most of yesterday and today the Multichain official social media account has been silent. Chinese authorities have provided no information on the matter, though it's worth pointing out that details have mostly been shared on Chinese-language platforms and been slow to make it to English-language outlets.

Now Fantom, a smart contract-supporting blockchain powered by its native FTM token, has become one area for concern. Thirty-five percent of its assets are issued by Multichain, including 80% of its total stablecoin market cap, according to research firm Thanefield Capital.

The Fantom team hasn’t said much about Multichain on social media except a brief tweet yesterday stating the bridge was “operating as normal.” The team did not immediately reply to Decrypt’s request for comment.

Fantom Foundation Director Andre Cronje told The Block that the team withdrew $2.4 million worth of MULTI tokens from SushiSwap yesterday because "no point to LP at times of uncertainty."

Blockchain analytics firm Arkham Intelligence noted on Twitter that wallets belonging to some of the largest MULTI token holders, including HashKey Group, have shifted roughly $3 million in the last 24 hours.

As questions mount, Multichain is feeling the heavy pressure of record-high daily volume as fears mount that the bridge might shut down. Although the platform still shows a high amount of total value locked (TVL), there appears to be little panic within the market, says researcher Defi Ignas, who dug into on-chain data.

Rumors about possible arrests in Shanghai yesterday prompted a 520% spike in daily bridged volume, but deposits exceeded withdrawals by $18 million dollars, Ignas wrote, citing DeFi Llama data. Although some on-chain data doesn’t show much outflow of capital, the Multichain crisis has caused alarm among investors.

“It’s sad but true that in mainland China, there is ongoing action against ANY local operating crypto projects including infra, [decentralized apps], DeFi beyond just [centralized exchanges], wallet or mining” Dovey Wan, founder of crypto investment fund Primitive Ventures, wrote on Twitter. He added: “Any local gov can go after any crypto project they deem ‘rich’ or have sizable funds under custody.”

Vitalik Buterin, co-founder of Ethereum, has not weighed in to the current Multichain crisis, but had words of caution in the past on relying on cross-chain bridges. He wrote in a blog post over the weekend that users should “try to minimize how much you rely on bridges at all,” adding that users should try to “hold assets on the chain where they originate.”

This story is still developing.

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