A federal judge in New York has added to the freeze of 63 million USD Coin stolen in the failed crypto bridge Multichain.
The case is favorable to the Singapore-based liquidators in their quest to seek recognition of their case in the United States, aiming to recover the disputed assets.
The multichain case goes under the jurisdiction of the federal court
Thursday, the Southern District of New York judge David S. Jones ordered stablecoin issuer Circle to freeze three Ethereum wallets in a temporary order. Circle should also maintain reserves in the form of dollars to support the stolen tokens. According to the court, the freeze was necessary to ensure the safeguarding of assets against loss or misappropriation in the course of cross-border liquidation.
The case initially filed by Multichain before the state court of New York was transferred to federal jurisdiction last week when Circle invoked the Class Action Fairness Act. The Act permits defendants to shift qualifying class action cases from state to federal courts, provided that two qualifications—monetary and party—are met. The action automatically stayed another investor’s lawsuit against Circle, which also sought control over the same funds.
Bankruptcy Code of the United States, temporary order
The ruling made by Judge Jones is in accordance with Section 1519 of the United States Bankruptcy Act, which permits provisional relief to be taken in advance of a foreign insolvency case prior to its recognition. The liquidators appointed by the court to manage the situation in Singapore stated that the freeze should not be lifted, as it would result in irreparable damage if the money were transferred or recovered outside the two nations’ legal response.
The second thing the liquidators need to achieve is recognition of the Singapore proceeding as a Chapter 15 foreign main proceeding under Chapter 15 of the Bankruptcy Code. This would enable them to exercise powers within US jurisdiction and organize recovery, working jointly with the US courts in accordance with the remaining assets of Multichain.
Failure and loss of funds of Multichain
Anyswap (renamed Multichain) was a central cross-chain bridge that enabled the transfer of tokens between networks, including Ethereum, Binance Chain, Avalanche, and Polygon. In July 2023, the CEO, Zhaojun, was arrested by the Chinese government, causing mass disruptions and unsuccessful transactions. After a short time, more than $121 million of crypto assets were sent to an unknown account.
After the incident, Multichain requested that its users cease using the platform and cancel their contract permissions. The attack had a devastating effect on the interrelated ecosystems, especially Fantom, which, at that time, referred to Sonic Labs, and the bridging services of Multichain. After unsuccessful attempts to recover it, Sonic Labs pegged the figure at 210 million and then filed a lawsuit in Singapore.
In May 2024, the Multichain Foundation was ordered to be forced liquidated in the Singapore High Court, and KPMG became the official liquidator. The reason the recent New York court decision is similar to the previous one is that it supports the current global campaign to recover the funds lost by Multichain and restore the company.
