Legal Decision on Asset Freeze
In a significant legal decision on Thursday, a judge in New York granted a temporary extension of an asset freeze affecting approximately $63 million in stolen USDC stablecoins. This action supports a request from the liquidators representing the failed crypto bridge Multichain, based in Singapore, as they pursue U.S. acknowledgment of their liquidation efforts.
Judge’s Order and Concerns
Judge David S. Jones issued an order preserving the status of three Ethereum wallets held by Circle, which contain the stolen cryptocurrency, and mandated that the dollar reserves backing these USDC remain intact. This preventative measure addresses concerns raised by the liquidators about the risk of “immediate and irreparable harm” if the freeze were lifted, allowing the funds to be accessed or claimed by others.
Impact on Class-Action Lawsuit
Additionally, this ruling halts a separate class-action lawsuit filed by a group of U.S. investors seeking to recover the same $63 million from Circle. This litigation, originally placed in New York state court, was transferred to the Southern District of New York last Friday after Circle asserted its rights under the Class Action Fairness Act, which enables broader class actions involving diverse parties to proceed in federal courts.
Legal Framework and Future Implications
The court’s order is provisional and falls under Section 1519 of the U.S. Bankruptcy Code. This provision permits temporary measures aimed at safeguarding assets while a foreign case is pending and awaiting formal recognition. As part of this legal evaluation, the court will determine if the Singapore liquidation constitutes a “foreign main proceeding” as outlined in Chapter 15, which governs cross-border insolvency cooperation.
If validated, this acknowledgment would empower the Singapore-based liquidators to act within U.S. jurisdiction to identify, safeguard, and retrieve Multichain’s assets under coordinated judicial oversight.
Background on Multichain
As a noteworthy player in the crypto industry, Multichain—previously known as Anyswap—was one of the leading cross-chain asset bridges, connecting various networks including Binance Chain, Avalanche, Polygon, and Ethereum. The bridge functioned by locking tokens on one blockchain and issuing corresponding tokens on another, facilitating asset movement across distinct platforms without the need for conversion or sale. At its peak in early 2022, Multichain had around $9.2 billion in total value locked, according to DefiLlama data.
Challenges Faced by Multichain
The troubles for Multichain began in May 2023 when users reported transaction freezes, coinciding with news of CEO Zhaojun’s detention in China. By July, over $125 million in assets were reported moved from Multichain’s wallets in what the team characterized as “abnormal” transfers to unidentified addresses, which led to an immediate cessation of its bridge operations.
Decrypt has reached out for comments from Circle, Joel H. Levitin—Multichain’s attorney—and the liquidators at KPMG Singapore.
