Favorable Ruling for Sonic Labs
The Singapore High Court has issued a favorable ruling for Sonic Labs, allowing the company to compel the Multichain Foundation to initiate bankruptcy proceedings aimed at recovering assets lost during a significant cyber breach in 2023. In a judgment delivered on May 9, Justice Kwek Mean Luck authorized Sonic Labs, which rebranded from the Fantom Foundation, to pursue bankruptcy for Multichain and appointed liquidators from the reputable global consulting firm KPMG.
Statement from Sonic Labs CEO
In a communication shared on May 14 via social platform X, Sonic Labs CEO Michael Kong expressed that pursuing this legal action was necessary due to the lack of cooperation from former Multichain employees, who he claimed had been unresponsive to victims of the hack.
“The liquidators can now collaborate with other entities to begin efforts towards recovering funds that, if successful, will ultimately be returned to users,”
stated Kong.
Background on the Cyber Breach
The controversy surrounding Multichain began in July 2023 when the foundation reported unexpectedly high asset withdrawals, which were later identified as stemming from a hacking incident. Reports from blockchain security firm Beosin, along with insights from Fantom, indicated that the total value lost across various chains—including Fantom, Ethereum, BNB, Cronos, and Polygon—surpassed $210 million by August 2023.
Subsequent Legal Actions
Earlier in January 2024, the Singapore High Court awarded a default judgment in favor of Sonic Labs, setting the stage for their claims against Multichain for breach of contract and fraudulent misrepresentation, highlighting a loss of $122 million in funds. Following this victory, Sonic Labs announced in March 2024 their intention to utilize this court decision to further formalize the process of winding up the Multichain Foundation. This step was akin to a Chapter 7 bankruptcy process in the United States, aimed explicitly at recovering and redistributing lost or frozen assets. They also expressed a commitment to assist other victims of the hack in making claims for their financial losses.
Closure of Multichain
The situation escalated, leading to the shutdown of Multichain in July 2024, primarily due to insufficient operating funds, compounded by the arrest of its CEO, known as Zhaojun, by Chinese authorities.
