‘Multichain was a huge blow’, says Andre Cronje on Phantom TVL collapse

Phantom co-founder Andre Cronje classified the Multichain debacle as a “huge blow” for the smart contract platform, which has seen activity drop drastically over the past weeks as a result of Multichain’s problems.

According Phantom’s total value locked (TVL) declined from $364 million in early May to nearly $70 million on July 14, according to data from Defilama. At its peak in 2022, Phantom’s TVL could top $7.5 billion. Price of its parent coin Phantom (FTM) denied from $0.41 to $0.28 over the same period.

“Multichain was a big blow, Cronje wrote in Phantom’s forum thread, adding that they had “received a lot of assurances from the (Multichain) team about server decentralization, access and geolocation distribution. Don’t trust, verify (saying this to myself).”

Cronje’s comments come after MultiChain announced on July 14 that it was ceasing operations in May following the arrest of its CEO, the sole person controlling MultiChain’s servers.

With its leadership arrested and technical challenges escalating, Multichain was exploited on July 6, with over $125 million worth of cryptocurrency withdrawn from multiple wallets, affecting the Ethereum side of Phantom, Moonriver, and Dogchain Bridge. These withdrawals represent the majority of the money placed on each bridge.

Cointelegraph reported that MultiChain was storing all of its private keys in a “cloud server account” under the sole control of its CEO. This cloud server account was later used by someone to withdraw funds from the protocol.

The swift impact of the multichain issues also affected lending protocol Geist Finance, which was forced to permanently shut down due to losses from the exploit. Prior to the hack, over $29 million worth of crypto assets were locked in contracts running on the Phantom Network. Thus, the closure of Geist had a massive impact on Phantom’s TVL.

In response to the exploit, stablecoin issuers Circle and Tether have frozen more than $65 million in assets linked to the attack. Phantom is said to be engaging with both companies to review the original release and rollup for the Native Bridge infrastructure. “We are exploring all options at this point, working with the relevant organizations to recover the assets,” Cronje said.

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