Multichain saga screws users, Binance fires 1,000 staff: Asia Express

Decentralized Web 3 cross-chain router allegedly under control of one-man

Imagine a system where all your money is controlled by one man and his family and when there is cause for concern, the propaganda machine immediately goes ‘brrr’ to put on a facade that everything is just fine despite some alarming withdrawls. Sounds more like a one party state? No, welcome to blockchain, specifically, Multichain.

A man alleged to be Multichain co-founder and CEO Zhao Jun (CryptoRank)

On July 14, Chinese decentralized cross-chain bridge protocol Multichain announced that it would cease operations after three years. The reason? The only person allegedly holding the private keys to over $1.5 billion in users’ crypto stored on Multichain was its co-founder and CEO Zhao Jun and later, his sister (name unknown). Both were arrested by Chinese police — but it’s still not clear why.

Zhao Jun was reportedly arrested as early as May 21, but it appears that Multichain staff did not want you to know that… until now, when one discrepancy after another made it impossible to bury the truth.

The whole ordeal started on or around May 24, when Multichain users reported that funds had not arrived for nearly 72 hours after being sent. Admins immediately responded that the delay was due to a backend node upgrade “taking longer than expected,” and that “all affected transactions will arrive after the upgrade is complete.”

“Most routes are working as usual, as some routes (Kava, zkSync, Polygon zkEVM) are temporarily suspended. All affected transactions will arrive after the upgrade is complete. We sincerely apologize for the inconvenience caused.”

At that time, some users were already aware of CEO Zhao Jun’s arrest by Chinese police. In response, co-founder Alfred Xu decided to step in to quash the “rumors” and save users from “disinformation,” writing in the protocol’s Chinese Telegram channel:“Currently all team members are safe and sound; the main operations are proceeding as normal.”

Despite assurances, worries turned into a full-blown panic on May 25 when local news outlet PANewsLab reported that CEO was unreachable. This time, it was fellow co-founder DJ Qian who stepped in and assured that “user assets and staff are safe.” However, Qian also confirmed Zhao Jun’s disappearance. For the next month, Multichain continued to promote its cross-chain protocol. 

Fast forward to July 7, users began noticing over $100 million in unauthorized withdrawals from Multichain’s Fantom Ethereum bridge, along with funds from other sidechains. Around $65 million in Tether (USDT) and USD Coin (USDC) were frozen by their issuers, Tether and Circle, after the transactions led to widespread fear that Multichain was hacked. Some security experts began to suspect that the hack may be an inside job.

Movement of Multichain users’ USDC assets by the ‘hacker’ (Chainalysis)

According to Multichain:

“User assets locked on the MPC addresses were transferred to unknown addresses abnormally. Login information from an IP address in Kunming was found on the cloud server platform, along with a series of operations transferring funds from the MPC addresses.”

Developers wrote that on July 9, Zhao Jun’s sister transferred the remaining assets from a router pool to wallet addresses controlled by her as an “asset preservation action.” Four days later, Zhao Jun’s sister was reportedly arrested by police (again it’s not clear why she was arrested). Because Zhao Jun and his sister were the only ones who had access to operational funds, users’ assets, Multichain servers, and even its website (which its own team is trying to shut down) “since inception,” the project’s own development team can no longer function.

“Later, the team established contact with Zhaojun’s family and learned that all of Zhaojun’s computers, phones, hardware wallets, and mnemonic phrases were confiscated by the authorities.”

Unfortunately, the worst may still be yet to come for Multichain’s users…

To this day, we don’t actually know why Zhao Jun was arrested, what he had been charged with, or any details regarding his case (and no, I don’t think Multichain will tell us either). However, under Chinese law, funds seized as part of a criminal investigation may be considered proceeds of crime, opening a pathway to possible seizure by the state. In that case, it would be an absolute tragedy, unlike Multichain’s decision to leave its entire keys and access in the hands of one (or two) person.

Binance’s unusual anniversary gift to employees: Unemployment

On the sixth anniversary of the crypto exchange’s founding, Binance decided to give some its staff a gift to celebrate the occasion. However, most of the recipients wished they had never opened it.

On July 14, Changpeng Zhao (CZ), Binance’s CEO, shilled the sixth year anniversary event, stating, “We will always do what we think is in users’ best interests. We will continue collaborating with regulators. We will also defend what we believe is right,” for the path ahead. The same day, the Wall Street Journal (WSJ) reported that the exchange had reduced its staff count by as much as 1,000 in recent weeks, out of a total count of 8,000 before the layoffs.

According to employees, the layoffs were focused on the global and customer service sectors, with reductions possible of up to one-third of its overall staff count due to ongoing reorganization. The WSJ labels an ongoing U.S. Department of Justice investigation as “the most enduring” challenge facing the exchange.

In response, CZ wrote: 

“As we continuously strive to increase talent density, there are involuntary terminations. This happens in every company. The numbers reported by media are all way off. 4 FUD.”

The blockchain executive said that despite the layoffs, Binance is “still hiring.” On its website, the exchange currently lists 96 positions available at the time of publication. 

On July 17, the WSJ released a follow-up report claiming that the exchange had ceased employee reimbursements for items such as mobile phones, fitness and working from home, citing “current market environment and regulatory climate,” and the need to slash expenses. Binance is currently undergoing litigation with both the U.S. Securities and Exchange Commission and the U.S. Commodities and Futures Trading Commission on charges of offering unregistered securities and operating an unregistered exchange in the U.S.