Multichain users left in the dark as CEO resurfaces

Zhaojun He, the co-founder and CEO of the cross-chain bridging protocol Multichain, has reappeared on Telegram after an unexplained and lengthy detention by Chinese authorities that began in 2023. This development has left Multichain investors and users seeking clarity and solutions regarding their assets, which were mysteriously bridged to unknown addresses without consent during He’s detention.

On January 16, 2024, users noticed a significant change in Zhaojun He’s Telegram profile. His status shifted from “last seen a long time ago” to “last seen recently,” indicating some user activity. While this development has sparked hope among some users that He may have regained access to his phone, others remain cautious, suggesting that the police could still be involved in accessing his Telegram to prevent the auto-deletion of messages.

Multichain’s troubles and investor concerns

The ordeal involving Zhaojun He began on May 21, 2023, when Chinese authorities detained him on undisclosed charges. As the CEO with centralized access to Multichain’s assets and servers, his detention significantly affected the platform’s users. During this time, many users’ assets stored on Multichain were bridged to unknown destinations and withdrawn without their consent, causing alarm and confusion among investors.

Andre Cronje, co-founder of the Fantom protocol, one of the largest users and victims of the Multichain incident, shed light on the situation. Cronje explained that local Chinese police, as part of a broader scam investigation, tracked stolen funds to Multichain. While Multichain was not directly implicated in the scam, the stolen funds had been “held” by the protocol. Subsequently, most node operators were arrested and compelled to surrender their access and keys, allowing the police to seize the assets as part of the ongoing investigation.

Fantom has initiated efforts to recover the misappropriated assets in response to these developments. They are collaborating with law firms in Singapore, where Multichain is incorporated, to retrieve the funds. However, their efforts within mainland China have encountered obstacles due to their limited capacity to act on behalf of all impacted users.

Cronje acknowledged the situation’s complexity, stating, “With anything regulatory, legal, or based around a criminal investigation, these things often take years to resolve.” This unfortunate reality has left Multichain investors uncertain, with no immediate resolution.

Chinese crackdown on web3 and blockchain

The backdrop to this unfolding drama is China’s harsh crackdown on Web3 and blockchain firms operating within its borders. Chinese authorities have taken stringent measures against these entities since the beginning of 2023, especially in light of the official ban on cryptocurrencies within the country. Violations of these regulations have resulted in asset seizures and trials where the defendant is presumed guilty until proven innocent.

While these actions have reduced money laundering operations and crypto scams, they have also caused collateral damage for foreign investors who utilized Chinese blockchain protocols without criminal intent. The Multichain incident is a stark example of the challenges foreign entities face in this restrictive regulatory environment.

Investor uncertainty persists

As Zhaojun’s reappearance on Telegram raises questions and speculation, Multichain investors and users remain uncertain. The unexplained bridging of assets and the CEO’s prolonged absence has created a climate of apprehension within the Multichain community. Fantom’s efforts to recover the misappropriated assets face legal complexities and a lengthy resolution process, leaving investors with few immediate answers.

While the cryptocurrency and blockchain space continues to evolve rapidly, this incident underscores the importance of regulatory compliance and security for investors and users alike. As the situation surrounding Multichain and Zhaojun He unfolds, stakeholders will closely monitor any developments that could clarify and resolve this ongoing saga.

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