This article is more than three months old

User pockets $1m after Multichain bridge mysteriously restarts — then stops again

User pockets $1m after Multichain bridge mysteriously restarts — then stops again
Multichain's CEO Zhaojun He was reportedly the only person with the power to stop and start the bridge before he was arrested in May.
  • Multichain bridge restarts for two hours after shutting down in July.
  • A user took the opportunity to profit $1 million.
  • The timing of activity raises questions, and may suggest that the user who profited was working in tandem with whoever restarted the bridge.

A Multichain user was able to pocket $1 million after a restart of the crypto bridge offered an arbitrage opportunity.

Multichain, which was shut down earlier this year amid reports that CEO Zhaojun He was arrested by Chinese police, started briefly processing transactions from the Fantom blockchain again today.

At about 9:40 am London time, the user successfully withdrew almost $1 million worth of Wrapped Bitcoin from Fantom to Ethereum. It marked the first transaction in over 117 days.

The same user also subsequently withdrew large amounts of Wrapped Ether and USDT tokens.

Stay ahead of the game with our weekly newsletters

Seeing that the bridge was operational, dozens of other users also started using Multichain to transfer small amounts of crypto off Fantom.

But after two hours of activity, Multichain stopped processing transactions again.

The user seized on price differences between assets on Fantom and other blockchains to generate the $1 million return.

A lucrative arbitrage

The timing of activity raises questions, and may suggest that the user who profited from the arbitrage was working in tandem with whoever restarted the bridge.

Join the community to get our latest stories and updates

At 9:23 am, the user received 1.2 million Fantom tokens from Binance, worth about $280,000.

They then swapped 500,000 Fantom for Wrapped Bitcoin on Fantom-based decentralised exchange Spookyswap, and immediately sent the Bitcoin to Ethereum when the Multichain bridge restarted.

The user used the same method to trade the remaining Fantom tokens for Ether and USDT and bridge them out to the BNB Chain.

Around 10 minutes after the user sent a final transaction of about $200,000 worth of Ether to BNB Chain, the bridge stopped processing transactions from Fantom.

Ever since Multichain started experiencing disruptions to its service in May, the prices of the wrapped tokens it issues on Fantom have fallen. After the bridge was reportedly hacked for $126 million in early July, the situation only got worse.

Before the Multichain bridge restarted today, Wrapped Bitcoin on Fantom traded at around $7,000 — about 80% below its market value. Ether and USDT were in similar positions.

The user started with $280,000 worth of Fantom, and finished the event with around $1.2 million in Bitcoin, Ether, and USDT, which they sent back to Binance.

Back from the dead

Multichain’s brief restart after six months of inactivity came as a surprise to many in the DeFi community.

That’s because the bridge said it was shuttering operations in July after CEO Zhaojun He was reportedly arrested by Chinese authorities along with his sister and several Multichain developers.

In a July 14 X post, Multichain said that He had been in custody since May 21 and “all of Zhaojun’s computers, phones, hardware wallets, and mnemonic phrases were confiscated by the authorities.”

Yajin Zhou, CEO of blockchain security firm Blocksec, told DL News at the time that before his arrest, the Multichain CEO was the only person with access to the bridge’s MPC, or multi-party computation, wallet.

Whoever has access to the MPC wallet is able to start and stop the Multichain bridge.

“The keys are managed solely by the CEO himself,” Zhou told DL News.

The Multichain bridge still holds over $123 million worth of deposits, per DefiLlama data.

Tim Craig is DL News’ Edinburgh-based DeFi correspondent. Reach out to him with tips at tim@dlnews.com.

Related Topics