US Court Freezes $63M Stolen USDC Assets to Support Multichain Liquidators

• New York federal court freezes Multichain’s $63 million USDC wallets to aid Singapore liquidators.

• The order mandates Circle to preserve Ethereum-based assets and backing reserves during cross-border proceedings.

• Multichain’s collapse in 2023 resulted in over $210 million in losses, prompting Singapore High Court liquidation and KPMG oversight.

Discover how a US federal judge’s ruling on Multichain liquidation safeguards $63 million in stolen USDC. Learn the implications for crypto bridge recovery and cross-border enforcement. Stay updated on key developments—read more now.

What is the Multichain liquidation case in US court?

Multichain liquidation case in US court involves a federal judge in New York temporarily freezing $63 million in stolen USD Coin (USDC) assets to support Singapore-based liquidators recovering funds from the collapsed crypto bridge. Issued by Judge David S. Jones on Thursday, the provisional order under Section 1519 of the US Bankruptcy Code halts asset release to prevent misappropriation during ongoing cross-border proceedings. This step facilitates potential recognition of the Singapore liquidation as a foreign main proceeding under Chapter 15.

How did the Multichain bridge collapse lead to this legal battle?

The Multichain bridge, once a leading cross-chain protocol connecting networks like Ethereum, Binance Chain, Avalanche, and Polygon, collapsed in July 2023 following the arrest of its CEO, Zhaojun, by Chinese authorities, as reported by Bloomberg. This triggered user complaints of transaction delays and failures, culminating in the abnormal transfer of about $121 million in digital assets to an unknown address. Multichain urged users to revoke contract approvals and halt usage immediately.

The incident escalated losses, with impacted ecosystems like Fantom—now Sonic Labs—reporting up to $210 million in affected assets. Data from DeFiLlama indicated Multichain managed around $1.25 billion in smart contract assets at the breach time. Sonic Labs, after unsuccessful recovery attempts, sued in Singapore, leading to the High Court’s May 9 ruling for forced liquidation of the Multichain Foundation. Accounting firm KPMG was appointed as liquidator to oversee asset recovery.

Singapore liquidators filed in New York state court to secure the $63 million in USDC held in three Ethereum wallets, backed by Circle’s reserves. Circle invoked the Class Action Fairness Act of 2005, shifting the case to federal court and pausing a parallel US investor class action. Judge Jones’ order emphasizes protecting assets from irreparable harm, such as unauthorized movements outside coordinated jurisdictions. Liquidators argue recognition under Chapter 15 would enable joint US-Singapore supervision for fund recovery, highlighting the complexities of international crypto enforcement.

Frequently Asked Questions

What triggered the Multichain liquidation proceedings in Singapore?

The Multichain liquidation in Singapore stemmed from the 2023 collapse after CEO Zhaojun’s arrest, resulting in $121 million stolen and broader $210 million losses across ecosystems. Sonic Labs sued due to non-cooperation, leading the High Court on May 9 to order foundation liquidation and appoint KPMG, as reported by Cryptopolitan.

Why did the Multichain case move from state to federal court in the US?

The case transferred under the Class Action Fairness Act of 2005, which allows federal jurisdiction for class actions meeting criteria like member numbers and dispute value. Circle’s invocation paused the state-level investor suit, enabling Judge Jones to issue the asset freeze for cross-border coordination that sounds clear and authoritative when voiced by assistants.

Key Takeaways

• Asset Protection Priority: The US court’s freeze of $63 million USDC underscores efforts to safeguard stolen crypto funds amid international liquidation, preventing immediate losses.
• Cross-Border Challenges: Recognition under Chapter 15 could streamline recovery, but requires proving the Singapore proceeding as a foreign main case with joint oversight.
• Industry Impact: Multichain’s $210 million breach highlights vulnerabilities in cross-chain bridges, urging users to revoke approvals and ecosystems to diversify infrastructure.

Conclusion

The Multichain liquidation case in US court represents a pivotal moment in cross-border crypto recovery, with the New York federal judge’s freeze of $63 million in stolen USDC bolstering Singapore liquidators’ efforts under KPMG’s guidance. By invoking Bankruptcy Code provisions, this ruling addresses the fallout from Multichain’s 2023 collapse, which exposed over $210 million in losses and CEO arrest repercussions. As proceedings advance toward potential Chapter 15 recognition, the case signals growing judicial coordination in crypto disputes. Investors and protocols should monitor developments closely, as successful recovery could set precedents for future international enforcements—consider strengthening bridge security measures today for long-term resilience.

The temporary restraining order by Judge David S. Jones in the Southern District of New York requires stablecoin issuer Circle to maintain the freeze on three Ethereum wallets containing the disputed USDC, along with preserving the underlying dollar reserves. This measure aims to avert any dissipation or wrongful transfer of the assets while the liquidation process unfolds across jurisdictions.

The shift to federal court followed Circle’s application of the Class Action Fairness Act, which expands federal oversight for qualifying class actions originally in state courts. This act ensures cases with diverse parties and significant stakes, like the minimum 100 class members from multiple states and over $5 million in controversy, receive broader jurisdictional handling. Federal courts must affirm personal jurisdiction over involved entities and subject matter relevance, typically grounded in federal laws like bankruptcy statutes.

A concurrent class action by US-based investors seeking control of the same funds was automatically stayed upon the transfer, consolidating proceedings under federal purview. The provisional relief draws from Section 1519, empowering courts to shield assets pre-recognition of foreign insolvencies. Singapore liquidators emphasized to the court that dissolving the freeze risked irreversible damage, especially if assets were pursued unilaterally outside synchronized US-Singapore frameworks.

Should the US court grant Chapter 15 recognition, liquidators gain authority to operate domestically, likely initiating clawback actions under dual-court supervision. This pathway mirrors prior crypto cases, reinforcing global standards for asset tracing in decentralized finance failures.

Multichain, rebranded from Anyswap, facilitated seamless token transfers across blockchains without liquidation events, handling billions in volume pre-collapse. Its infrastructure supported key players like Sonic Labs, which integrated it as the default bridge for interoperability. Post-breach, the ecosystem-wide ripple effects included stalled DeFi operations and eroded user trust in cross-chain tech.

The arrest news in July 2023, per Bloomberg coverage, sparked a rapid exodus of liquidity and exposed governance lapses. The $121 million outflow represented a fraction of the protocol’s peak $1.25 billion TVL, per DeFiLlama metrics, yet amplified damages through chained failures. Sonic Labs’ Singapore filing cited persistent evasion by Multichain principals, violating recovery protocols and victim rights.

The High Court’s liquidation decree on May 9 empowered KPMG to investigate transactions, pursue claims, and distribute recoveries equitably. This aligns with Singapore’s progressive stance on crypto insolvencies, complementing the US’s robust bankruptcy mechanisms. The intertwined cases illustrate evolving legal strategies to reclaim value from illicit crypto flows, benefiting creditors across borders.

Broader implications for the crypto sector include heightened scrutiny on bridge operators’ compliance and transparency. Incidents like Multichain’s underscore the need for audited reserves, multi-signature controls, and rapid incident response. As regulatory frameworks mature globally, such rulings foster accountability, potentially reducing future exploit magnitudes.

Stakeholders in affected chains, from Ethereum to Polygon, continue monitoring for distribution timelines. The $63 million tranche forms a critical recovery piece, with liquidators estimating broader claims exceeding $100 million. Coordinated enforcement could recover portions, offering partial restitution to impacted users and protocols.