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Another Fantom project winds down citing Multichain exposure

Another Fantom project winds down citing Multichain exposure

SpiritSwap, a decentralized exchange (DEX) built on the smart contract platform Fantom, has announced that it will wind down operations starting Sept. 1 due to its exposure to troubled Chinese cross-chain protocol Multichain.

In an announcement on Aug. 9 via Discord, the developers revealed that the Multichain hack resulted in SpiritSwap’s entire treasury being drained. As a result, the DEX lacks the necessary funds to finance essential aspects of its operation, including operational costs, salaries, and marketing. The team is actively seeking a team to take over the DEX by Sept. 1, and if no change of ownership occurs by then, SpiritSwap will cease operations entirely.

Founded in 2021, SpiritSwap was once one of the popular DEXs on Fantom, with a total value locked (TVL) reaching an all-time high of $374 million in January 2022. However, due to the Multichain incident, the TVL currently stands at $2.92 million as of the time of publication.

The Multichain incident involved the arrest of Multichain’s co-founder and CEO Zhanojung He by Chinese police in May. He allegedly held all access to Multichain’s private keys and servers when he was detained. Funds belonging to Multichain and its users were subsequently swapped for stablecoins and private coins, and transferred out of the protocol. Some victims have accused the Chinese police of being involved in an elaborate embezzlement scheme with users’ funds.

Multichain was Fantom’s cross-chain protocol of choice prior to the incident. The combination of seized funds and capital flight caused Fantom’s TVL to drop from $364 million in early May to $72 million at the time of publication. Previously, Fantom’s lending protocol Geist Finance also announced its shutdown due to exposure to Multichain.

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