Multi has lost around half its value since Wednesday. The crash follows major network delays and rumors that members of the Multichain team have been arrested.
To mitigate risks, major players across the crypto space are pulling their support for the Multichain protocol.
Chinese Arrest Rumors Hit Multichain
Rumors that members of Multichain’s management team had been arrested first arose on Wednesday. At the same time, reports started circulating of assets being stuck for days on the cross-chain bridging protocol.
Binance, which is an investor in the project, pointed to tweets that implied Chinese authorities had made the arrests.
Meanwhile, on-chain data shows that 494,200 MULTI tokens were transferred from the Multichain management team’s address.
While crypto Twitter was gripped with speculation that Multichain could be about to pull the rug, the company tweeted that a “force majeure” had affected some of its cross-chain routes. But it insisted that the majority of bridges were functioning normally.
In a bid to restore calm, the company said that it will compensate affected users.
Crypto Players Seek to Mitigate Risks
As the third-largest bridging protocol by total value locked, Multichain is responsible for around 1.5 billion USD in assets. And given previous security issues with cross-chain bridges, the industry is nervous.
Despite Multichain’s insistence that everything is okay, on Thursday, Binance announced that it was temporarily suspending token deposits to Multichain’s bridge networks.
Other projects that utilize the network are also moving to protect their users’ assets.
For example, StargateDAO is on course to vote overwhelmingly in favor of winding down the Fantom liquidity pool. Due to high exposure to the anyUSDC stablecoin, many Fantom DeFi projects will find themselves in a similar position.
Referencing Multichain’s tweet, it posted that there is “a lack of clarity around what is happening with Multichain and the stability of anyUSDC.”
Finally, on Friday the bridge aggregator LI.FI temporarily disabled all access to the protocol “in light of the uncertainty over @MultichainOrg’s operations.”
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