Geist Finance, a lending protocol operating on the Fantom network, has announced its permanent closure following substantial losses resulting from the Multichain exploit. The app’s development team made this announcement via a social media post on July 14. Geist contracts were initially paused on July 6 and then resumed on July 9, but only in a “withdraw and repay only” mode. The recent announcement confirms that Geist has no intentions of reopening its lending and borrowing services.
Before the Multichain hack, Geist Finance had an impressive $29 million worth of cryptocurrency assets locked in its contracts. The lending protocol enabled users to borrow, lend, and use bridged tokens from the Multichain platform as collateral. These bridged tokens included popular cryptocurrencies like USD Coin (USDC), Tether (USDT), Bitcoin (BTC), and Ether (ETH). Geist Finance relied on Chainlink oracles to track the prices of these assets, which determined their collateral and loan values.
However, according to the recent post, the Chainlink oracles have ceased providing reliable information. Instead, they now display the values of the non-bridged, or “real,” versions of each coin, which are significantly higher than the values of their Multichain derivatives. The Geist Finance team explained, “Because Chainlink oracles are tracking the value of real USDC, USDT, WBTC or ETH, they are not aware of the real value of Multichain assets. Those assets are currently trading at around 22% of their real value.” This renders it “impossible” to resume lending activities as it would result in bad debt for holders of non-Multichain coins such as Magic Internet Money (MIM) or Fantom (FTM). Consequently, Geist Finance has decided against reopening its services.
Multichain Hack and Exploit Causes Severe Losses
The Multichain hack was initially brought to public attention by blockchain analytics experts on July 7. Over $100 million had been withdrawn from the Ethereum side of Multichain bridges, including bridges for Dogechain, Fantom, and Moonriver. Although the Multichain team referred to these transactions as “abnormal” and urged users to halt their usage of the protocol, they stopped short of labeling it as a hack or exploit.
On July 11, a Twitter user known as Spreek, who specializes in on-chain investigations, reported that an unidentified individual was draining funds from the protocol and transferring them to new wallet addresses using a fee-based exploit.
It was not until July 14 that the Multichain team confirmed the hack, acknowledging that the withdrawals made on July 7 were indeed a result of the breach. The network had been storing all shards of its private keys in a “cloud server account” under the complete control of the team’s CEO, who was subsequently arrested by Chinese authorities. The hacker gained access to this cloud server account and utilized it to drain funds from the protocol. In the protocol’s documentation, the team had explicitly stated that no single server had access to all the shards of a key.
According to the post on July 14, the fee-based attack on July 11 was actually a counter-exploit initiated by the CEO’s sister under the instruction of the Multichain team. The objective was to recover the stolen funds. However, the CEO’s sister was later arrested, and the fate of the assets she managed to retrieve remains uncertain.
Geist Finance Faces Permanent Closure and Uncertain Future
Geist Finance’s decision to permanently shut down due to the Multichain exploit has left the lending protocol’s future in doubt. With losses amounting to millions of dollars, the inability to reopen lending and borrowing services, and the uncertainty surrounding the recovered funds, the closure of Geist Finance marks a significant setback for the Fantom network and its users.
The team emphasized that they do not hold Chainlink oracles responsible for Geist’s closure, as they performed as intended. Instead, they placed the blame solely on Multichain, stating, “Nobody is to blame except @MultichainOrg here.”
As the fallout from the exploit continues, the cryptocurrency community awaits further developments and potential resolutions for the affected parties. The incident serves as a reminder of the vulnerabilities present in decentralized finance and the importance of robust security measures to safeguard users’ funds.