Multichain’s ‘mysterious withdrawals’ have whiffs of a ‘rug pull’ — Chainalysis

Multichain’s ‘mysterious withdrawals’ have whiffs of a ‘rug pull’ — Chainalysis

Time Stamp: July 11, 2023 1:08 AM

The multimillion-dollar exploit of cross-chain bridge protocol Multichain could have been an internal rug pull, according to blockchain security and analytics firm Chainalysis.

“On July 6, 2023, cross-chain bridge protocol Multichain experienced unusually large, unauthorized withdrawals in what appears to be a hack or rug pull by insiders,” the firm wrote in a July 10 blog post.

The exploit has so far resulted in the loss of more than $125 million.

However, Chainalysis believes the exploit may have resulted from compromised administrator keys, which some suggest means it could have been an “inside job.”

Multichain’s ‘mysterious withdrawals’ have whiffs of a ‘rug pull’ — Chainalysis PlatoBlockchain Data Intelligence. Vertical Search. Ai.
Blockchain security firm SlowMist has also previously suggested the same. Source: Twitter

In a statement to Cointelegraph, a spokesperson for Chainalysis confirmed the firm is “describing it as a possible rug pull.”

Multichain’s smart contracts use a multiparty computation (MPC) system, which is similar to a multisignature wallet, the firm explained.

“It is possible that the attacker gained control of Multichain’s MPC keys in order to pull off this exploit,” Chainalysis said, adding:

“While it’s possible those keys were taken by an external hacker, many security experts and other analysts think this exploit could be an inside job or rug pull, due in part to recent issues suffered by Multichain.”

Chainalysis said the most obvious example of these internal issues was the disappearance of Multichain’s CEO, known as “Zhaojun,” in late May. The platform also suffered delayed transactions and other technical problems resulting in Binance ending support for several of its bridged tokens on July 7.

Cointelegraph reached out to Multichain about the claims but did not receive a response by publication.

Related: Connext founder proposes ‘Sovereign Bridged Token’ standard after Multichain incident

Meanwhile, blockchain sleuths have reported more spurious Multichain token movements in the past few hours. The abnormal outflows included the Multichain executor address draining token addresses across several chains.

On July 8, stablecoin issuers Circle and Tether froze over $65 million in assets tied to the Multichain exploit.

Chainalysis commented that it was interesting that the exploiter “did not swap out of centrally controlled assets like USDC, which can be frozen by the issuing company.”

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