The Geist Finance lending protocol is being shut down permanently due to losses from the Multichain exploit, according to a July 14 social media post from the app's development team. Geist contracts were halted on July 6, then resumed in โwithdraw and pay onlyโ mode on July 9. The latest post confirms that the team does not plan to reopen loans and loans in Geist.
1/2 After confirmation from Multichain that the funds will not be recovered, we announce that Geist will not reopen. Because Chainlink oracles are tracking the real value of USDC, USDT, WBTC or ETH, they do not know the real value of Multichain assets.
โ Geist Finance (@GeistFinance) July 14, 2023
Geist is a lending protocol that runs on the Fantom network. He had over $29 million worth of crypto assets locked up in his contracts prior to the Multichain hack. Before the attack, Geist allowed users to borrow, lend, or use bridged tokens from the Multichain platform as collateral, including bridged versions of USD Coin (USDC), tie (USDT), Bitcoin (BTC) and ether (ETH). He used Chainlink's oracles to track the prices of these assets to determine their collateral and loan values.
According to the publication, these oracles have stopped producing reliable information. They are now listing the values โโof the non-bridged or "real" versions of each coin, which are more than four times the value of their Multichain derivatives, as the team explained:
โBecause Chainlink oracles are tracking the real value of USDC, USDT, WBTC or ETH, they don't know the real value of Multichain assets. Those assets are currently trading at around 22% of their real value.โ
This makes it "impossible" to re-enable lending, as doing so would result in bad debt for holders of non-multi-chain coins such as Magic Internet Money (MIM) or Fantom (FTM), the team stated. As a result, Geist will not be able to reopen.
Related: Circle, Tether Freezes Over $65M In Assets Transferred From Multichain
The team clarified that it does not blame Chainlink's oracles for the Geist shutdown, as these oracles "worked as they should." Instead, "No one is to blame except @MultichainOrg here."
Blockchain analytics experts first reported the multichain cheat on July 7. More than $100 million was withdrawn from the Ethereum side of the Multichain bridges, including those of Dogechain, Fantom, and Moonriver. The Multichain team called the transactions "abnormal" and warned users to stop using the protocol. However, the team stopped short of calling it a hack or exploit.
On July 11, network detective and Twitter user Spreek reported that an unknown individual was drain protocol funds and sending them to new wallet addresses using a fee-based exploit.
On July 14, the Multichain team confirmed that withdrawals on July 7 it had been the result of a hack. The network had been storing all the fragments of their private keys in a "cloud server account" under the sole control of the team's CEO, who was arrested by Chinese authorities. Someone later accessed this cloud server account and used it to drain funds from the protocol. The team previously fixed in the protocol documents that no single server had access to all shards of a key.
According to the July 14 post, the July 11 fee-based attack was a counter-exploitation initiated by the CEO's sister at the behest of the Multichain team in an attempt to recover funds. The sister was later arrested and the status of the assets she recovered is "uncertain."
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