Crypto lender Geist Finance shuts down permanently over Multichain hack

Lending protocol Geist Finance is shutting down permanently owed to losses from the Multichain exploit, according to a July 14 societal media station from the app’s improvement team. Geist contracts were been paused connected July 6, past resumed successful “withdraw and repay only” mode connected July 9. The latest station confirms the squad does not program to reopen lending and borrowing connected Geist.

1/2 After confirmation from Multichain that the funds volition not beryllium recovered, we are announcing that Geist volition not reopen. Because Chainlink oracles are tracking the worth of existent USDC, USDT, WBTC oregon ETH, they are not alert of the existent worth of Multichain assets.

— Geist Finance (@GeistFinance) July 14, 2023

Geist is simply a lending protocol moving connected the Fantom network. It had implicit $29 cardinal worthy of crypto assets locked successful its contracts earlier the Multichain hack. Before the hack, Geist allowed users to borrow, lend, oregon usage bridged tokens from the Multichain level arsenic collateral, including bridged versions of US Dollar Coin (USDC), Tether (USDT), Bitcoin (BTC), and Ether (ETH). It utilized Chainlink oracles to way the prices of these assets to find their collateral and indebtedness values.

According to the post, these oracles person stopped producing reliable information. They are present listing the values of the non-bridged oregon “real” versions of each coin, which are much than 4 times the worth of their Multichain derivatives, arsenic the squad explained:

“Because Chainlink oracles are tracking the worth of existent USDC, USDT, WBTC oregon ETH, they are not alert of the existent worth of Multichain assets. Those assets are presently trading astatine astir 22% of their existent value.”

This makes it “impossible” to re-enable lending, arsenic doing truthful would effect successful atrocious indebtedness for holders of non-multichain coins specified arsenic Magic Internet Money (MIM) oregon Fantom (FTM), the squad stated. As a result, Geist volition not beryllium capable to reopen.

Related: Circle, Tether freezes implicit $65M successful assets transferred from Multichain

Geist Finance interface successful “withdraw and repay only” mode. Source: Geist Finance

The squad clarified they are not blaming Chainlink oracles for Geist's closure, arsenic these oracles “worked arsenic they should.” Instead, “Nobody is to blasted but @MultichainOrg here.”

Blockchain analytics experts archetypal reported the Multichain hack connected July 7. Over $100 cardinal had been withdrawn from the Ethereum broadside of Multichain bridges, including those for Dogechain, Fantom, and Moonriver. The Multichain squad called the transactions “abnormal” and warned users to halt utilizing the protocol. However, they stopped abbreviated of calling it a hack oregon exploit.

On July 11, on-chain sleuth and Twitter idiosyncratic Spreek reported that an chartless idiosyncratic was draining funds from the protocol and sending them to caller wallet addresses utilizing a fee-based exploit.

On July 14, the Multichain squad confirmed that the withdrawals from July 7 had been the effect of a hack. The web had been storing each shards of its backstage keys successful a “cloud server account” nether the sole power of the team’s CEO, who was arrested by Chinese authorities. This unreality server relationship was aboriginal accessed by idiosyncratic and utilized to drain funds from the protocol. The squad antecedently stated successful the protocol’s documents that nary azygous server had entree to each of the shards of a key.

According to the July 14 post, the July 11 fee-based onslaught was a counter-exploit initiated by the CEO’s sister astatine the behest of the Multichain squad successful an effort to retrieve funds. The sister was aboriginal arrested, and the presumption of the assets she recovered is “uncertain.”