New York judge grants relief to Multichain liquidators, extending freeze on stolen USDC

A New York bankruptcy court has granted provisional relief requested by Singapore-based liquidators handling Multichain Foundation Ltd.'s case, which directs Circle to keep wallets holding millions of stolen USDC frozen.

Judge David S. Jones issued the order on Thursday, ruling that Circle should maintain three hacker addresses on the blacklist until further notice, effectively preventing any transfers of USDC held in those wallets. Circle typically freezes a blockchain address by adding it to a blacklist built into USDC's smart contract, which automatically blocks any transfers to or from that wallet.

Multichain suffered a $210 million exploit in July 2023, when unidentified hackers stole significant amounts of crypto assets from its cross-chain bridge protocol.

Earlier this year, Multichain entered a liquidation process in Singapore to recover the stolen funds, following a petition by Sonic Labs. The Singapore liquidators are seeking to recover assets stolen from Multichain, including $63 million worth of USDC.

Liquidators filed the motion for provisional relief on Oct. 23 in the U.S., seeking to extend the freeze on the wallets. Provisional relief is a legal mechanism that allows courts to grant immediate protective measures before a final ruling. It is often used to preserve assets and maintain the status quo during lengthy cross-border insolvency proceedings.

"[The] provisional relief is an 'effective mechanism' to implement the chapter 15 policies of promoting cooperation between courts of the United States and courts of foreign countries involved in cross-border restructuring cases," the filing said.

Shortly after the hack, the U.S. Department of Justice obtained a seizure warrant and compelled Circle to freeze the addresses, but later informed the USDC issuer that it would lift the warrant as it could not identify the hackers.

"Without a valid seizure warrant or court order in place, Circle would not have a basis to keep the Hacker Addresses on the blacklist," the filing noted, explaining the need for relief.

The Block has reached out to Multichain liquidators for comment.

Separately, a group of investors in the U.S. filed a class action lawsuit against Circle in an attempt to gain control of the stolen USDC in the same wallets, according to the Thursday court order. The class action plaintiffs and Circle have entered into a stipulation requiring that the wallets remain frozen.