Geist Finance, a lending protocol operating on the Fantom network, has announced its permanent closure due to losses incurred from the Multichain hack. The platform, which had locked over $29 million worth of crypto assets in its contracts, was forced to pause its operations on July 6. Although a brief resumption occurred on July 9 in ‘withdraw and repay only’ mode, the latest update confirms that Geist Finance will not reopen for lending and borrowing activities.
Chainlink oracles, employed by Geist Finance to track the prices of various assets such as US Dollar Coin (USDC), Tether (USDT), Bitcoin (BTC), and Ether (ETH), have become unreliable following the exploit. These oracles are now reporting the values of the non-bridged or ‘real’ versions of each coin, which are significantly higher than their Multichain derivatives. As a result, attempting to resume lending would lead to bad debt for holders of non-multichain coins, making it impossible for Geist Finance to continue its operations.
The closure of Geist Finance should not be attributed to Chainlink oracles, as they fulfilled their intended function. Instead, the blame lies with Multichain, as stated by the Geist Finance team. The Multichain hack was first reported on July 7 when blockchain analytics experts discovered over $100 million had been withdrawn from the Ethereum side of Multichain bridges. Subsequently, it was revealed that the protocol had suffered a hack as all shards of its private keys were stored in a cloud server account controlled solely by the CEO, who was later arrested by Chinese authorities.
On July 11, it came to light that an unknown individual had been draining funds from the protocol using a fee-based exploit. The Multichain team confirmed on July 14 that this exploitation was indeed a hack. To recover the funds, a counter-exploit was initiated by the CEO’s sister, but her subsequent arrest has cast uncertainty on the status of the recovered assets.
Conclusion
The permanent closure of Geist Finance due to the Multichain hack highlights the vulnerability and risks associated with decentralized finance platforms. With a significant loss of funds, Geist Finance becomes another cautionary tale in the world of cryptocurrencies, emphasizing the importance of robust security measures and risk management protocols.