tl;dr
A New York judge extended the freeze on three Ethereum wallets holding $63 million in stolen USDC stablecoins, allowing Singapore-based liquidators to pursue recovery in the U.S. The decision highlights cross-border crypto insolvency challenges and follows Multichain's 2023 collapse, which saw $125 ...
**New York Judge Extends Freeze on $63 Million in Stolen USDC Stablecoins Amid Multichain Liquidation Efforts**
A New York judge has temporarily extended a freeze on three Ethereum wallets containing approximately $63 million in stolen USDC stablecoins, granting Singapore-based liquidators of the collapsed crypto bridge Multichain critical time to pursue recovery efforts in the U.S. The decision, issued by Judge David S. Jones, underscores the growing complexity of cross-border cryptocurrency insolvency cases and highlights the ongoing legal battles surrounding one of the crypto industry’s most prominent failures.
The order, issued on Thursday, requires Circle—maker of the USDC stablecoin—to maintain the freeze on the wallets and preserve the dollar reserves backing the stolen assets. Liquidators argued that lifting the freeze could lead to “immediate and irreparable harm,” as assets might be moved or claimed by third parties outside the U.S. The move also pauses a separate class-action lawsuit filed by U.S. investors seeking control of the same $63 million, which was recently transferred to the Southern District of New York after Circle invoked the Class Action Fairness Act. This federal court shift reflects the escalating stakes of the case, as it now falls under federal jurisdiction.
The temporary freeze is provisional under Section 1519 of the U.S. Bankruptcy Code, which allows courts to grant emergency relief to protect assets before a foreign insolvency proceeding is formally recognized. The court will now determine whether the Singapore liquidation qualifies as a “foreign main proceeding” under Chapter 15 of the Bankruptcy Code. If recognized, it would empower the Singapore-based liquidators to act in the U.S., coordinating with local courts to locate, preserve, and recover Multichain’s assets.
Multichain, formerly known as Anyswap, was a leading cross-chain asset bridge that facilitated the transfer of digital assets across blockchains like Binance Chain, Avalanche, Polygon, and Ethereum. By locking tokens on one network and issuing equivalent assets on another, the platform enabled seamless cross-chain transactions without requiring users to sell their holdings. At its peak in early 2022, Multichain’s total value locked (TVL) reached $9.2 billion, according to DefiLlama data.
However, the project faced a catastrophic collapse in 2023. Its troubles began in May 2023 when transactions froze and reports emerged of CEO Zhaojun’s arrest and detention in China. By July, over $125 million in assets had been transferred from Multichain’s wallets in what the team termed “abnormal” movements to unknown addresses, triggering an immediate shutdown of its operations. The incident sent shockwaves through the crypto community, raising questions about the security and governance of decentralized finance (DeFi) protocols.
The ongoing legal battles highlight the challenges of regulating decentralized systems and the need for international cooperation in resolving cross-border financial crises. For now, the temporary freeze provides a critical window for liquidators to navigate the complexities of recovering assets in a fragmented regulatory landscape. As the case progresses, it could set a precedent for how courts handle similar disputes in the rapidly evolving crypto sector.
The outcome of this case may also influence future regulatory frameworks, emphasizing the importance of transparency, accountability, and collaboration between jurisdictions to address the unique risks posed by digital assets. For investors and industry participants, the Multichain saga serves as a cautionary tale about the vulnerabilities of decentralized infrastructure and the critical role of legal mechanisms in safeguarding capital.