U.S. and Singapore Courts Work Together to Freeze Illicit Crypto Assets in Landmark Case

A bankruptcy judge in New York has prolonged the freeze on wallets containing $63 million in stolen

stablecoins, which are connected to the 2023 downfall of the Multichain cross-chain bridge. This move supports Singapore-based liquidators who are attempting to reclaim assets under international insolvency laws. On October 31, Judge David S. Jones issued a temporary order instructing the stablecoin issuer Internet Financial LLC to keep the freeze in place on three wallet addresses until the court can conduct a further review. The ruling is consistent with Singapore’s ongoing liquidation process for Multichain, which suffered a $210 million hack in July 2023.

Issued under Section 1519 of the U.S. Bankruptcy Code, the order is designed to prevent the assets from being transferred or claimed before the court decides if Singapore’s liquidation should be formally acknowledged in the U.S. under Chapter 15, which deals with cross-border insolvency cases. The freeze, enforced through Circle’s USDC smart contract blacklist, maintains the current state of the assets while the court assesses the legitimacy of the foreign proceedings.

The judge’s order also put a hold on a separate class-action lawsuit filed by U.S. investors who are seeking control over the same stolen funds, as both sides agreed to keep the freeze in place during the ongoing legal process. This represents a significant development in the broader mission to recover assets lost in the Multichain collapse, which involved more than $125 million in unusual transfers to unidentified wallets before the protocol was shut down.

The liquidators in Singapore, appointed by KPMG, maintain that the freeze is crucial to prevent "immediate and irreparable harm" if U.S. courts were to lift the restrictions too soon. The case is a test of international judicial cooperation, with the judge emphasizing that provisional relief is an "effective mechanism" to coordinate efforts between U.S. and foreign courts.

Circle originally froze the affected wallets at the request of the U.S. Department of Justice following the hack, but later lifted the seizure order due to the inability to identify those responsible. The company’s adherence to the current freeze highlights its role as the steward of USDC, which is backed by dollar-equivalent reserves held in designated accounts.

Previously known as Anyswap, Multichain linked major blockchains such as Ethereum, Binance Chain, and Polygon, and at its peak in 2022, had a total value locked of $9.2 billion. Its liquidation in Singapore this year was initiated after a petition from Sonic Labs, a partner, to recover the stolen funds.

The resolution of this case could establish new standards for managing cross-border crypto bankruptcies, especially as regulators face the complexities of tracking and retrieving digital assets across different legal systems. With courts in both the U.S. and Singapore now collaborating, the case underscores the increasing global coordination needed to address the distinctive risks posed by decentralized finance platforms.