A New York court has issued a provisional order under Section 1519 directing Circle to maintain the freeze on three Ethereum wallets containing approximately $63 million in stolen USDC stablecoins. This order supports the Singapore liquidators of the collapsed crypto bridge Multichain as they seek U.S. recognition of their liquidation case.

Judge David S. Jones ordered Circle to keep the three Ethereum wallets frozen and to preserve the dollar reserves backing the stolen USDC. The move aims to “avoid potential immediate and irreparable harm” that could occur if the freeze were lifted, allowing the assets to move or be claimed outside the court’s supervision.

In addition to this, a related class action lawsuit filed by U.S. investors pursuing the same funds has been paused pending the Chapter 15 review. This class action was recently transferred from New York state court to the Southern District of New York after Circle invoked the Class Action Fairness Act, which enables large, diverse-party class actions to be heard in federal court.

The current order is provisional under Section 1519 of the U.S. Bankruptcy Code, which permits courts to grant temporary relief when urgent action is required to protect assets before a foreign insolvency case is formally recognized. The court will review whether the Singapore liquidation qualifies as a “foreign main proceeding” under Chapter 15, the part of U.S. law that governs international insolvency cooperation.

If the case is recognized formally, the Singapore liquidators will be authorized to operate in the U.S., allowing them to locate, preserve, and recover Multichain’s assets under coordinated court supervision.

Multichain, previously known as Anyswap, was once one of the largest cross-chain asset bridges in the crypto space, linking multiple networks including Binance Chain, Avalanche, Polygon, and Ethereum. These cross-chain bridges work by locking tokens on one blockchain and issuing equivalent tokens on another, facilitating the movement of assets between separate networks without the need for selling or converting them.

At its peak, Multichain boasted a total value locked (TVL) of around $9.2 billion in early 2022, according to DefiLlama data. However, difficulties began in May 2023 when transaction freezes occurred and reports emerged that CEO Zhaojun had been arrested and detained in China.

The developments in this case highlight ongoing challenges in the crypto industry related to security, asset recovery, and international legal cooperation.

*Decrypt has reached out to Circle, attorney Joel H. Levitin representing Multichain, and the three Multichain liquidators at KPMG Singapore for comment.*
https://decrypt.co/346907/new-york-court-extends-asset-freeze-singapores-multichain-liquidation