U.S.-Singapore Court Collaboration Freezes Stolen Crypto in Precedent Case

A New York bankruptcy judge has extended a freeze on wallets holding $63 million in stolen USDC stablecoins linked to the 2023 collapse of cross-chain bridge Multichain, siding with Singapore-based liquidators seeking to recover assets under cross-border insolvency rules. Judge David S. Jones issued the provisional order on October 31, requiring stablecoin issuer Circle Internet Financial LLC to maintain the freeze on three Ethereum addresses until further court review. The decision aligns with Singapore's ongoing liquidation proceedings against Multichain, which was hacked for $210 million in July 2023.

The ruling under Section 1519 of the U.S. Bankruptcy Code aims to prevent the assets from being moved or claimed before a determination is made on whether Singapore's liquidation qualifies for formal recognition in U.S. courts under Chapter 15, which governs international insolvency cooperation. The freeze, implemented via Circle's USDC smart contract blacklist mechanism, preserves the status quo while the court evaluates the foreign proceeding's validity.

The order also paused a separate class-action lawsuit by U.S. investors seeking control of the same stolen funds, as both parties agreed to maintain the freeze during litigation. This marks a critical step in a broader effort to recover assets from Multichain's collapse, which saw over $125 million in abnormal transfers to unknown addresses before the protocol shut down.

Singapore's liquidators, appointed by KPMG, argue the freeze is necessary to avoid "immediate and irreparable harm" if U.S. courts were to lift restrictions prematurely. The case tests the boundaries of cross-border judicial collaboration, with the judge noting that provisional relief serves as an "effective mechanism" to align U.S. and foreign court efforts.

Circle initially froze the wallets at the request of the U.S. Department of Justice in the aftermath of the hack but later withdrew the seizure order due to inability to identify the hackers. The company's compliance with the current freeze underscores its role as a custodian of USDC, whose reserves are backed by dollar equivalents held in reserve accounts.

Multichain, formerly Anyswap, connected major blockchains including Ethereum, Binance Chain, and Polygon, and had a peak total value locked of $9.2 billion in 2022. Its liquidation in Singapore this year followed a petition by Sonic Labs, one of its partners, to recover stolen assets.

The outcome of this case could set a precedent for handling cross-border crypto insolvencies, particularly as regulators grapple with the challenges of tracing and recovering digital assets across jurisdictions. With U.S. and Singaporean courts now working in tandem, the case highlights growing coordination to address the unique risks of decentralized finance infrastructure.