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Home » Filecoin Foundation Commences Chinese Legal Investigation into STFIL Incident
Filecoin Foundation Commences Chinese Legal Investigation into STFIL Incident
Filecoin Foundation Commences Chinese Legal Investigation into STFIL Incident

Filecoin Foundation Commences Chinese Legal Investigation into STFIL Incident

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By admin on 2024-04-15 Regulations Security

The Filecoin Foundation, a nonprofit organization dedicated to advancing the Web3 storage protocol Filecoin, is currently investigating the reported detention of members from the Filecoin Liquid Staking (STFIL) team in China. This information was shared by Danny O’Brien, a senior fellow of the foundation, in a social media post on April 13.

The issue arose when withdrawals from the STFIL protocol stopped working in early April. It was discovered that a developer wallet had undergone unscheduled upgrades and moved $23 million worth of Filecoin (FIL) tokens to an unknown address. On April 8, the STFIL team revealed that core technical members had been detained by the local Chinese police during which the unauthorized upgrades and transfers took place. This left STFIL users concerned about the recovery of their funds.

O’Brien mentioned in his post that the Filecoin Foundation has a lawyer in China who is currently investigating the incident. He expressed the foundation’s “high confidence” that the STFIL team members are in police custody but could not confirm if the police have possession of the funds. However, they anticipate receiving this information in approximately a week. The foundation intends to have their attorney represent all staking providers and leasers in any legal proceedings related to the incident.

O’Brien assured that more information would be shared once the details of the plan are finalized. He also requested staking providers who lost funds to provide their contact details through a Google Doc or Slack Channel specifically created for this purpose.

Filecoin is a decentralized storage protocol that enables PC owners to rent out their hard disk space to individuals in need of data storage. Storage providers are required to provide FIL tokens as collateral to ensure that they fulfill their data storage agreements.

FIL holders have the option to lend out their tokens to storage providers and earn a portion of the collected fees. This process is known as “FIL staking.” STFIL, on the other hand, is a protocol that pools FIL tokens and stakes them through a network of trusted storage providers. When users deposit FIL into the STFIL protocol, they receive STFIL tokens in return. Under normal circumstances, these STFIL tokens can be redeemed for the deposited FIL and accumulated staking rewards. However, this redemption process has been disrupted since the unauthorized upgrades and transfers occurred in April.

In a similar event, the Multichain cross-chain bridging platform also faced criminal legal action in China, resulting in over $1.5 billion of frozen cryptocurrencies for its users. The protocol’s development team was arrested, and the funds have yet to be recovered. As a result, Fantom Protocol, one of the largest depositors to Multichain, filed for bankruptcy in March in an attempt to seek some restitution through litigation. According to Andre Cronje, co-founder of Fantom, it may take several years for investors to obtain a court order that compels the police to release the funds.

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