Fantom Foundation Ltd v Multichain Foundation Ltd and another [2024] SGHC 173

Case Details

• Citation: [2024] SGHC 173
• Court: General Division of the High Court of the Republic of Singapore
• Decision Date: 8 July 2024
• Coram: Mohamed Faizal JC
• Case Number: Originating Claim No 621 of 2023; Assessment of Damages No 2 of 2024
• Hearing Date(s): 3 June 2024
• Claimants / Plaintiffs: Fantom Foundation Ltd
• Respondent / Defendant: Multichain Foundation Ltd; Multichain Pte Ltd
• Counsel for Claimants: Nicolas Tang Tze Hao, Ashviniy Narenthiren (Farallon Law Corporation)
• Practice Areas: Damages — Assessment; Cryptocurrency; Contract Law

Summary

In Fantom Foundation Ltd v Multichain Foundation Ltd and another [2024] SGHC 173, the General Division of the High Court of Singapore addressed the "valuation conundrum" inherent in assessing damages for the loss of cryptocurrency assets. The proceedings followed a default judgment obtained by the Claimant, Fantom Foundation Ltd, against the Defendants, Multichain Foundation Ltd and Multichain Pte Ltd, after a catastrophic security breach on the Multichain Bridge resulted in the siphoning of over US$127 million worth of digital assets. The core of the dispute lay in determining the appropriate methodology and temporal reference point for valuing highly volatile digital tokens in the context of a contractual breach.

The Court’s decision is a significant contribution to the burgeoning field of digital asset litigation in Singapore. It reaffirms the primacy of the compensatory principle—that damages should place the claimant in the position they would have occupied had the breach not occurred—while acknowledging that the traditional "breach date rule" is not an inflexible mandate. Mohamed Faizal JC navigated the complexities of cryptocurrency volatility, ultimately accepting the date of the security breach as the most equitable point for valuation, while leaving the door open for alternative reference points in future cases where the breach date might lead to injustice.

A pivotal aspect of the judgment was the Court’s treatment of expert evidence in the cryptocurrency space. By accepting the testimony of the Claimant’s expert, Gu Miao, who utilized data from major aggregators like CoinMarketCap and CoinGecko, the Court established a pragmatic standard for proving market value in decentralized markets. The judgment also dealt with the technical nuances of "wrapped assets" and "source assets," concluding that where a security breach renders wrapped tokens worthless, the loss is properly measured by the value of the underlying source assets siphoned from the protocol.

Ultimately, the Court awarded the Claimant US$58,620.55 for its "damages claim" and US$2,129,250 for its "FTM claim." Beyond the immediate financial outcome, the case serves as a critical precedent for practitioners on how to plead and prove damages in the DeFi (Decentralized Finance) sector, emphasizing the necessity of robust expert evidence and the Court's willingness to adapt traditional common law principles to the unique realities of blockchain technology.

Timeline of Events

1. 11 November 2020: The First Defendant, Multichain Foundation Ltd, announced a strategic tie-up with the Claimant via a Medium.com post, establishing the framework for the integration of the Fantom blockchain with the Multichain Bridge.
2. 30 August 2021: The parties continued their operational relationship, which included a "liquidity facility" arrangement where the Claimant provided liquidity to the First Defendant upon request.
3. 13 April 2023: The First Defendant requested liquidity from the Claimant pursuant to their ongoing arrangement.
4. 14 April 2023: In response to the request, the Claimant transferred 4.175 million FTM tokens onto the Multichain Bridge.
5. 20 April 2023: Further interactions occurred regarding the liquidity facility and the management of assets on the bridge.
6. 6 July 2023: As of this date, the Claimant had deposited various source assets (including USDT, USDC, and DAI) into the Multichain Bridge to facilitate the minting of value-equivalent wrapped assets on other blockchain networks.
7. 7 July 2023: A major security breach occurred on the Multichain Bridge. Over US$127 million worth of assets were moved out of the multichain bridge wallet without authorization.
8. 18 September 2023: The Claimant commenced legal action by filing Originating Claim No 621 of 2023 (HC/OC 621/2023) against the Defendants.
9. 30 January 2024: The Claimant obtained default judgment against both Defendants for the damages claim and the FTM claim, as the Defendants failed to enter an appearance or file a defense.
10. 26 March 2024: Procedural steps were taken to move the matter toward an assessment of damages.
11. 3 June 2024: A substantive hearing for the assessment of damages was held before Mohamed Faizal JC.
12. 8 July 2024: The High Court delivered its judgment, quantifying the damages owed to the Claimant.

What Were the Facts of This Case?

The Claimant, Fantom Foundation Ltd, is an exempted foundation company incorporated in the Cayman Islands. It is the entity responsible for the development and maintenance of the Fantom Opera Chain, a high-performance, scalable, and secure smart contract platform. The First Defendant, Multichain Foundation Ltd, and the Second Defendant, Multichain Pte Ltd, are both companies limited by guarantee incorporated in Singapore. The First Defendant operated the "Multichain Bridge," a cross-chain bridge and router protocol designed to facilitate interoperability between discrete blockchain networks. This bridge allowed users to "lock" source assets on one blockchain and "mint" value-equivalent wrapped tokens on another, thereby enabling the movement of value across fragmented ecosystems.

The relationship between the parties was governed by two primary agreements. The first was the "Integration Agreement," announced on 11 November 2020, which provided for the integration of the Fantom blockchain into the Multichain Bridge. This was complemented by a "User Agreement," which set out the terms and conditions for the use of the bridge. Under these agreements, the Claimant utilized the Multichain Bridge to facilitate the creation of wrapped assets. Specifically, as of 6 July 2023, the Claimant had deposited source assets into the bridge. These assets included stablecoins such as USDT, USDC, and DAI. The mechanism was such that the Claimant would deposit these source assets to "mint" wrapped versions on other chains.

In addition to the standard bridge usage, the parties entered into a "liquidity facility" arrangement. This was a more bespoke commercial agreement where the Claimant would provide liquidity to the First Defendant to ensure the smooth operation of the bridge. On 14 April 2023, following a request from the First Defendant, the Claimant transferred 4.175 million FTM tokens (the native token of the Fantom ecosystem) onto the Multichain Bridge pursuant to this facility. These tokens were intended to be used by the First Defendant to maintain the bridge's liquidity and operational efficiency.

The dispute was precipitated by a catastrophic security breach on 7 July 2023. This breach was internationally publicized and resulted in the unauthorized withdrawal of over US$127 million in various cryptocurrencies from the Multichain Bridge wallets. Among the siphoned assets were the source assets deposited by the Claimant and the 4.175 million FTM tokens provided under the liquidity facility. The breach effectively rendered the wrapped assets held by the Claimant worthless, as the underlying source assets that gave them value had been removed. The Defendants' failure to secure the assets constituted a fundamental breach of their contractual obligations under the Integration and User Agreements.

Following the breach, the Claimant sought to recover its losses. It filed HC/OC 621/2023 on 18 September 2023. The Defendants did not participate in the proceedings, leading the Claimant to obtain a default judgment on 30 January 2024. The judgment ordered the Defendants to pay damages to be assessed. The assessment process required the Court to evaluate two distinct heads of loss: (a) the "damages claim," representing the value of the source assets (USDT, USDC, and DAI) deposited by the Claimant, and (b) the "FTM claim," representing the value of the 4.175 million FTM tokens transferred under the liquidity facility. The Claimant's legal counsel, Mr. Eliahu Bernstein, provided testimony regarding the nature of the bridge's operations, while Mr. Gu Miao was engaged as an expert witness to provide a valuation of the lost tokens at the relevant time.

What Were the Key Legal Issues?

The primary legal issue before the Court was the assessment of damages following a default judgment in a breach of contract action involving cryptocurrency. This required the Court to resolve several sub-issues:

• The Valuation Methodology for Cryptocurrency: Given that cryptocurrencies are not traditional fiat currencies and lack a single centralized exchange price, the Court had to determine how to ascertain a "market value" that is legally robust. This involved an application of s 47(1) of the Evidence Act 1893 (2020 Rev Ed) regarding expert testimony.
• The Temporal Reference Point (The "Breach Date Rule"): The Court had to decide whether to apply the general rule that damages are assessed at the date of the breach (7 July 2023), or whether the inherent volatility of cryptocurrency necessitated a departure to the date of filing (18 September 2023) or the date of judgment.
• The Quantification of Loss for Wrapped Assets: The Court needed to determine if the loss should be measured by the value of the "wrapped assets" held by the Claimant or the "source assets" siphoned from the bridge. This required an analysis of the "residual value" of the wrapped tokens following the security breach.
• Mitigation of Loss: The Court had to consider whether the Claimant had taken reasonable steps to mitigate its losses, particularly in the context of a protocol-wide security breach where the Defendants held control over the siphoned assets.

These issues are critical because they test the limits of traditional compensatory principles in the face of novel digital assets. The "valuation conundrum" identified by the Court highlights the tension between the need for legal certainty and the reality of 24/7, highly volatile global crypto markets.

How Did the Court Analyse the Issues?

The Court began its analysis by reiterating the fundamental compensatory principle of contract law. Relying on iVenture Card Ltd v Big Bus Singapore City Sightseeing Pte Ltd [2022] 1 SLR 302 ("iVenture"), the Court noted that the objective of compensatory damages is to place the innocent party in the same position as if the contract had been performed. This principle remains the "north star" even when dealing with unconventional assets like cryptocurrency.

The Valuation of Cryptocurrency

The Court acknowledged that cryptocurrency valuation is inherently complex. Unlike traditional commodities, cryptocurrencies often trade on multiple decentralized and centralized exchanges simultaneously with varying prices. The Court cited In the matter of Hodlnaut Pte Ltd [2023] SGHC 323 at [11], noting that the acceptance of any valuation must "turn on the evidence presented before it."

To resolve this, the Claimant adduced expert evidence from Mr. Gu Miao. Under s 47(1) of the Evidence Act 1893, the Court accepted Mr. Gu as an expert. He utilized a methodology that averaged prices from CoinMarketCap and CoinGecko—two of the most recognized data aggregators in the industry. The Court found this approach reliable, noting that it mirrored the "reliable cryptocurrency valuation tool" approach discussed in the US case of Diamond Fortress Technologies Inc v EverID Inc 274 A.3d 287. The Court observed that while cryptocurrency has no "intrinsic value" beyond its perceived value (citing ByBit FinTech Limited v Ho Kai Xin & Others [2023] 5 SLR 1748), its market value can be proven through such aggregated data.

The Temporal Reference Point: Breach Date vs. Alternatives

A significant portion of the judgment was dedicated to the "breach date rule." The general position in Singapore, as stated in iVenture at [133], is that damages for breach of contract are assessed as at the date of the breach. However, the Court noted that this is not an absolute rule. Mohamed Faizal JC cited Lord Leggatt JSC in Stanford International Bank Ltd (in liquidation) v HSBC Bank plc [2023] AC 761:

"The error lies in the premise that loss caused by a breach of duty is generally to be assessed as at the date of the breach. There is no such rule of law." (at [46])

The Court analyzed whether the volatility of FTM tokens warranted a departure from the breach date (7 July 2023). The Claimant had initially suggested the filing date (18 September 2023) might be appropriate but ultimately argued for the breach date. The Court found that in this specific case, the breach date was the most appropriate. On 7 July 2023, the assets were siphoned, and the loss was crystallized. Using a later date would introduce an element of speculation regarding market movements that neither party could have reasonably anticipated as a direct consequence of the breach.

The Damages Claim (Source Assets)

The "damages claim" concerned the USDT, USDC, and DAI deposited by the Claimant. The Court accepted that as of 6 July 2023, the value of these assets was approximately US$61,829.70. However, the Claimant sought a slightly lower sum of US$58,620.55. The Court scrutinized this discrepancy and found it was due to the Claimant accounting for the "residual value" of the wrapped assets. Even though the wrapped assets were effectively worthless because the bridge was broken, the Claimant's expert calculated their theoretical residual market value and deducted it from the total loss to ensure the claim was strictly compensatory. The Court praised this conservative approach, noting it prevented any risk of over-compensation.

The FTM Claim (Liquidity Facility)

For the FTM claim, the Court had to value 4.175 million tokens. Using the expert's valuation of US$0.51 per FTM token on the breach date of 7 July 2023, the Court arrived at a figure of US$2,129,250. The Court rejected any suggestion that the valuation should be tied to the date the tokens were originally transferred (14 April 2023), as the breach—and thus the loss of the ability to have those tokens returned—occurred on 7 July 2023.

Mitigation

The Court accepted that the Claimant was unable to mitigate its losses. Once the security breach occurred and the assets were moved out of the Multichain Bridge wallet by the Defendants (or through their failure to secure it), the Claimant had no mechanism to recover the assets or prevent the value of its wrapped tokens from collapsing. The "market mitigation rule," which often applies in Sale of Goods cases (e.g., section 51 of the Goods Act 1979), was inapplicable here because there was no "available market" in which the Claimant could have substituted the unique liquidity and bridge positions it had lost.

What Was the Outcome?

The Court granted the Claimant's prayers for damages in full, based on the quantified amounts presented during the assessment. The final orders were as follows:

"For the reasons I have given, I accepted the Claimant’s submissions and order as follows: (a) that the Defendants pay the Claimant damages in the sum of US$58,620.55; and (b) that the Defendants pay the Claimant damages in the sum of US$2,129,250, namely the equivalent value of the 4.175m FTM." (at [50])

The total award amounted to US$2,187,870.55. This award was made against both Multichain Foundation Ltd and Multichain Pte Ltd on a joint and several basis, consistent with the default judgment previously obtained.

Regarding the currency of the award, the Court ordered the sums in United States Dollars (USD). This reflected the reality of the cryptocurrency market, where most assets are pegged to or denominated in USD (or USD-linked stablecoins). While the Court noted that some figures in the evidence were occasionally referenced in Singapore Dollars (SGD), the primary loss was felt in the USD-equivalent value of the digital assets.

On the issue of costs, the Court did not make an immediate order. Mohamed Faizal JC stated at [51] that he would "consider the issue of costs separately," inviting further submissions or a separate hearing to determine the appropriate quantum of legal costs and disbursements to be awarded to the Claimant. No interest rate was specifically mentioned in the operative paragraph for the pre-judgment period, though standard post-judgment interest would apply by operation of law.

The Court's disposition effectively validated the Claimant's use of aggregated market data and the selection of the breach date as the valuation point. By awarding the value of the source assets rather than the wrapped assets, the Court recognized the economic reality of cross-chain protocols: the value of a wrapped token is entirely derivative of the security and availability of the underlying source asset.

Why Does This Case Matter?

This judgment is a landmark for cryptocurrency litigation in Singapore for several reasons. First, it provides a clear judicial roadmap for the assessment of damages in cases involving siphoned or lost digital assets. While previous cases like ByBit established that cryptocurrencies can be treated as property capable of being held on trust, Fantom Foundation is one of the first to provide a detailed analysis of the quantum aspect of such claims.

The Court’s treatment of the "breach date rule" is particularly significant. By acknowledging that the rule is a "general position" rather than an "absolute rule of law," the Court has provided practitioners with the flexibility to argue for different valuation dates in the future. This is crucial in the crypto space, where a token's value can crash or moon by 90% between the date of a breach and the date of a trial. The Court’s reliance on Stanford International Bank signals a shift toward a more fact-sensitive, equitable approach to valuation that prioritizes the compensatory objective over rigid adherence to temporal rules.

Second, the case sets a high but achievable standard for expert evidence. By accepting data from CoinMarketCap and CoinGecko, the Court has recognized the practical realities of the industry. Practitioners now know that they do not necessarily need to provide data from every single exchange; rather, a well-reasoned methodology using reputable aggregators will likely satisfy the Court's requirements under the Evidence Act. This reduces the evidentiary burden on claimants while maintaining a standard of "reliable valuation tools."

Third, the judgment clarifies the legal nature of "wrapped assets." In the DeFi world, wrapped assets (like wETH or wFTM) are ubiquitous. This case confirms that if the bridge protocol fails, the loss is not merely the loss of the "wrapped" token but the loss of the "source" asset that was supposed to be held in reserve. This distinction is vital for drafting pleadings in future bridge-hack litigations.

Finally, the case reinforces Singapore's position as a leading jurisdiction for digital asset dispute resolution. The Court's sophisticated understanding of "liquidity facilities," "cross-chain routers," and "wrapped tokens" demonstrates that the Singapore judiciary is well-equipped to handle the technical complexities of the Web3 era. For international foundations and crypto-native companies, this judgment provides much-needed legal certainty regarding how Singaporean courts will quantify losses in the event of a protocol failure or contractual breach.

Practice Pointers

• Expert Evidence is Non-Negotiable: In cryptocurrency valuation disputes, do not rely on mere assertions of value. Engage an expert who can explain the methodology of price aggregation (e.g., using CoinMarketCap or CoinGecko) to satisfy s 47(1) of the Evidence Act.
• Plead the Breach Date Carefully: While the breach date is the default, practitioners should analyze whether the volatility of the asset makes a different date (e.g., the date the claimant discovered the breach) more equitable. Be prepared to argue why the iVenture rule should or should not be departed from.
• Distinguish Source vs. Wrapped Assets: When pleading losses involving bridge protocols, clearly distinguish between the source assets locked in the bridge and the wrapped assets held by the user. The loss of the former usually dictates the value of the latter.
• Account for Residual Value: To maintain the "compensatory" nature of the claim and avoid charges of over-compensation, have your expert calculate if the lost tokens have any residual "junk" value and deduct that from the total claim.
• Mitigation Evidence: Be prepared to demonstrate why mitigation was impossible. In protocol hacks, the fact that the defendant had exclusive control over the siphoned funds is a strong argument that the claimant could not have mitigated its loss.
• Currency of Claim: Given that most crypto assets are USD-denominated, pleading and seeking an award in USD is often more practical and reflective of the actual loss than converting to SGD at an arbitrary date.

Subsequent Treatment

As this is a relatively recent decision (July 2024), its subsequent treatment in later Singapore judgments is still developing. However, it stands as a primary authority for the application of the compensatory principle to digital assets. It builds upon the doctrinal lineage of iVenture regarding contract damages and ByBit regarding the property status of cryptocurrency. It is expected to be frequently cited in future assessments of damages involving decentralized finance (DeFi) protocols and cross-chain bridge failures.

Legislation Referenced

• Evidence Act 1893 (2020 Rev Ed): Specifically s 47(1) regarding the admissibility of expert opinions on points of science or art (applied to cryptocurrency valuation).
• Goods Act 1979: Section 51 was referenced in the context of the "market mitigation rule" and the measure of damages for non-delivery of goods.

Cases Cited

• Applied: iVenture Card Ltd v Big Bus Singapore City Sightseeing Pte Ltd [2022] 1 SLR 302
• Applied: In the matter of Hodlnaut Pte Ltd [2023] SGHC 323
• Considered: Diamond Fortress Technologies Inc v EverID Inc 274 A.3d 287 (Delaware Superior Court)
• Referred to: ByBit FinTech Limited v Ho Kai Xin & Others [2023] 5 SLR 1748
• Referred to: Stanford International Bank Ltd (in liquidation) v HSBC Bank plc [2023] AC 761
• Referred to: Hooper v Oats [2014] Ch 287
• Referred to: MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appeal [2011] 1 SLR 150
• Referred to: Mayandi s/o Sinnathevar (representative of the estate of Mayandi s/o Sinnathevar, deceased) and another [1995] 3 SLR(R) 627

Source Documents

• Original Judgment PDF (eLitigation)
• Case Summary on eLitigation