Filecoin Foundation, a nonprofit organization that advocates for the advancement of the Web3 storage protocol Filecoin, is currently investigating the reported detention of Filecoin Liquid Staking (STFIL) team members in China, according to a social media post made on April 13 by Danny O’Brien, a senior fellow at the foundation.
The withdrawal functionality of the STFIL protocol ceased to work in early April after an unscheduled series of upgrades were made to a developer wallet. These upgrades resulted in the transfer of $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 local Chinese police during which the unauthorized upgrades and transfers occurred. This announcement left many STFIL users concerned about the recovery of their funds.
In his post, O’Brien confirmed that the Filecoin Foundation has engaged a lawyer in China to investigate the incident. He expressed “high confidence” that the STFIL team members are currently in police custody. While the foundation has not yet confirmed whether the police have possession of the funds, they anticipate receiving this information within the next week. The foundation intends to allow their attorney to represent all staking providers and leasers involved in any legal proceedings related to the incident.
O’Brien assured that more details will be shared once the plan has been finalized. He also requested staking providers who have suffered losses to provide their contact information through a designated Google Doc or Slack Channel.
Filecoin is a decentralized storage protocol that enables PC owners to rent out their hard drive space to individuals with data storage requirements. Storage providers are required to provide FIL tokens as collateral to ensure that they fulfill their data storage obligations.
FIL holders have the option to lend out their tokens to storage providers, earning a portion of the fees collected in return. 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 exchange. Under normal circumstances, these STFIL tokens can be redeemed for the deposited FIL along with accumulated staking rewards. However, the redemption process came to a halt in April following the unauthorized upgrades and transfers.
In a related incident, users of the Multichain cross-chain bridging platform experienced the freezing of over $1.5 billion worth of crypto assets after the protocol’s development team was arrested by Chinese authorities. As of now, the frozen funds have not been recovered.
In an attempt to recover at least a portion of the lost Multichain funds through legal means, Fantom Protocol, one of the major depositors to Multichain, filed for bankruptcy in March. According to Andre Cronje, co-founder of Fantom, it could take “years” for investors to obtain a court order compelling the police to release the funds.