Filecoin Foundation launches Chinese legal inquiry into STFIL incident

The Filecoin Foundation, a non-profit organization that supports the growth of the Filecoin project – a Web3 storage protocol, announced via a social media post by senior fellow Danny O’Brien on April 13, that they have a legal representative in China and are currently looking into reports regarding the detention of members from the Filecoin Liquid Staking (STFIL) team.

In early April, the ability to make withdrawals from the STFIL protocol suddenly stopped working. This issue arose following a series of unexpected upgrades and the transfer of approximately $23 million in Filecoin (FIL) tokens to an unidentified address, which occurred when some of the STFIL’s core technical team members were taken into police custody in China. The announcement of these events on April 8 left many users questioning how they could regain access to their funds.

In the post, O’Brien revealed that there is a lawyer from FF based in China who has been investigating the incident on their behalf. With a strong belief, he mentioned that members of the STFIL team are currently under police custody. However, the foundation is yet to find out if the authorities have seized the funds, and they anticipate receiving this information within a week’s time. The foundation intends to assign its lawyer to represent all staking providers and lessors in any legal proceedings linked to the incident.

O’Brien assured that he would disclose additional insights when the plan’s specifics are all settled. Meanwhile, he invited stakeholders who suffered losses to communicate their contact information using either Google Doc or Slack for this particular communication channel.

Filecoin Foundation launches Chinese legal inquiry into STFIL incident

Filecoin is a decentralized system whereby computer owners can offer their hard drive capacity for rental to those in search of data storage solutions. In return, these storage providers must deposit FIL tokens as security to ensure they comply with their data storage commitments.

One simple way to rephrase this: FIL token owners have the ability to loan their tokens to storage providers. In return, they receive a share of the fees paid. This action is referred to as “staking FIL.”

The STFIL protocol is a system where users deposit FIL tokens with trusted storage providers and receive STFIL tokens as receipts. These STFIL tokens can be exchanged for the original FIL tokens along with any earned staking rewards when the protocol operates smoothly. However, due to unauthorized upgrades and transfers in April, the redemption process for these tokens has become non-functional.

The STFIL protocol isn’t alone in facing criminal investigations in China within the Web3 domain. Over $1.5 billion worth of crypto belonging to users of the Multichain cross-chain interoperability platform were seized by Chinese authorities after they apprehended the development team. Unfortunately, these funds have yet to be returned.

In March, Fantom Protocol – a significant depositor into Multichain – applied for bankruptcy protection in a bid to recover some misplaced Multichain funds via legal action. As per Fantom’s co-founder Andre Cronje, the process could take “years” before investors secure a court order allowing them to seize the funds from law enforcement agencies.

Read More

2024-04-15 23:04