Insolvency rumors surfaced after a series of events involving Multichain. Gate.io has denied any liquidity issues.
Centralized crypto exchange Gate.io has threatened legal action in response to rumors of imminent bankruptcy. Crypto community members have been speculating since May about a possible connection between Gate.io and the troubled cross-chain protocol Multichain.
“Legal proceedings will be initiated against people who cause panic among investors only with rumors and gossip, without relying on any concrete source,” reads a June 4 Twitter announcement originally written in Turkish.
Gate.io’s insolvency rumor surfaced after a series of events involving Multichain. The cross-chain protocol has been experiencing technical difficulties since May 24, when a node issue delayed transactions. A few days later, Multichain’s team disclosed it couldn’t contact its CEO to access the servers and resolve the problem, fueling previous rumors that the protocol’s leadership had been arrested and over $1.5 billion in smart contract funds seized by Chinese authorities.
Data from Blockchain analytics firm Arkham Intelligence on May 24 showed large inflows of Multichain tokens (MULTI) from Gate.io’s platform.
Gate.io first denied liquidity issues on May 31, claiming its operations were “running healthy” and that withdrawals were not an issue. Although Twitter and Telegram channels have been flooded with reports of traders withdrawing funds, the exchange’s trading volume appears to remain relatively steady in the past few days.
At the time of writing, its native token, GateToken (GT), trades at $4.29, a decline of 9.6% in the past seven days, according to data from CoinGecko. First founded in 2013 in the Cayman Islands, the exchange recently expanded to Hong Kong, Turkey and Dubai.
Multichain’s ongoing issues prompted other crypto exchanges to take action. Binance suspended deposits for 10 bridged tokens on the BNB Smart Chain, Fantom, Ethereum and Avalanche blockchain networks on May 25. Transaction downtime also led the Fantom Foundation to remove 449,740 MULTI ($2.4 million) from liquidity on the decentralized exchange SushiSwap.