Filecoin Foundation launches Chinese legal inquiry about STFIL incident

Filecoin Foundation Launches Chinese Legal Inquiry About Stfil Incident

The Filecoin Foundation, a non-profit organization promoting the development of the Web3 storage protocol Filecoin, “has a lawyer in China” and is investigating the arrest of members of the Filecoin Liquid Staking (STFIL) group, according to an April 13 social media post by Danny O'Brien.

Exits from the STFIL protocol stopped working in early April after a developer wallet made an unscheduled update and moved $23 million in FileCoin (FIL) tokens to an unknown address. On April 8, STFIL announced that key technical members of the STFIL team had been arrested by the local Chinese police and that clandestine reforms and transfers had taken place during these arrests. This announcement has left many STFIL users wondering how to get their money back.

In the post, O'Brien said, “FF has a lawyer in China who is pursuing the case,” adding that the foundation has “high confidence” that members of the STFIL group are in police custody. The foundation could not confirm whether the police seized the money, but they expect to know this information “in the week ahead”. The foundation plans to allow its attorney to represent all vendors and tenants in any court proceedings related to the event.

O'Brien promised to share more information as details of the plan are finalized. It has also asked disbursed stakeholders to provide their contact details via a dedicated Google Doc or Slack Channel.

Source: Filecoin Foundation Senior Danny O'Brien

Filecoin is a decentralized storage protocol that allows computer owners to rent out their hard disk space to users interested in data storage. It requires storage providers to provide FIL tokens as collateral to store data under their agreement.

FIL holders can lend their tokens to storage providers, in which case they receive a portion of the fees collected. This process is called “FIL staking”.

STFIL is a protocol for storing and holding FIL tokens through a network of trusted storage providers. When users submit FIL to the STFIL protocol, they receive STFIL tokens in return. When the protocol works properly, these STFIL tokens can be redeemed for accumulated FIL and accumulated equity rewards. However, this rescue process stopped working in April after unauthorized upgrades and transfers.

Related: What is Filecoin and how does it work?

STFIL is not the only Web3 protocol facing criminal legal action in China. Users of the multichain cross-chain bridge platform have seen more than $1.5 billion worth of crypto frozen after Chinese police seized the protocol's development team. The funds have still not been returned.

Phantom Protocol, the largest depositor to Multichain, filed for bankruptcy in March in an attempt to pursue lost Multichain funds through litigation. Fantom co-founder Andre Cronje said it could take “years” for investors to get a court order forcing the police to hand over the money.

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