Smart Contracts Were Going to Replace Lawyers
Sixty-three million dollars hangs in the void between three jurisdictions, visible to anyone, accessible to no one. Three armies of lawyers are fighting over it, along with hackers and the Department of Justice. And it’s all happening in the world of blockchain smart contracts – the technology that was supposed to make lawyers obsolete.
The Promise: Smart Contracts Will Replace Lawyers
The year was 2015. Ethereum launched its smart-contract platform. Blockchain enthusiasts proclaimed a revolution: “Code is law.” Contracts would execute themselves. Automatically. Irrevocably. No courts. No disputes. No lawyers billing by the hour to polish every comma in paragraph three, subsection b.
A smart contract is a computer program written into the blockchain that executes automatically when certain conditions are met. If A transfers X tokens to address B, the smart contract automatically transfers Y tokens from address C to address A. No intermediaries. No interpretation. No clauses about “the care generally required in relations of this kind” or stipulations that “one cannot exercise one’s rights in a manner contrary to the socio-economic purpose of those rights or the principles of social coexistence.”
Imagine an insurance contract. Traditionally: your flight is delayed, you file a claim, the insurer verifies documents, someone approves it, weeks later you get a wire transfer. Or maybe you don’t, because the insurance company decides to contest. With a smart contract: your flight is delayed, an oracle – a source of external data – delivers this information to the blockchain, the smart contract automatically transfers compensation to your account. In seconds. No paperwork. No possibility of the insurer refusing payment if the conditions specified in the smart contract have been met.
Nick Szabo, the cryptographer who conceived of smart contracts in the nineteen-nineties, compared them to vending machines: you insert a coin, the machine dispenses a product. No human operator. No negotiation. Deterministic executability.
It seemed like an existential threat to the legal profession. If contracts can execute themselves, why do we need specialists to interpret them? If code unambiguously defines rights and obligations, why do we need arbitrators and judges? If the blockchain automatically enforces commitments, why do we need bailiffs? They were predicting the end of a profession that had existed since Roman law.
Reality: The Multichain Foundation Case
Then came July, 2023, and a hack of the Multichain Foundation. Multichain Foundation operated as a “cross-chain bridge” – a conduit between different blockchain networks. Imagine a bank that accepts deposits in one currency to issue the equivalent in another. A user transfers USDC from the Ethereum network and receives Multi-USDC on the Fantom blockchain. This isn’t an exchange – it’s the creation of a new asset backed by the original deposit.
In July, 2023, someone broke this mechanism. We don’t know the technical details of the attack. We don’t know whether it was an external breach or an inside job. Court documents are silent on the attack vector, the penetration method, the vulnerabilities exploited. We know only the result: sixty-three million dollars in USDC left wallets controlled by Multichain and landed in three new blockchain addresses. These three addresses are now the most important physical evidence in the case. Here they are, visible to anyone with a Web browser. You can check them in any blockchain explorer. You can see the balance, transaction history, every movement since the theft. Blockchain transparency in all its glory – and all its helplessness.
Panic Button: The Emergency Shut-off
USDC is a stablecoin – a cryptocurrency designed to always be worth exactly one U.S. dollar. Circle Internet Financial, its issuer, maintains dollar reserves at a one-to-one ratio. For every USDC token in circulation, a real dollar sits in reserve. This makes USDC more predictable than Bitcoin or Ethereum, whose values fluctuate daily.
But Circle built something into USDC that many users don’t know about: a central kill switch. In the smart-contract code, there’s a list of addresses – a blacklist. Every address on that list becomes functionally paralyzed. It can’t send USDC. It can’t receive it. The tokens at that address become a digital prison without keys.
This isn’t confiscation. Circle doesn’t seize control of the stolen funds. It doesn’t transfer them to its own account. It simply modifies the code so that these specific addresses stop participating in the network. It’s a simple technological solution to a legal problem – like digital quarantine.
The Department of Justice, acting quickly after the theft was discovered, obtained a court order compelling Circle to place the three hacker addresses on the blacklist. Within hours, sixty-three million dollars was frozen. Not confiscated. Not seized. Simply immobilized in code, awaiting a legal decision that may never come.
Then the D.O.J. made a strategic mistake – or a strategic calculation, depending on your perspective. Unable to identify the perpetrators, unable to bring charges, unable to continue criminal proceedings, the Department announced in July, 2025, that it would vacate the seizure order. Without the order, Circle has no legal basis to maintain the blacklist. And without the blacklist, the hackers regain control.
A Cayman Islands Fund Makes a Cosmic Claim but Obtains an Injunction
Into this legal vacuum stepped Newton AC/DC Fund, based in the Cayman Islands. Newton holds 3.575 million Multi-USDC tokens – that derivative asset issued by Multichain on the Fantom blockchain. On this basis, it filed suit in New York State Supreme Court, demanding a proportional share of the stolen sixty-three million dollars.
The Newton Fund’s claim rests on a fundamental misunderstanding – or a very aggressive interpretation of property rights in the blockchain world. When a user transferred USDC to Multichain and received Multi-USDC, an exchange occurred. Not a loan. Not a security deposit. An exchange of one asset for another.
Multi-USDC is not a deposit certificate. It’s a separate token on a separate blockchain. Its holder has no more rights to the underlying USDC than someone holding casino chips has to specific bills in the casino’s vault. If Newton were right, every holder of Multi-USDC could claim not just their tokens but the entire Multichain reserve. It’s economically absurd.
But Newton doesn’t have to be right to achieve its goal. It just has to maintain the status quo long enough. And Circle helped it do that.
Newton and Circle entered into a settlement – a so-called Stipulated Consent Preliminary Injunction – obligating Circle to continue maintaining the blacklist until the court resolves the ownership question. This private agreement between two parties effectively extended the order that the D.O.J. had renounced. The function of the state was assumed by a contract between private entities.
The Singapore Liquidator Enters the Fray
While Newton was fighting in New York, a different story was unfolding in Singapore. Fantom Foundation – the blockchain platform on which Multichain issued Multi-USDC – filed as a creditor seeking liquidation of Multichain Foundation. On May 9, 2025, the Singapore High Court issued its order. Multichain is placed into liquidation under Section 125(1)(e) of the Insolvency, Restructuring and Dissolution Act 2018. The court appointed three liquidators from KPMG Services: Bob Yap Cheng Ghee, Toh Ai Ling, and Tan Yen Chiaw. Their mandate is clear: gather all of Multichain’s assets, wherever they may be, and distribute them fairly among all creditors in accordance with Singapore insolvency law.
The problem is that Multichain’s most valuable asset is frozen in an American stablecoin, is the subject of proceedings before a New York state court, and is the subject of claims by a Cayman Islands fund. The liquidators have a duty to recover it. But how do you enforce a Singapore judgment in a jurisdiction that hasn’t even recognized your mandate yet?
The answer: Chapter 15 of the U.S. Bankruptcy Code.
On October 23, 2025, the liquidators filed a petition in the Bankruptcy Court for the Southern District of New York. This isn’t an ordinary bankruptcy proceeding. Chapter 15 is a specialized mechanism for recognizing foreign insolvency proceedings. If the American court recognizes the Singapore proceeding as a “foreign main proceeding,” the Singapore liquidators automatically receive in the United States powers similar to those American bankruptcy trustees would have.
The consequences would be immediate. Automatic stay of all litigation against the debtor – including Newton’s suit. An order requiring Circle to maintain the blacklist not based on a private settlement but on a bankruptcy-court order. Centralization of all claims in one forum, where they will be adjudicated according to principles of fair distribution among creditors.
Newton may believe it has a claim. It may convince the New York state court of its theory. But in bankruptcy proceedings, what matters isn’t who filed suit first. What matters is creditor hierarchy, proportionality of claims, fair division among all those harmed. If Newton really is a creditor of Multichain – which is doubtful for the reasons described earlier – its claim will be considered along with the others. But it won’t receive priority just because it was fastest to court.
War on Three Fronts
We’re now witnessing a war being fought simultaneously in three legal dimensions. Singapore has primary jurisdiction. That’s where Multichain was registered. That’s where the court issued the liquidation order. That’s where the KPMG liquidators derive their mandate. Singapore insolvency law is clear: all assets of the debtor, wherever they may be, are subject to the liquidators’ control. But “wherever they may be” is a philosophical problem when it comes to blockchain assets. Where is a USDC token “located”? At an address on the Ethereum blockchain, which exists simultaneously on thousands of nodes distributed around the world? In Circle’s dollar reserves in American banks? In the smart-contract code?
New York has functional jurisdiction. Circle is registered there. That’s where Newton filed suit. That’s where the dollar reserves backing USDC are located. New York State Supreme Court is now considering ownership questions, probably unaware that its ruling could conflict with the Singapore court’s judgment issued five months earlier. And now a third dimension enters the game: the Bankruptcy Court for the Southern District of New York, which must decide whether to recognize the Singapore proceeding and import it into the American legal system.
The blockchain remains indifferent to all these disputes. The code runs independently of court judgments. The three addresses still exist. The sixty-three million USDC is still there. Everything is transparent, immutable, verifiable. The hackers control them but can’t access the contents, because they’re on the blacklist. They’re on the blacklist because that’s what the Cayman Islands Fund and the Singapore Foundation – whose rights the liquidators are assuming, if the New York court so orders – agreed to.
This is a new category of legal dispute – not international in the classic sense but transnational. The assets exist in a space that isn’t subject to any single jurisdiction but is simultaneously subject to all of them. The smart contract executes according to code, but the code is controlled by a company subject to American law, while the token owner is an entity in liquidation under Singapore law, to which a Cayman Islands fund is making claims.
Epilogue: Where Are the Promises of Smart Contracts?
Remember the slogans from a decade ago? “Code is law.” “Smart contracts will eliminate lawyers.” “Blockchain automates trust.” Transactions were supposed to execute themselves, without courts, without disputes, without armies of legal counsel parsing paragraphs. Now look at the Multichain case: three jurisdictions, six law firms (counting only those named in the documents), hundreds of pages of court filings, a Chapter 15 proceeding, a class action, a motion to dismiss, petitions for recognition of foreign judgments. Cahill Gordon & Reindel represents the liquidators. KPMG manages the assets. Fantom Foundation has its lawyers. Newton has its own. Circle has its own.
This doesn’t look like a world where lawyers have become obsolete. It looks like the most lucrative case study for firms specializing in international insolvency law and fintech. What went wrong? Or, rather – what went exactly as it always had to go?
Problem one: A smart contract executes only what’s in the code
And the code doesn’t have an answer to the question “Who owns these tokens?” The code says only: “This address controls these tokens.” But is control ownership? Is a hacker who stole a private key the owner? The code doesn’t know. The code doesn’t ask such questions.
Problem two: Smart contracts live in the world of humans
Circle can add a blacklist function to the USDC smart contract because Circle wrote that contract. But the decision about which addresses to add to the blacklist doesn’t come from code. It comes from a court order. From a civil settlement. From a decision by a compliance officer at Circle acting under regulatory pressure.
Problem three: Property doesn’t exist without enforcement
You can have the most perfect smart contract in the world, one that precisely defines who can transfer assets and under what conditions. But what happens when someone steals a private key? The code will execute the transaction. Because for the code, possession of the key equals ownership. There’s no function in the code that says “check whether this transfer is legal under Singapore law”.
Problem four: Dollar reserves aren’t in the blockchain
Every USDC token is backed by a dollar in an American bank. Those dollars are subject to American law. American seizure orders. American court proceedings. You can have all the USDC tokens in the world in your wallet, but if a court orders Circle to freeze the dollar reserves, your tokens become a digital record without value.
Problem five: International disputes can’t be resolved by code
Does a Singapore liquidator have the right to control assets located… where? On the Ethereum blockchain, which doesn’t exist in any specific geography? In Circle’s reserves in New York? In a smart contract whose nodes are distributed around the world? Code won’t answer that question. Judges will. After years of proceedings.
Multichain is a perfect illustration of something that crypto enthusiasts consistently ignore: technology can automate execution, but it can’t automate agreement. A smart contract will execute exactly what’s in its code. But how is the code supposed to know what it should execute? Who decides which version of reality is true when two parties have conflicting claims? It turns out the answer is: lawyers. Lots of lawyers. Lawyers who understand insolvency law in Singapore and the United States. Lawyers who can navigate between Chapter 15 and the UNCITRAL Model Law on Cross-Border Insolvency. Lawyers who know how to draft a stipulated preliminary injunction in New York while simultaneously preparing a petition for recognition of a foreign main proceeding.
Sixty-three million dollars hangs in suspension not because the code broke. The code works perfectly. Circle blacklists, so the tokens can’t move. The USDC smart contract executes exactly as designed. The funds hang in suspension because people can’t agree on who they belong to. And no smart contract in the world will solve that problem for them. “Code is law” turned out to be a beautiful slogan and a terrible prophecy. Code isn’t law. Code is a tool that executes instructions. But who decides which instructions are right? Who adjudicates when two smart contracts give conflicting results? Who enforces property rights when the keyholder isn’t the legal owner?
The same people who have been doing it for hundreds of years. Judges. Lawyers. Legislators. Smart contracts didn’t eliminate lawyers. They created the most lucrative specialization niche since the rise of securities law.
This article concerns the following cases:
1. Insolvency in Singapore: HC/CWU 134/2025 (High Court of Singapore)
2. Bankruptcy in the United States: Case No. 25-12340-dsj (S.D.N.Y., Chapter 15)
3. Payment dispute in New York: Newton AC/DC Fund, L.P. v. Circle Internet Financial, LLC, No. 654157/2025
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
