Fusion Foundation Wallet Theft Update: 10/8th

Proposed recovery solutions to stolen tokens, which transactions are honored, what is impact on token supply, what Fusion is doing to prevent future thefts and more.

Important events will be taking place in the coming days to help the Fusion Foundation and community move forward from the theft. During this period, to limit the thief from profiting, we discourage the community from trading ERC-20 FSN on OTC/DEX and Native FSN through Quantum Swaps.

1. What are Fusion’s plans to recover the stolen funds and / or limit impact of remaining stolen funds?

Plan for ERC-20 FSN (3.5 Million Stolen, 1.978 Million left in thief accounts)

Impact:

Foundation reclaims stolen tokens in thief’s account(s).

Steps:

1. Issue a new smart contract.
2. Take token balance snapshot at block height XXXX. The exact block height XXXX will be announced at a later date.
3. Set to zero outstanding balance of 1.978 million stolen tokens, as of time of snapshot, in thief accounts.
4. Transfer exposure of outstanding balance of 1.978 million stolen tokens back to Foundation accounts.
5. For non-thief accounts (that is, valid holders of ERC-20 FSN), deposit new ERC-20 FSN to accounts in 1:1 ratio. In other words, valid holders of ERC-20 FSN will not lose their token exposure.

Plan for MainNet FSN (10 Million Stolen, 3.9143 Million left in thief accounts)

There are three solutions being considered for implementation.

As we have stated, the community has always been, and continues to be, an important part of Fusion’s project. Thus, we will conduct a vote so that the community’s voice can also be considered as we choose the best solution. Details on the vote are here.

Option 1 — Do Nothing
Impact:

Stolen tokens remain in thief’s accounts, and can continued to be transferred or sold by thief.

Steps:

None. There will be no hard fork, roll back, or transfer of funds.

Option 2 — State Change

Impact:

Foundation reclaims stolen tokens in thief’s account(s).

Steps:

1. Select block height XXXX for hard fork (similar to Ethereum DAO hard fork). The exact block height XXXX will be announced at a later date.
2. For a period of 1 week (block time) post hard fork, only buy transactions will be supported— all other types of transactions will not be allowed.
3. All transactions related to the stolen tokens done after block height 600,000 via DEX, OTC, Quantum Swaps, and Timelocks will be rolled back.
4. After block time of 1 week post hard fork, set to zero outstanding balance of 3.9143 Million stolen tokens in thief accounts and simultaneously transfer balance to foundation account.
5. Resume support of all transactions.

Note:
If stolen tokens are sold before first hard fork, a second hard fork will be done to deduct amount transferred to foundation account by the amount sold by thief.

Option 3— State Change and Mainnet Restart

Impact:

Foundation reclaims stolen tokens in thief’s account(s).

Steps:

1. Select block height XXXX for hard fork. The exact block height XXXX will be announced at a later date.
2. Take balance snapshot at XXXX. The exact snapshot XXXX will be announced at a later date.
3. Set to zero outstanding balance of 3.9143 Million stolen tokens in thief account and simultaneously transfer balance to foundation account.
4. All transactions related to the stolen tokens done after block height 600,000 via DEX, OTC, Quantum Swaps, and Timelocks will be rolled back.
5. Restart MainNet with balances post token recovery as genesis block.

2. What will happen to the FSN bought in centralized Exchanges post theft?

All FSN (native and ERC20) bought in centralized Exchanges are valid and will be honored. Withdrawals will be allowed once we remove the stolen tokens from the thief’s accounts(s).

3. What will happen to the stolen FSN that are still in the thief’s account(s) identified, both frozen at exchanges and those being actively monitored?

For the stolen FSN that is currently frozen at Exchange accounts, we will work with Exchanges to return to Foundation accounts. Once recovered, Foundation will burn the tokens, thereby decreasing total supply. The exact amounts will be shared as Foundation recovers the tokens.

For the stolen FSN that is currently in the monitored non-exchange accounts, we will handle as per answer to question one.

4. What will happen to the BTC and ETH in the frozen accounts at Exchanges resulting from the thief’s sales of stolen FSN?

We will work with the Exchanges to use the BTC/ETH to buy back FSN in the exchanges and then burn them immediately, thereby decreasing total supply of tokens.

5. What will happen to the BTC and ETH sitting in addresses identified by Fusion which the thief successfully withdrew from exchanges?

1. Foundation will continue monitoring those addresses and update the list if/when the thief moves them
2. Foundation will contact exchanges to freeze the thief’s account if he moves to any Exchanges
3. Foundation will continue working with police to get back those stolen assets. Any BTC/ETH we are able to recover, we will use it to buy back FSN from market and then burn them immediately, thereby decreasing total supply of tokens.

6. What will happen to the remaining ERC-20 FSN that Foundation received from the ERC-20 to native FSN swap?

Foundation will burn all the ERC-20 FSN that it has received from token holders swapping from ERC-20 to native FSN tokens.

7. What is foundation doing to prevent this theft from occurring again?

No matter how safe we think a wallet is, as continues to be shown across the industry, we must always assume it needs to be safer. Therefore:

1. Foundation will distribute FSN into multiple cold wallets.
2. Foundation is working with licensed custody and banks to store FSN native tokens
3. Foundation has strengthened management process.
4. Foundation will leverage community power and strength of Fusion network itself, which was not compromised in this theft, to enhance storage safety with time lock and DCRM technology

8. How is Foundation going to fund the stolen FSN that have been sold, which are honored as valid transactions?

The Foundation will take responsibility and use its own Reserve and Team allocation, without impacting the Community allocation.

9. Can we get more updates on authorities’ and Foundation’s efforts to apprehend the thief?

Information will be shared with public as soon as it no longer impacts the investigation. The last thing anyone wants is to compromise the investigation by sharing sensitive information and tipping off the thief.

10. Will the incident affect Fusion adoption and partnerships with governments and institutions?

Fusion has never stopped moving forward on innovation and adoption. We continue to have fruitful conversations and progress with financial institutions, both new and in existing. Shortly after the funds were stolen, we proactively informed our partners, including those recently announced, on the theft and some partners did ask for clarification. Once they learned that the security of the network was never compromised, they were comfortable continuing their engagement with Fusion and some have even offered their support. We recognize that there were misleading headlines published in the press, but are confident that as we continue to execute, the truth will take care of itself.

11. Will there still be 3 different types of FSN in the market in the future? (Native, ERC20, and BEP2)

Foundation will swap all of its remaining ERC-20 FSN into native FSN and we will urge all Exchanges to move to native FSN asap. We are looking forward to phase out ERC-20 FSN in the near future. BEP2 FSN will continue to be supported, as we are firm believers of the Binance DEX.