LayerZero, a cross-chain interoperability protocol, is grappling with an operational security controversy after blockchain analytics platform SolanaFloor exposed that its multisig wallet keys—designed to safeguard user funds—were allegedly used to trade the meme coin McPepes (PEPES). The revelation has sparked community concerns about LayerZero's internal security controls.
Exposure: Multisig Keys Used for Meme Coin Trading
On-chain data tracked by SolanaFloor shows that addresses associated with LayerZero's multisig wallet interacted with the McPepes project, including both buy and sell orders. Multisig wallets require multiple private key signatures to authorize transactions, typically serving as a secure vault for project treasuries or user assets. The discovery undermines the assumption that multisig mechanisms are foolproof, as the keys were reportedly used for high-risk, high-volatility meme coin speculation.
Co-founder's Response: Ex-Members Acted, Permissions Revoked
LayerZero co-founder Bryan quickly issued a statement confirming that the transactions did originate from addresses with multisig authority, but stressed that the operators were not current team members. He said the trades were conducted by "former members who were previously involved in the LayerZero multisig" and have since been removed from the multisig. Bryan denied any internal involvement in meme coin trading and clarified that the actions were part of OFT (Omnichain Fungible Token) testing aimed at verifying cross-chain message functionality.
Market Reaction: PEPES Unshaken, ZRO Rises Slightly
Following the controversy, the meme coin PEPES held its ground without a panic sell-off, while LayerZero's native token ZRO actually rose +2.44% amid the news. In comparison, SOL dipped -0.80%. Analysts suggest that the market viewed Bryan's swift clarification as a positive signal, temporarily easing security concerns. However, some users noted that the fact former members could still use multisig keys points to a loophole in permission revocation, urging LayerZero to strengthen internal risk controls.
Industry Warning: Multisig Management Becomes Key for Cross-Chain Protocols
This is not the first time LayerZero has faced security scrutiny. The protocol previously apologized for mishandling the Kelp DAO exploit and has seen funds migrating to Chainlink CCIP. The multisig key misuse incident underscores the vulnerabilities in governance security, permission management, and offboarding processes for cross-chain protocols. Going forward, ensuring regular multisig key rotation and instant permission revocation for departed personnel will become critical compliance challenges for LayerZero and its peers.