Solana’s Cypher Experience $300K Theft

Developer of the Cypher Protocol Steals $300K from Funds Meant for Hack Victims, Claiming Addiction to Gambling

TakeAway Points:

  • Hoak, a developer at Cypher Protocol in Solana, acknowledged taking $300,000 from a fund intended to compensate hack victims.
  • According to reports, after months of deliberate theft that started in December, the stolen assets were forwarded to Binance for cash out.
  • The creator of Cypher exposed internal disloyalty by reporting the incident to law authorities along with the identity of the developer.

Cypher’s Internal Betrayal 

The Solana, California-based cryptocurrency trading network Cypher has experienced a number of difficulties, such as external attacks and thefts. But the most recent episode is more personal; it involved an inside job that resulted in the loss of money intended to compensate victims. Under the pseudonym Hoak, a Cypher developer admitted to stealing hundreds of thousands of dollars from the protocol’s hack reparation fund. 

“To address the elephant in the room, the allegations are true, I took the funds and gambled them away,” the developer, who goes by the pseudonym Hoak, said in a document titled “Public Statement.” Hoak published the document Tuesday afternoon on X, formerly Twitter.

“I didn’t run away with it, nor did anyone else,” he added.

Cypher’s founder, Barrett, accused Hoak of methodically withdrawing cryptocurrency from the protocol’s redemption contract since December, which led to Hoak’s shocking admission. The stolen goods, which are estimated to be worth $300,000 at today’s pricing, were found to be directed to Binance, where they were probably supposed to be exchanged for cash.

Disclosure and Results

Following Barrett’s public charges and a thorough examination of on-chain data that implicated Hoak in the theft, Hoak ultimately confessed to the crime, apologised, and blamed his behaviour on a “crippling gambling addiction and probably multiple other psychological factors that went by unchecked for too long.”

It emphasises how serious the breach is because Hoak acknowledged the accusations and said that he expected to be punished. Barrett responded by informing law enforcement of Hoak’s activities and real name, indicating a move towards accountability and legal action.

Effect on the Community and Cypher

At its peak in August, users had deposited crypto worth more than $1.5 million in the exchange. On August 7, however, a hacker exploited a bug in the protocol’s code and made off with more than $1 million in crypto, this episode has significant ramifications for Cypher and its community. 

It is especially disappointing for Barrett and the Cypher team to learn that one of the project’s key contributors, who stuck around to help with its recovery, was in charge of “rugging” money from the redemption contract. 

“This is incredibly saddening to me. I never thought this would be a possibility, having a core contributor who stayed on after the exploit to try and rebuild the project be the one who raised funds from the redemption contract.” Barrett said.

The loss not only erodes confidence in the system but also draws attention to the vulnerabilities that crypto projects have to both internal and external attackers.


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