Cypher Protocol Developer Confesses to Stealing $300,000 in User Funds and Gambling Away
A pseudonymous developer at Solana-based Cypher Protocol has confessed to stealing approximately $300,000 worth of user funds and gambling them away.
Hoak’s Public Confession
In a public statement shared on May 14, the developer, known as Hoak, admitted to stealing approximately $300,000 worth of user funds from the Solana-based cross-margin decentralized exchange (DEX). Hoak’s confession came after another pseudonymous core contributor, Barrett_io, raised concerns about the missing funds.
The initial post went unnoticed until a member of an unknown Discord group highlighted issues with fund withdrawals, bringing the matter to public attention.
Hoak Stole Funds from Cypher Redemption Contract
According to Barrett, Hoak had stolen funds from the Cypher redemption contract over several months through 36 withdrawals. These funds were transferred to an intermediary wallet before being moved to the Binance exchange.
On-chain data compiled by Barrett reveals that an address associated with Hoak sent approximately $317,000 worth of Solana, Tether USDT, and USDC to Binance. CoinStats data shows that at its peak on December 7, Hoak’s wallet held around $68,365 worth of digital assets before the funds were sent to Binance. By April 22, the wallet still held over $56,000 worth of digital assets, but within the next two days, over 99% of the assets were transferred.
This incident is a significant blow to Cypher Protocol, which has been striving to recover after a previous hack in August 2023 that resulted in the loss of over $1 million worth of digital assets from the DEX.
Hoak’s Gambling Addiction
Hoak attributed his actions to a severe gambling addiction, acknowledging that he does not expect understanding or sympathy. He stated, “I am also in no way, shape, or form attempting to victimise myself, but this is the culmination of what snowballed into a crippling gambling addiction and probably multiple other psychological factors that went by unchecked for too long.”
Critics of the cryptocurrency space often compare it to gambling due to its speculative nature. This comparison has been emphasized by U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, who likened the crypto ecosystem to “casinos in the Wild West,” with stablecoins compared to poker chips.
A 2023 survey by YouGov revealed that individuals gambling at “harmful levels” were nearly five times more likely to own cryptocurrencies than the general population, indicating a correlation between gambling addiction and participation in crypto trading.
Broader Impact on the Crypto Industry
Despite the recent hacks, including this incident and a major fraud at digital asset investment firm BlockTower Capital, the cryptocurrency industry experienced a notable downturn in combined losses from hacks and scams in April. The month saw the lowest combined losses from crypto-related hacks and scams since 2021, with approximately $25.7 million lost to exploits, hacks, and scams.
This incident at Cypher Protocol underscores the ongoing challenges of security and trust in the decentralized finance (DeFi) space, highlighting the need for robust security measures and greater awareness of the risks associated with cryptocurrency investments.
