The Solana-based Cypher Protocol is again in the negative spotlight after one of its core developers admitted to stealing and losing over $300,000 of users’ funds. Another of the project’s developers first unveiled the news and also alerted law enforcement.
Solana-Based Protocol Faces Inside Job
On Monday, Cobra, one of Cypher Protocol’s developers, revealed that a core contributor had stolen funds from the Cypher Redemption Package Contract. The developer, Hoak, had withdrawn funds from the contract for several months unnoticed.
The heist was only caught after a user in the project’s Discord pinged the team about having issues withdrawing funds. Per the post, Hoak claimed he would handle the issue. However, the user contacted the team after the developer’s deadline, stating that the issue persisted.
Consequently, the team investigated the issue and found that, in the last six months, Hoak had taken over $300,000 from the contract via 36 transactions.
During this time, the developer used the deployer wallet to withdraw assets such as Ethereum (ETH), Bonk (BONK), Orca (ORCA), Wrapped SOL (WSOL), Tether (USDT), USDC (USDC), among others.
Per the investigation, Hoak swapped the assets for Solana (SOL), USDT, and USDC before sending the funds to an intermediary wallet. The funds were sent to Binance from this wallet. The developer stole 2,498.8 USDT, 51,785.2 USDC, and 1,830.8 SOL, accounting for approximately $317,000.
Cobra expressed his disbelief and sadness regarding the situation, stating that he didn’t think it was possible a core contributor, who stayed after last year’s exploit to rebuild the project, could “be the one who rugged funds from the redemption contract.”
As reported by Bitcoinist, the Solana-based decentralized finance (DeFi) protocol was the victim of a security breach that took $1.03 million from the project. Despite the exploit being a major hit to the protocol, the team was able to freeze over half the stolen funds and offer a redemption plan.
The Redemption Package was based on the “socializing losses” mechanism, which consists of distributing the effects of an unfortunate event, like an exploit, across all users. Users would receive a portion of the remaining assets corresponding to their share or involvement in the protocol.
Developer Gambles Funds Away
On Tuesday, Hoak made a public statement admitting to the allegations against him and apologizing. In the statement, the developer claims to suffer from a crippling gambling addiction which has affected his professional life in several instances.
He explained that the untreated addiction drove him to steal the funds from the Redemption Package. However, he claims not to have run away with the Solana-based protocol funds but instead gambled them away, suggesting there’s little hope of retrieving the misappropriated assets.
He closed his statement by apologizing for his actions and stating, “Whatever comes next is in God’s hands.”
The community had mixed reactions to Hoak’s confession. Some members felt sympathetic towards the developer, as Ludomania is a serious matter that should be treated like any other addiction.
However, others felt that Hoak was “playing the victim” and using gambling as an excuse. Similarly, some considered that even if the reason was the one stated, users remained affected by his actions.
Problem gambling with cryptocurrencies is not a new issue in the community, as a user pointed out. A 2023 YouGov survey revealed that people in the UK “are experiencing harm from investing in cryptocurrencies and other high-risk trading products, experiencing similar difficulties that people report with gambling harms.”
It’s worth noting that cryptocurrencies are not related to or a cause of gambling addictions, but, as the UK’s Gambling Commission stated, “consumers who have a propensity to risk do perceive investing in these products as gambling.”
Solana is trading at $144.62 in the 3-day chart. Souce: SOLUSDT on TradingView
