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Cypher Protocol Developer Confesses to Stealing $300,000 in User Funds and Gambling Away

A developer using the pseudonym Hoak within the Solana-based Cypher Protocol has admitted to appropriating around $300,000 in user funds and using them for gambling purposes.

Hoak made this admission in a public statement released on May 14, acknowledging the misappropriation of approximately $300,000 in user funds from the cross-margin decentralized exchange (DEX) operating on the Solana network.

This confession came after Barrett_io, another core contributor who operates under a pseudonym, previously raised concerns about the disappearance of funds.

The issue came to broader attention when a member of an undisclosed Discord group reported encountering difficulties with withdrawing funds.

Hoak Stole Funds from Cypher Redemption Contract

Barrett disclosed that Hoak had siphoned funds from the Cypher redemption contract over several months through 36 separate withdrawals. These funds were then funneled to an intermediary wallet before being routed to the Binance exchange.

On-chain data, meticulously compiled by Barrett, illustrates that an address linked to Hoak transmitted roughly $317,000 worth of Solana, Tether USDT, and USDC to Binance.

According to CoinStats data, Hoak’s wallet held a peak value of approximately $68,365 in digital assets on December 7 before the assets were sent to Binance. However, by April 22, the wallet still retained over $56,000 in digital assets. Within the following two days, however, more than 99% of these assets were swiftly transferred elsewhere.

This incident deals yet another significant blow to Cypher Protocol, which had been striving to recover from a prior hack in August 2023. During that attack, over $1 million worth of digital assets were pilfered from the DEX, further exacerbating the challenges faced by the platform.

Hoak Says He Has Gambling Addiction

Hoak, while acknowledging that he doesn’t anticipate sympathy for his actions, attributed his theft to a severe gambling addiction that spiraled out of control.

“I’m not trying to make excuses for myself, but this is the result of a gambling addiction that became overwhelming, compounded by possibly other psychological factors that went unchecked for too long.”

Critics of the cryptocurrency realm often draw parallels between the industry and gambling due to its speculative nature.

This comparison has been underscored by U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, who likened the crypto ecosystem to “casinos in the Wild West,” with stablecoins being equated to poker chips.

A YouGov survey conducted in 2023 revealed a striking correlation between individuals gambling at “harmful levels” and cryptocurrency ownership. Those gambling at such levels were nearly five times more likely to own cryptocurrencies compared to the general population, highlighting a potential link between gambling addiction and participation in crypto trading.

In another significant incident, BlockTower Capital, a digital asset investment firm, found its main hedge fund “partially drained” by fraudsters.

Despite these recent breaches, the cryptocurrency industry witnessed a notable decline in combined losses from hacks and scams in April.

During that month, the industry experienced its lowest combined losses from crypto-related hacks and scams since 2021, with approximately $25.7 million lost to exploits, hacks, and scams.

To be more precise, only $25.7 million was lost in attacks throughout the month, representing the lowest amount recorded since CertiK began tracking such data in 2021.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

Every cryptocurrency has two main components: the units of digital exchange called “coins” and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks in which these coins exist are called blockchains, which translates to “chains of blocks.”

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