Cypher Developer Gambles Away $300,000 in User Funds

In a public statement on Twitter, a contributor to the Cypher Protocol known as “Hoak” confessed to stealing nearly half a million dollars in community funds to support a gambling addiction.

The pseudonymous developer admitted to the theft, stating that he took the funds and gambled them away, but did not flee with the money nor did anyone else. Hoak’s admission came as a result of an ongoing investigation that began on the Cypher Protocol Discord server, a platform that facilitates cross-margin decentralized exchange on the Solana blockchain.

Details of the Theft

According to Cypher Protocol core contributor “Barrett,” the stolen funds included $314,674 in USDT, USDC, and Solana (SOL) sent to Binance by a wallet linked to Hoak. Additionally, the same wallet accumulated over $184,077 in various cryptocurrencies such as ETH, RLB, ORCA, RAY, USDT, USDC, BONK, JitoSOL, mSOL, and WSOL.

Hoak’s confession detailed his deep remorse and acknowledgment of the consequences of his actions. He expressed his apology to all affected parties and admitted that his actions were driven by a severe gambling addiction and other unchecked psychological factors. The situation that led to the theft dates back to an unexplained event at the first Solana Breakpoint conference in November 2021, where both Hoak and his brother, along with Max from Mango DAO, were victims of a similar situation.

Impact on Cypher Protocol

Following the failure of a previous project, Hoak began working with Cypher Protocol, a decentralized exchange that offers margin- spot and derivatives markets as well as borrowing and lending services. He recounted his dedication to the project, likening his colleagues to family and emphasizing his commitment to their mission. Despite his efforts to innovate within the DEX design space, Hoak admitted that he ultimately succumbed to the pressures and fell into a destructive cycle of gambling.

Barrett further elaborated on the theft on Twitter, revealing Hoak’s wallet address and explaining that the theft occurred through 36 withdrawal transactions over several months. The initial detection of the theft came when a member of the Cypher Protocol Discord server reported an inability to withdraw funds, which Hoak initially promised to resolve. However, when the user was still unable to withdraw after the provided deadline, suspicions were confirmed.

Response and Investigation

Barrett has since reached out to law enforcement with detailed information about the theft, sharing a Google Docs document that outlines the extensive details of the incident. Internet sleuth ZachXBT, who previously assisted the Cypher Protocol team with an exploit in 2023, also commented on Twitter, revealing that he had Hoak’s personal information and would share it with law enforcement if necessary.

Hoak concluded his public statement with a somber acknowledgment of his situation, expressing his belief that there was no way forward and that his fate was now out of his hands. He ended his Twitter thread with a heartfelt apology for his actions.

Broader Implications

The incident has raised concerns about the growing issue of gambling addiction within the cryptocurrency space. Hoak’s confession highlights the impact of his gambling addiction on his behavior, a point he reiterated while denying any intent to victimize himself. The cryptocurrency industry has often been criticized for its perceived resemblance to gambling, with U.S. Securities and Exchange Commission Chair Gary Gensler likening the crypto ecosystem to “casinos in the Wild West” and stablecoins to “poker chips.”

A 2023 YouGov survey of over 4,200 adults in the United Kingdom found that individuals gambling at harmful levels were nearly five times more likely to own cryptocurrencies than the general population, making them more susceptible to the negative impacts of crypto trading. This data underscores the potential risks associated with gambling addictions within the rapidly evolving cryptocurrency market.