Cypher Protocol Contributor Confesses to Misappropriating $260K for Gambling

A core contributor of the Solana-based Cypher Protocol, known by the pseudonym “hoak,” has admitted to misappropriating approximately $260,000 in cryptocurrency and using it for gambling. This disclosure follows an earlier exposure of missing funds intended to compensate for a $1 million exploit of the protocol last year.

In a statement posted on May 14 on X, hoak acknowledged the accusations against them, confirming that they had not absconded with the funds but had instead lost them to gambling. “The allegations are true, I took the funds and gambled them away,” hoak said.

The revelation came after another Cypher contributor, “Barrett,” shared a document on X, which detailed that hoak’s wallet executed 36 transactions to withdraw various cryptocurrencies, including Ether, Bonk (BONK), and Wrapped Solana (wSOL), from Cypher’s redemption contract, totaling around $260,000.

Expressing disbelief, Barrett noted, “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 rugged funds from the redemption contract.” Barrett also mentioned that law enforcement had been notified about hoak’s actions.

In his statement, hoak reflected on the personal turmoil and psychological challenges that led to this misconduct, describing it as a result of “a crippling gambling addiction” and “multiple other psychological factors that went by unchecked for too long.”

Hoak recounted their personal and professional struggles that preceded the incident, including failures to innovate within the decentralized exchange (DEX) design space. “I worked and worked,” hoak wrote. “I failed, I worked some more and I broke.”

They detailed how their mental state deteriorated over time, leading to withdrawal from friends and family, missed deadlines, and erratic behaviors. “I let too many things pile up in my head for too long, I let them consume me,” hoak confessed.

In August 2023, an attacker initially stole $1 million worth of Solana and USD Coin from Cypher Protocol. The protocol managed to secure $600,000 of the stolen assets and established a redemption contract along with a recovery plan to reimburse users for their losses.