Solana's Cypher Developer Admits Losing $300K in Gambling

A developer linked to Cypher Protocol confesses to misusing $300,000 of user funds for gambling. Explore the repercussions and the impact on the crypto world.

May 15, 2024 - 18:05
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Solana's Cypher Developer Admits Losing $300K in Gambling
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An undisclosed individual exploited the system for months, completing more than 36 transactions. Hoak, a developer linked to Cypher Protocol, admitted to misappropriating nearly $300,000 of user funds and using them for gambling.

In a public statement on May 14, Hoak confessed, "To address the elephant in the room, the allegations are true, I took the funds and gambled them away. I didn’t run away with it, nor did anyone else."

This admission came after a May 13 post by Cobra, a core contributor, revealed the fund's absence, initially overlooked until a Discord group member reported issues with fund withdrawals.

According to Cobra, "Hoak has stolen funds from the cypher redemption contract. This happened over months via 36 withdraws… Deployer wallet (ETR8…) withdraws funds from Cypher’s redemption contract. Then conducts swaps and sends SOL, USDC, and USDT to an intermediary wallet (7sKM…). This intermediary wallet then sends funds to Binance."

Data from Cobra indicated that the address associated with Hoak sent $317,000 worth of Solana’s SOL, Tether, and USD Coin to Binance.

Summary of stolen funds. (Source: Cobra)

Hoak's wallet peaked at $68,365 in digital assets on Dec. 7, 2023, before transferring funds to Binance. By April 22, the wallet held over $56,000 in assets before most were transferred in two days. These actions compounded Cypher Protocol's challenges, as the DEX had already faced a hack in August 2023, losing over $1 million in digital assets.

Is there a rise in gambling addiction within the crypto world?

While Hoak acknowledged that he doesn't anticipate empathy for his actions, he attributed his extensive gambling problem to the theft:

“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 cryptocurrency have frequently condemned the industry for resembling a casino environment. Gary Gensler, the Chair of the United States Securities and Exchange Commission, is renowned for comparing the crypto world to “casinos in the Wild West,” where stablecoins operate as the equivalent of “poker chips.”

Crypto Survey 2023. (Source: GamCare/YouGov)

Based on a 2023 YouGov survey of more than 4,200 adults in the United Kingdom, individuals engaged in “harmful levels” of gambling were almost five times more inclined to own cryptocurrencies than the general populace, thus increasing their susceptibility to adverse impacts from crypto trading.