Once again, the Solana Cypher Protocol Developer is under scrutiny after one of its key creators confessed to embezzling more than $300,000 from customers. Another developer on the project broke the news first and notified authorities.
Solana-Based Protocol Faces Inside Job
Cobra, a Cypher Protocol developer, said on Monday that a significant contributor stole money from the Cypher Redemption Package Contract. For months, nobody knew developer Hoak was discreetly withdrawing money from the contract. A project Discord member informed the crew about the theft when they had trouble withdrawing funds. Hoak pledged to fix it, according to the message. After the developer’s deadline, the client wanted to contact the team, indicating the problem was still present.
So, the group looked into it and discovered that Hoak had 36 transactions totaling over $300,000 removed from the contract in the past six months. At that time, the developer withdrew various assets from the deployer wallet, including Ethereum (ETH), Bonk (BONK), Orca (ORCA), Wrapped SOL (WSOL), Tether (USDT), and USDC (USDC). Investigators found that Hoak sent the money to a third-party wallet after exchanging it into Solana (SOL), USDT, and USDC. This wallet is where the money went to Binance. The developer stole about 317k USDT, 51,785.2 USDC, and 1,830.8 SOL.
Cobra voiced his shock and disappointment at the turn of events, saying he couldn’t believe a key contributor—who remained on board following last year’s exploit to help rebuild the project—could “be the one who rugged funds from the redemption contract.” According to Bitcoinist, a security breach cost the Solana Cypher Protocol Developer-based decentralized finance (DeFi) system $1.03 million. The team managed to freeze over half of the stolen cash and provide a redemption scheme, even though the exploit damaged the protocol.
The Redemption Package’s foundational “socializing losses” strategy makes sure that every user feels the impact of a disaster, like an exploit, the same way. A user’s stake or participation in the protocol would determine the percentage of the residual assets that would go to them.
Developer Gambles Funds Away
Hoak made an apology and public admission of guilt in a message he released on Tuesday. The developer alleges in the statement that his gambling addiction has severely impacted his career on multiple occasions. He said that he stole from the Redemption Package since his addiction was untreated. But he insists he didn’t steal the money from the Solana Cypher Protocol Developer; he just gambled it all away, so there must be some way to get his hands on those stolen riches.
At the end of his remarks, he regretted his behavior and said, “Whatever comes next is in God’s hands.” In response to Hoak’s confession, the community felt conflicted. As with any significant addiction, some people felt sorry for the developer because of Ludomania. Some, meanwhile, thought Hoak was “playing the victim” by blaming his gambling problems on someone else. Others argued that his actions would still impact users regardless of the stated rationale.
As one member of the forum pointed out, cryptocurrency gambling problems are nothing new. The results of a YouGov poll conducted in 2023 showed that “people report with gambling harms,” meaning that individuals in the UK “are experiencing harm from investing in cryptocurrencies and other high-risk trading products.” Although cryptocurrencies have nothing to do with or contribute to compulsive gambling, “consumers who have a propensity to risk do perceive investing in these products as gambling,” according to the UK’s Gambling Commission.
Hoak Stole Funds from Cypher Redemption Contract
Barrett claims that Hoak withdrew 36 payments totaling thousands of dollars from the Cypher redemption contract over several months. The funds were sent to a wallet that did as a go-between before being sent to the Binance exchange. According to Barrett’s on-chain data, a wallet linked to Hoak transmitted almost $317,000 worth of Solana, Tether USDT, and USDC to Binance.
According to CoinStats, when they were given to Binance on December 7, Hoak’s digital assets were worth roughly $68,365 at their Peak. By the end of the following two days, more than 99 percent. The wallet’s digital assets—worth more than $56,000—had been moved. After a prior theft in August 2023 took digital assets worth over $1 million. The DEX, Cypher Protocol has been trying to recover, but this incident has dealt it another major setback.
Hoak Fesses Up
Yesterday, Hoak made a statement through an X post:
The accusation that I took the money and gambled it away is steadfast; I will address it in my statement. Hoak was forthright about the theft. No one, including me, made off with it. Finally, Hoak offered some justification for his behavior. He apologized for everything he had done. The suffering he wrought and swore to endure whatever penalty came out to him.
