Hoak, a core developer of Cypher Protocol, a Solana-based decentralized exchange (DEX), has publicly admitted to misappropriating nearly $300,000 from user funds and losing them through gambling.
In a revealing X post on May 14, Hoak openly confessed to the embezzlement, stating, “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 another core contributor, Cobra, posted about the missing funds on May 13.
Sequence of Misappropriation
Cobra’s detailed account disclosed that Hoak siphoned funds from the cypher redemption contract over several months through 36 withdrawals. The stolen funds, which included Solana (SOL), Tether (USDT), and USD Coin (USDC), were initially transferred to an intermediary wallet before being moved to the Binance exchange.
At its peak on December 7, 2023, Hoak’s wallet held approximately $68,365 worth of digital assets. By April 22, the balance stood at over $56,000, but more than 99% of these assets were transferred out within the following two days.
Impact on Cypher Protocol
This theft is a significant setback for Cypher Protocol, which has been recovering from a previous hack in August 2023 that resulted in over $1 million in losses. The recent incident further damages the protocol’s credibility and trust within the community.
While Hoak expressed remorse for his actions, he attributed them to a severe gambling addiction and possibly other unaddressed psychological issues. He stated, “I am also in no way, shape, or form attempting to victimize myself, but this is the culmination of what snowballed into a crippling gambling addiction.”
Broader Concerns
The incident has reignited criticisms of the cryptocurrency industry’s resemblance to gambling. SEC Chair Gary Gensler has likened the crypto environment to “casinos in the Wild West,” describing stablecoins as the “poker chips” of the sector. Moreover, a 2023 YouGov survey highlighted that individuals engaged in harmful levels of gambling were significantly more likely to be involved in cryptocurrency trading.
As the cryptocurrency community processes this incident, it underscores the urgent need for stronger governance and oversight mechanisms within the industry to protect users and maintain market integrity.
The event also serves as a reminder of the personal and professional risks associated with unchecked addictive behaviors, particularly in high-stakes environments like cryptocurrency trading.
