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Solana Cypher developer admits to gambling $300K of user funds

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Solana Cypher developer admits to gambling $300K of user funds

A core pseudonymous developer of the Solana-based decentralized exchange Cypher Protocol, known as Hoak, confessed to misappropriating approximately $300,000 worth of user funds and gambling them away.

Despite carrying out over 36 separate transactions, Cypher Protocol’s core developer, Hoak, exploited the system internally without detection for months.

The core developer of the Solana-based cross-margin decentralized exchange (DEX) publicly acknowledged his misappropriation of funds in a candid statement shared via a May 14 X post.

“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.”

Hoak’s public admission followed a May 13 post by fellow core contributor Cobra, who revealed the unexplained disappearance of funds within the Solana-based cross-margin decentralized exchange (DEX) platform.

Initially, users overlooked the revelation from Cobra, but it garnered attention after an anonymous Discord user expressed concerns about difficulties encountered while attempting to withdraw funds from the decentralized exchange platform.

According to Cobra:

“Hoak has stolen funds from the cipher 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.”

An analysis of on-chain data conducted by Cobra revealed that an address linked to Hoak transferred a combined sum of $317,000 in Solana’s SOL, Tether (USDT), and USD Coin (USDC) to the Binance exchange.

At his peak, Hoak’s digital wallet contained a substantial sum of $68,365 in various cryptocurrencies on Dec 7, 2023. However, he subsequently transferred these funds to the Binance exchange.

In other news, North Korean hackers are now targeting cryptocurrency companies with a newly identified malware called Durian.

According to CoinStats data, Hoak’s digital wallet contained more than $56,000 worth of cryptocurrencies on April 22. Intriguingly, he moved over 99% of these assets within the subsequent 48-hour period.

Hoak’s actions have significantly set back Cypher Protocol, which has been striving to regain its footing following a major hack in August 2023 that resulted in the loss of over $1 million in digital assets.

Despite acknowledging that his actions are inexcusable, Hoak attributed his compulsive gambling addiction as the underlying cause of the misappropriation of funds.

“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 and probably multiple other psychological factors that went by unchecked for too long.”

Critics of the cryptocurrency industry frequently draw parallels between it and the high-stakes, unpredictable world of casino gambling, citing concerns over the speculative nature of the market and the potential for substantial financial losses.

Gary Gensler, the Chairman of the United States Securities and Exchange Commission, likened the crypto ecosystem to “casinos in the Wild West,” with stablecoins serving as the “poker chips.”

A 2023 YouGov survey of more than 4,200 adults in the United Kingdom found a striking correlation between problem gambling and cryptocurrency ownership. According to the study, individuals exhibiting gambling behavior at “harmful levels” were nearly five times more likely to hold cryptocurrencies than the average person, indicating a heightened vulnerability to the potential adverse effects of crypto trading.

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