As a researcher with personal experience in the blockchain and cryptocurrency industry, I find the recent turn of events surrounding the Cypher Protocol on Solana deeply concerning. The admission by one of its core developers, Hoak, that he stole and lost over $300,000 of users’ funds is a significant blow to the project’s reputation and community trust.
As an analyst, I’d rephrase it as follows: I’ve come across troubling news regarding the Cypher Protocol, a project built on the Solana blockchain. One of its core developers has admitted to stealing and subsequently losing over $300,000 worth of users’ funds. This revelation was initially brought to light by another developer within the project who also notified law enforcement.
Solana-Based Protocol Faces Inside Job
On Mondays announcement, it came to light that a key member of the Cypher Protocol development team, identified as Cobra, disclosed a distressing incident. An unidentified contributor, referred to as Hoak, had clandestinely taken funds from the Cypher Redemption Package Contract over an extended period, approximately several months, without detection.
As an analyst, I uncovered an intriguing turn of events regarding the recent heist attempt. Initially, one of our project Discord users reached out to us with concerns over their inability to withdraw funds. They tagged Hoak, our designated team member for such matters, asking him to address the issue. According to the user’s post, Hoak assured them that he would take care of it. However, the situation escalated when the user recontacted us after the established deadline, reporting that the problem had not been resolved.
After looking into the matter closely, it was discovered that Hoak had made a total of 36 transactions amounting to over $300,000 in the past six months, drawing funds from the contract.
As a crypto investor, I have observed that during this period, the developer made withdrawals using the deployer wallet. Among the assets taken out were Ethereum (ETH), Bonk (BONK), Orca (ORCA), Wrapped SOL (WSOL), Tether (USDT), and USDC (USDC).
According to the findings of the investigation, Hoak exchanged the assets for Solana (SOL), Tether (USDT), and USD Coin (USDC) prior to transferring the funds to an intermediary wallet. Subsequently, these funds were forwarded to Binance from this wallet. The developer illicitly obtained a total of $317,000 worth of 2,498.8 USDT, 51,785.2 USDC, and 1,830.8 SOL.
Cobra voiced his shock and disappointment over the turn of events, expressing his strong belief that the key team member, who had devoted effort towards the project’s revival following last year’s security breach, couldn’t have been the person responsible for misappropriating funds from the redemption contract.
According to Bitcoinist‘s report, a Decentralized Finance (DeFi) project built on the Solana blockchain suffered a security breach, resulting in a loss of approximately $1.03 million. Although this incident significantly impacted the protocol, its developers managed to freeze more than half of the stolen funds and proposed a redemption strategy for the affected parties.
The Redemption Package utilized the principle of “shared burden,” whereby the costs of an unforeseen incident, such as a security breach, were dispersed among all participants. Each user received a proportional share of the remaining resources based on their level of engagement with the protocol.
Developer Gambles Funds Away
On Tuesday, Hoak confessed publicly to the accusations levied against him and expressed regret. In his statement, Hoak acknowledged struggling with a debilitating gambling problem that has negatively impacted his career on multiple occasions.
The addiction to substances that went untreated caused him to pilfer the funds from the Redemption Package against his will. Yet, he asserts that he didn’t abscond with the Solana protocol funds but rather wagered them away, leaving slim chances for recovering the mismanaged resources.
At the end of his speech, he expressed regret for his past actions and added, “From hereon, I leave the outcome to the will of God.”
Some community members expressed understanding towards Hoak, recognizing Ludomania as a genuine issue deserving compassion and attention, similar to other addictions.
Some people believed that Hoak was making an exaggerated display of being wronged and that his gambling issue was just a convenient explanation. Likewise, it was pointed out that regardless of the cause, others were still impacted by Hoak’s behavior.
The issue of problematic gambling behavior with cryptocurrencies is nothing new within the community, as one user has highlighted. A recent 2023 YouGov survey disclosed that individuals in the UK have been encountering harm from investing in cryptocurrencies and other high-risk trading products, facing challenges akin to those reported with gambling-related harms.
As a researcher studying the relationship between cryptocurrencies and gambling addictions, I’d like to clarify that there is no inherent connection between the two. However, based on the findings of the UK Gambling Commission, it appears that individuals with a predisposition towards taking risks may view investing in cryptocurrencies as a form of gambling.
Solana is trading at $144.62 in the 3-day chart. Souce: SOLUSDT on TradingView
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2024-05-16 04:12