A pseudonymous developer at Solana-based Cypher Protocol has confessed to stealing approximately $300,000 worth of user funds and gambling them away.

In a public statement shared on May 14, the developer, known as Hoak, said it stole approximately $300,000 worth of user funds from the Solana-based cross-margin decentralized exchange (DEX).

Hoak’s confession followed a previous disclosure by Barrett_io, another pseudonymous core contributor, who raised concerns about the absence of funds.

The post went unnoticed until a member of an unknown Discord group shed light on experiencing issues with fund withdrawals.

Hoak Stole Funds from Cypher Redemption Contract

According to Barrett, Hoak had stolen funds from the Cypher redemption contract over several months through 36 withdrawals.

The funds were then sent to an intermediary wallet before being transferred to the Binance exchange.

On-chain data compiled by Barrett reveals that an address associated with Hoak sent approximately $317,000 worth of Solana, Tether USDT, and USDC to Binance.

cypher contributor Hoak (wallet: 7sKMs4mdqFzFgmcZhMnaZayCFqfDEimAf94A2KKXjrWW) has stolen funds from the cypher redemption contract. This happened over months via 36 withdraws (txs laid out in document).

Summary of movement:
Deployer wallet (ETR8…) withdraws funds from…

— cobra ©️ (@barrett_io) May 13, 2024

CoinStats data shows that at its peak on December 7, Hoak’s wallet held around $68,365 worth of digital assets before the funds were sent to Binance.

The wallet still held over $56,000 worth of digital assets on April 22, but within the next two days, over 99% of the assets were transferred.

The incident deals another significant blow to Cypher Protocol, which has been striving to make a comeback after a previous hack in August 2023, when over $1 million worth of digital assets were stolen from the DEX.

Hoak Says He Has Gambling Addiction

Hoak, while acknowledging that he does not expect understanding for his actions, attributed his theft to a severe gambling addiction that spiraled out of control.

“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 the cryptocurrency space have often drawn parallels between the industry and gambling due to its speculative nature.

The comparison has been further emphasized by U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, who likened the crypto ecosystem to “casinos in the Wild West,” with stablecoins being compared to poker chips.

A survey conducted by YouGov in 2023 revealed that individuals gambling at “harmful levels” were nearly five times more likely to own cryptocurrencies than the general population, indicating a correlation between gambling addiction and participation in crypto trading.

In another major incident, digital asset investment firm BlockTower Capital saw its main hedge fund “partially drained” by fraudsters.

Despite the recent hacks, the cryptocurrency industry experienced a major downturn in combined losses from hacks and scams in April.

The month saw the lowest combined losses from crypto-related hacks and scams since 2021, with approximately $25.7 million lost to exploits, hacks, and scams.

More specifically, only $25.7 million was lost in attacks throughout the month, marking the lowest amount since CertiK began tracking such data in 2021.