Hoak, a pseudonymous contributor to the Solana SOL +0.56% -based exchange Cypher, admitted to taking and gambling away the protocol's funds recovered from an exploit. 

Hoak appears to have withdrawn ETH, WSOL, BONK and other cryptocurrencies across 36 transactions from Cypher's redemption contract, another Cypher contributor who goes by Barrett found. The amount taken from the redemption contract totaled to around $260,000, The Block calculated at current prices. 

Barrett stated in a social media post that he contacted law enforcement regarding Hoak's transactions. 

"I know nothing I say or do will make things better — perhaps other than rotting in jail,” Hoak wrote in a Tuesday statement. “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 noted that his behavior was due to worsening mental health over the past year. He said he had a "crippling" gambling addiction as well as "probably multiple other psychological factors that went by unchecked for too long."

"I let too many things pile up in my head for too long," Hoak continued. "I let them consume me, and ultimately they took the best of me — I completely lost it late last year and earlier this year to the point where simply trying to hold it together was impacting everything else in my life, distancing myself from long-time friends, family, not being able to meet the deadlines I set for myself, having erratic behaviors, you name it."

Cypher exploit and redemption

In August 2023, Cypher experienced an exploit that resulted in the loss of 38,530 SOL and 123,184 USDC. Cointelegraph reported at the time that the total value loss from the exploit surpassed $1 million. 

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The Cypher team froze $600,000 worth of funds stolen in the exploit on centralized exchanges. They then created a redemption contract for users to retrieve their lost funds.  

Barrett expressed his disappointment about the fate of the recuperated funds in a social media post. 

"This is incredibly saddening to me," Barrett said. "I never thought this would be a possibility, having a core contributor who stayed on after the exploit to try and rebuild the project be the one who rugged funds from the redemption contract."

"This was not caught until an individual in the discord pinged that he could not withdraw. Hoak then indicated that he would take care of the issue," Barrett continued. "The individual pinged again stating they still was not able to withdraw after the deadline Hoak provided."

Update (May 14, 21:48 UTC): Added The Block's calculation of the total amount taken from the redemption contract at current prices.