Cameron Winklevoss defends Zcash as bug sparks market panic

Cameron Winklevoss has defended Zcash after the privacy coin plunged as much as 45% and Cypherpunk Technologies shares dropped 37% following disclosure of a critical bug that could have allowed unlimited counterfeit ZEC to be created.

According to a June 5 X post, Cameron Winklevoss defended Zcash as investors reacted to the disclosure of a critical vulnerability in the network’s Orchard shielded pool. While acknowledging that bugs can emerge in any blockchain system, he argued that the focus should be on how quickly researchers identify and address them.

“When it comes to any L1, there will be bugs. What’s important is that there are world class researchers focused on hardening the network and staying ahead of the bad guys.”

His remarks arrived as pressure spread across companies tied to the Zcash ecosystem.

Shares of Cypherpunk Technologies, a publicly traded company focused on accumulating Zcash, fell to their lowest level since March. Yahoo Finance data showed the stock dropped 37% to $0.59 after touching an intraday low of $0.53. At the same time, shares of Gemini-linked GEMI declined 4.4% to $4.41 as technology stocks weakened across U.S. markets.

Shielded Labs says exploit was possible before emergency fix

Details released by Shielded Labs showed that security researcher Taylor Hornby discovered the vulnerability on May 29 during an AI-assisted audit. According to the organization, the flaw remained undetected for roughly four years inside the Orchard shielded pool.

Shielded Labs stated that Hornby successfully used the exploit in a local testing environment to create unlimited counterfeit ZEC without detection. The organization added that the same method could have worked on the Zcash mainnet before the issue was patched.

An emergency response led by the Zcash Open Development Lab and other ecosystem contributors resulted in a network upgrade completed by June 2. The fix temporarily paused Orchard activity before restoring it with corrected code.

Despite the repair, Shielded Labs said cryptographic tools alone cannot determine whether the exploit was used before the patch because Orchard transactions are designed to preserve privacy.

While the organization described prior exploitation as unlikely, it emphasized that users should not rely solely on that assessment.

The Zcash Foundation later released Zebra 5.0.0 through the NU6.2 hard fork, re-enabling Orchard with the corrected circuit. According to the foundation, no evidence of unauthorized value creation had been identified.

Market participants cut exposure as uncertainty grows

Selling intensified across Zcash-related assets following the disclosure. According to data from crypto.news, Zcash (ZEC) plunged more than 45% in 24 hours, hitting an intraday low of $264.80 on June 5. The privacy coin has since pared some of those losses and was changing hands at around $361 at press time.

Among those reducing exposure was BitMEX co-founder Arthur Hayes. In a post on X, Hayes said he sold his entire ZEC position because the incident undermined his investment thesis around privacy-focused assets.

Hayes wrote that exploitation appeared “extremely unlikely” but argued that the inability to conclusively rule it out created a problem for a privacy-focused cryptocurrency. 

“The privacy from AI, govt, big tech narrative demands perfection not improbability. I read about the exploit yday, and didn’t appreciate how it violated my narrative mental map. The 30% dump, made me rethink, and I had to take profit on the entire position.”

Meanwhile, Cypherpunk pushed back against concerns that counterfeit coins had entered circulation. In a statement posted on X, the company said there was “zero evidence” that the vulnerability had been exploited. It also argued that an attacker would have had little incentive to hold counterfeit ZEC through a major bull market instead of selling the coins earlier.