Winklevoss-Backed Zcash Treasury Plunges Nearly 40% on ZEC Privacy Bug Concerns

Fallout from a major bug that could’ve flooded the Zcash market with counterfeit coins hit Wall Street on Friday as investors unloaded shares in Cypherpunk Technologies, putting pressure on the firm backed months ago by tech moguls Cameron and Tyler Winklevoss.

The company, which late last year dedicated itself to buying Zcash, saw shares plunge to their lowest level since early March. As of writing, the company’s stock price (CYPH) had fallen 37% to 59 cents, recovering from an intraday low of 53 cents, according to Yahoo Finance.

Cameron rushed to Zcash’s defense, saying in an X post that “there will be bugs” found in the software behind any blockchain. He added, “What’s important is that there are world class researchers focused on hardening the network and staying ahead of the bad guys.”

Cypherpunk’s downturn marked a sudden blow to the Winklevoss twins’ crypto empire, which centers around exchange Gemini. GEMI shares fell 4.4% to $4.41 amid signs of broader pressure for U.S. stocks, with the Nasdaq on pace to slide more than 2%.

The vulnerability disclosed by Shielded Labs went undetected for four years before it was discovered by an AI-assisted audit, the organization supporting Zcash said. An emergency fix was deployed this week, but investors still flinched as the organization said it could not guarantee that the vulnerability had not been exploited.

The privacy coin changed hands around $329, a 37% decrease over the past day, according to CoinGecko. It had previously hit a multi-year high of nearly $700 in November.

That was the same month that Cypherpunk, formerly known as Leap Therapeutics, announced that Winklevoss Capital had led a nearly $59 million private placement in the firm. Since then, the company has bought 314,185 Zcash worth $102 million.

Because the company purchased the privacy coin at an average price of $337 apiece, Friday’s drop thrust its holdings into the red. Last month, the company reported a net loss of $77.2 million in the three months ended March 31, citing a swing in the value of its Zcash holdings.

In January, Shielded Labs unveiled that it had received $1.2 million worth of Zcash, representing a second donation from the Winklevoss twins. In an accompanying statement, Cameron said, “We believe strong privacy is an essential property of sound money.”

Onlookers who said that they had reduced their entire exposure to Zcash, such as BitMEX co-founder Arthur Hayes, noted in an X post that it’s “impossible” to assess whether the bug was exploited due to its privacy features, even if he thinks it’s “extremely unlikely.” 

Cypherpunk, meanwhile, made its case in response to similar doubt.

“There is zero evidence,” Cypherpunk said on X. Theoretically, it added, an attacker would have needed to “sit on counterfeit ZEC through a massive bull run instead of cashing out.”

“We are firmly committed to our 5% network accumulation target, as Zcash just demonstrated the institutional-grade security culture ,” Cypherpunk CIO Will McEvoy told Decrypt. “Short-term price action is noise, and our long-term capital allocation strategy remains unchanged.”

Editor’s note: This story was updated after publication to include comments from Cypherpunk.