Zcash Bug Fears Sink Winklevoss-Backed Firm Shares 37%

Shares of Cypherpunk Technologies (CYPH), a company backed by the Winklevoss twins and dedicated to buying Zcash, plunged nearly 40% on Friday following disclosure of a critical bug in the Zcash protocol. The vulnerability, discovered by Shielded Labs through an AI-assisted audit, could have allowed attackers to create counterfeit coins undetected for four years.

Panic Selling Hits Stock and Crypto

The stock hit an intraday low of 53 cents before recovering slightly to close at 59 cents, a 37% drop, according to Yahoo Finance. This marks Cypherpunk’s lowest price since early March. The broader crypto market also felt the heat, with Zcash’s native token (ZEC) falling 37% to around $329, down from a multi-year high of nearly $700 last November.

The vulnerability was patched this week with an emergency fix, but Shielded Labs acknowledged they could not guarantee it hadn’t been exploited already. That uncertainty spooked investors. BitMEX co-founder Arthur Hayes said on X that it’s “impossible” to assess exploitation due to Zcash’s privacy features, though he personally thinks it’s “extremely unlikely.”

Winklevoss Defense and Portfolio Pain

Cameron Winklevoss took to X to defend the project, stating that “there will be bugs” in any blockchain software and emphasizing the importance of having top researchers “staying ahead of the bad guys.” He also noted in January that the twins donated $1.2 million in Zcash to Shielded Labs, calling privacy “an essential property of sound money.”

Despite his defense, the downturn directly hit the Winklevoss portfolio. Cypherpunk had purchased 314,185 ZEC at an average price of $337 each, meaning Friday’s drop pushed its holdings underwater. Last month, the firm reported a net loss of $77.2 million for the quarter ended March 31, largely due to swings in Zcash’s value. Shares of Gemini (GEMI), their exchange, also fell 4.4% to $4.41 amid broader U.S. stock market pressure.

No Evidence of Exploitation, Says Firm

Cypherpunk pushed back against doubt, stating on X that there is “zero evidence” of exploitation. The firm argued that an attacker would have needed to “sit on counterfeit ZEC through a massive bull run instead of cashing out,” which seems unlikely. Still, the damage to sentiment was immediate.

The incident underscores how even well-audited privacy coins remain vulnerable to hidden flaws, and how quickly markets punish uncertainty. For the Winklevoss twins, it’s a reminder that backing a single asset—even one they believe is sound money—carries serious risk when bugs surface.

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