Shares of Cypherpunk Technologies (CYPH) plunged 37% on Friday following the disclosure of a critical bug in Zcash, a privacy coin heavily backed by the Winklevoss twins. The vulnerability, which could have allowed counterfeit coins to flood the market, was discovered by an AI-assisted audit after going undetected for four years. An emergency fix was deployed, but uncertainty about potential exploitation spooked investors. Cypherpunk holds 314,185 Zcash (worth $102 million) purchased at an average price of $337, pushing its holdings underwater as Zcash dropped 37% to around $329. The firm, which pivoted to Zcash accumulation last year, reported a $77.2 million net loss last quarter due to the coin's value swing. Winklevoss Capital led a $59 million private placement in Cypherpunk in November. Cameron Winklevoss defended the network, stating that bugs are inevitable but emphasized world-class research efforts. BitMEX co-founder Arthur Hayes noted it's 'impossible' to determine if the bug was exploited due to Zcash's privacy features, though he considers it unlikely. Cypherpunk CIO Will McEvoy reaffirmed the firm's commitment to its 5% network accumulation target, dismissing short-term price action as noise.

Key facts

• Cypherpunk shares fell 37% after a Zcash bug that could create counterfeit coins was disclosed.
• The bug went undetected for four years and was found by AI-assisted audit; emergency fix deployed.
• Cypherpunk holds $102M in Zcash bought at average $337; now underwater as Zcash dropped 37%.
• Winklevoss-backed firm reported $77.2M net loss last quarter due to Zcash value swing.
• Cypherpunk CIO says long-term strategy unchanged despite short-term price drop.