Arthur Hayes Sells Entire Zcash Position After Orchard Pool Vulnerability Disclosure
Maelstrom, the fund run by Arthur Hayes, has sold its entire Zcash position after developers disclosed a counterfeiting vulnerability in the Orchard shielded pool. Hayes said he would reconsider if his assumption that exploitation is unlikely proves wrong, while the fund retains its Worldcoin position.
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The Position Exit
Arthur Hayes said on X that Maelstrom has sold its entire Zcash (ZEC) position following disclosures about a critical vulnerability in Zcash's Orchard pool. "Sadly due to the Orchard Pool exploit, I had to dump our entire ZEC bag," he wrote. The sale ends the 'Holy Trinity' basket Hayes publicly outlined on May 22, which also included NEAR and HYPE, according to his posts and NewsBTC's reporting. Hayes said the fund still holds Worldcoin (WLD), which he described as its AI-linked position.
Hayes also said ZEC's roughly 30% selloff forced him to reassess the position and take profit on all of it. He did not say the vulnerability had been exploited. His stated reasoning was that the privacy thesis he had attached to ZEC required a higher standard of assurance than the current reassurance provides.
The Vulnerability and Its Disclosure
Zcash developers Zooko Wilcox, Jason McGee and Taylor Hornby described the issue as "The Orchard Counterfeiting Vulnerability." Their statement said Hornby found the flaw on May 29 and disclosed it to the Zcash Open Development Lab, which coordinated an emergency response completed on June 2. The statement said the bug "could have been exploited to undetectably create an unlimited amount of counterfeit ZEC within Orchard."
Sources differ on how much weight to put on the absence of evidence of exploitation. Earlier ecosystem messaging said the flaw had been remediated, no exploitation was detected, and user funds were safe. The developers added a caveat that Orchard's privacy properties make it impossible to cryptographically prove whether the flaw was used while it existed. Josh Swihart, CEO of the Zcash Open Development Lab, described the bug in a post titled "Never Again" as a soundness failure in the proof system, in which a rule was written loosely enough to accept false information.
Remediation and Market Reaction
The fix required coordinated network action rather than a wallet or application patch. ZODL and the wider Zcash ecosystem temporarily disabled Orchard actions and then restored them with a corrected circuit. Reporting on the remediation describes the vulnerability as closed, but the residual uncertainty over whether counterfeiting ever occurred is the central issue for a privacy asset.
Hayes's account frames the decision around that uncertainty. "While I think it's extremely unlikely of any minting, it cannot be formally cryptographically proved impossible," he wrote. He said he had not appreciated how the flaw conflicted with his investment thesis until he read about it.
The Broader Trade and What Comes Next
The ZEC sale follows a quick reversal. Hayes had named HYPE, ZEC and NEAR the 'holy trinity' on May 22 and wrote that once in position, "trading is easy, sit back and watch number go up." A day before the ZEC exit, he said he had also sold his HYPE and NEAR positions, citing higher energy prices, upcoming large AI IPOs and political risk around artificial intelligence.
Hayes did not rule out returning to Zcash. "We will consistently re-evaluate our thinking and if my assumptions are proven incorrect, will rebuy, hopefully at lower prices," he wrote.
Why It Matters
For Traders
Large discretionary fund exits can add near-term pressure to ZEC, and Hayes's stated willingness to rebuy at lower prices is an open question rather than a signal.
For Investors
The episode shows that for privacy assets, the absence of evidence of exploitation may not restore confidence once a counterfeiting flaw is disclosed.
For Builders
The incident underscores that soundness bugs in shielded-pool proof systems can require coordinated network-level fixes, not just application patches.
This article is for information only and is not financial advice. Read the full disclaimer.
