How a Zcash Vulnerability Made a Fallen Crypto Founder $13.5 Million

The discovery triggered immediate, confidential coordination between the Zcash Open Development Lab engineers, the Zcash Foundation, miners, and exchanges . The team had to act fast: the vulnerability existed in a live privacy pool handling real user funds, but any public disclosure before a fix could invite exploitation.

The Two-Stage Emergency Upgrade

The Zcash Foundation executed a two-phase response over five days.

Phase 1: Emergency Soft Fork (June 2)

At block height 3,363,426 — approximately 02:00 UTC on June 2 — the network activated an emergency soft fork through the Zebra 4.5.3 client . The soft fork temporarily disabled all Orchard-containing transactions, effectively freezing the shielded pool. This containment measure stopped any theoretical exploitation while developers finalized a permanent circuit fix.

Phase 2: NU6.2 Hard Fork (June 3)

At block height 3,364,600 — approximately 00:05 EDT on June 3 — the NU6.2 hard fork activated . The upgrade introduced a corrected zero-knowledge proof verification key through the Zebra 5.0.0 release, permanently closing the vulnerability and re-enabling the Orchard pool .

The Zcash Foundation confirmed no user funds were lost, no privacy was breached, and there was no evidence the bug was ever exploited . However, as multiple sources note, Zcash's privacy design makes it cryptographically impossible to conclusively confirm the absence of hidden counterfeit ZEC inside the shielded pool . A built-in "turnstile" mechanism was cited as an additional safeguard .

The 30% Crash and Its Aftermath

When news of the vulnerability became public, ZEC plunged roughly 30% . The drop triggered immediate selling pressure across exchanges, with traders reacting to the gravity of a potential unlimited-inflation bug inside a privacy coin.

The sharp move rewarded one leveraged position in particular.

Garrett Jin's $13.5 Million Short

Garrett Jin, founder of the now-defunct exchange BitForex, holds a 3x leveraged short position on ZEC executed on Hyperliquid, a fully on-chain derivatives exchange . On-chain analytics firm Onchain Lens reported the position had generated approximately $13.5 million in unrealized profit following the ZEC crash .

Key details of the trade, based on on-chain data:

• Entry price: ~$626 per ZEC
• Notional size: Jin placed a $36 million limit order to short ZEC in late May, alongside a separate HYPE buy order
• Leverage: 3x on the ZEC short
• Platform: Hyperliquid decentralized exchange

Notably, Jin also carries a 5x leveraged long on Bitcoin with an unrealized loss exceeding $17 million . The contrasting directional bets — long BTC, short ZEC — suggest a specific thesis rather than a broad hedging strategy .

The BitForex Backstory

Jin's trading activity doesn't exist in a vacuum. BitForex abruptly halted withdrawals in early 2024, locking users out of their assets. On-chain investigators described the event as a $56.5 million exit scam . The exchange is now widely characterized as "now-defunct" and "fraud-accused," with multiple regulatory bodies — including authorities in Hong Kong and Japan — investigating allegations of fraud and mismanagement of user funds .

The exchange had a troubled history well before the 2024 collapse. Japan's Financial Services Agency flagged BitForex in 2023 for operating without proper registration . The exchange was also previously accused of fabricating trading volume . Jin served as BitForex's CEO from 2017 to 2020, and had previously held an operations director role at Huobi (HTX) .

A Pattern of Suspiciously Timed Shorts

The June 2026 Zcash trade is not Jin's first appearance in on-chain investigations. In October 2025, pseudonymous on-chain researcher Eye published an analysis linking Jin to a Hyperliquid whale wallet controlling over 100,000 BTC . That wallet had opened a $1.1 billion leveraged short on Bitcoin and Ethereum just before President Trump announced 100% tariffs on Chinese imports, a "black swan" event that triggered $19 billion in liquidations and reportedly earned the whale over $80 million in profit .

The timing of the 2025 trade — the short was placed minutes before the tariff announcement — immediately sparked insider trading allegations. Eye traced the whale's addresses back to Jin through ENS domains ereignis.eth and garrettjin.eth, connecting funds withdrawn from exchanges like HTX and Binance years earlier to his tenure at Huobi and the BitForex collapse .

Jin denied controlling the wallet, claiming it belonged to a client. He stated he had "no connection with the Trump family" and criticized the allegations as baseless . Despite the denials, the on-chain attribution and pattern of precisely timed directional bets have intensified scrutiny from crypto investigators and regulators alike.

What This Means for DeFi and Protocol Security

The combined episode highlights three interconnected themes in modern crypto markets.

AI-assisted security auditing works. The Orchard bug sat undetected for nearly four years through traditional audits. Claude Opus 4.8 found it in a single day . As zero-knowledge systems grow more complex, AI-assisted formal verification is becoming a critical layer of defense.

Privacy coins face a unique auditability problem. Zcash's strongest feature — shielded transactions — also made it impossible for the Foundation to definitively prove no hidden counterfeit ZEC existed. The incident underscores a fundamental tension between privacy and provable soundness.

On-chain leverage amplifies protocol risk into market risk. A $36 million short on a mid-cap privacy coin might seem like a routine trade. When that short is held by a trader with a history of allegations involving suspicious timing, operating through a fully on-chain venue with no KYC barriers, and executing against a protocol's worst-case scenario, the boundary between informed trading, security research, and potential market manipulation blurs significantly.