Zcash is facing renewed market pressure after developers revealed details of a critical vulnerability in its Orchard shielded pool, while crypto investor Arthur Hayes confirmed he has sold his entire ZEC position following the disclosure.
The issue came to light after Shielded Labs published findings from security researcher Taylor Hornby, who discovered the flaw on May 29. The vulnerability affected Orchard, a key component of Zcash’s privacy-focused transaction system, and could have allowed an attacker to create counterfeit ZEC within the shielded pool without immediate detection.
— zooko🛡🦓🦓🦓 ⓩ (@zooko) June 4, 2026
According to the development team, an emergency response involving multiple Zcash ecosystem contributors was launched shortly after the bug was identified. Developers moved quickly to patch the vulnerability, temporarily disabling Orchard-related activity before restoring operations with corrected code on June 2.
Critical bug raised supply concerns
Shielded Labs confirmed that the vulnerability was both real and exploitable. During internal testing, researchers successfully demonstrated how the flaw could be used to generate unlimited counterfeit ZEC inside the Orchard pool.
While the exploit was proven in a controlled environment, developers stressed that no evidence has been found showing the bug was used on the live network before it was fixed.
However, verifying whether any exploitation occurred remains difficult. Because Orchard is designed to protect transaction privacy, the network’s cryptographic tools cannot conclusively prove whether the vulnerability was abused before the patch was deployed.
Despite this limitation, Shielded Labs said available evidence suggests prior exploitation is unlikely.
Arthur Hayes sells entire ZEC holdings
The disclosure also prompted a reaction from Arthur Hayes, co-founder of BitMEX and a prominent crypto market participant. Hayes revealed that he had exited his entire Zcash position after reviewing the details of the vulnerability.
The Holy Trinity is dead. Sadly due to the Orchard Pool exploit, I had to dump our entire $ZEC bag.
– While I think it’s extremely unlikely of any minting, it cannot be formally cryptographically proved impossible
– The privacy from AI, govt, big tech narrative demands perfection…— Arthur Hayes (@CryptoHayes) June 5, 2026
According to Hayes, the incident undermined one of the core assumptions behind his investment thesis for Zcash. While he acknowledged that large-scale counterfeit minting appeared unlikely, he argued that privacy-focused cryptocurrencies require near-perfect security guarantees.
His decision to sell was notable since he had recently made ZEC, due to its focus on privacy, a key part of his “Holy Trinity” trade, which contrasted with the narratives represented by HYPE and NEAR.
His comments came as ZEC experienced a sharp decline, falling roughly 30% following the disclosure. Hayes added that he could reconsider the asset in the future if further information supports the network’s integrity.
Zcash developers are considering new upgrade
In response to ongoing concerns, Shielded Labs is exploring a network upgrade designed to provide stronger assurances about Zcash’s circulating supply.
The proposal would introduce a new shielded pool and implement a turnstile accounting mechanism to track coins moving out of Orchard. The goal is to allow the community to verify that no counterfeit ZEC remains hidden within the affected pool.
Developers said additional details on the proposal will be released next week, including potential trade-offs and implementation plans.
The disclosure follows the recent NU6.2 hard fork and the release of Zebra 5.0.0, which re-enabled Orchard using corrected code. Developers maintain that no evidence of unauthorized value creation has been discovered, but efforts are continuing to strengthen confidence in Zcash’s supply integrity.
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