Everything Is Plummeting, But the Situation Is Even Worse for This Altcoin: Allegations of a Fake Token Caused a Nearly 50% Drop

The privacy-focused altcoin Zcash (ZEC) faced intense selling pressure following the discovery of a critical security vulnerability in its protected trading pool called Orchard. Losing over 50% of its value in the last 24 hours, ZEC’s market capitalization has been wiped out at approximately $5 billion.

Daily chart showing the decline in ZEC price.

According to information shared by Shielded Labs, security researcher Taylor Hornby discovered a critical vulnerability on May 29, 2026, that allows for the unlimited generation of counterfeit ZEC in the Orchard pool. The vulnerability reportedly existed in the system since the Orchard update for Zcash was implemented in May 2022 and went undetected for nearly four years despite numerous security audits.

Another noteworthy detail is that Hornby utilized Anthropic’s Claude Opus 4.8 AI model during his security research. According to Shielded Labs, Hornby was able to develop an attack code that worked based on AI-powered analysis, generating unlimited and undetectable fake ZECs in a local test environment.

The Zcash ecosystem initiated an emergency response process after the vulnerability was discovered, and the issue was resolved with updates released on June 2nd. However, experts argue that due to Zcash’s privacy architecture, it’s impossible to cryptographically prove whether the vulnerability was exploited in the past. While the total supply can be independently verified in transparent blockchains like Bitcoin, Zcash’s secure transaction structure prevents definitively determining whether counterfeit coins were created in the past.

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Shielded Labs maintains that there is no evidence so far that fake ZECs have been generated, and that it is unlikely the vulnerability has been exploited. The company states that the vulnerability went unnoticed for years by leading cryptography experts worldwide, and that its discovery was the result of a privately conducted security investigation.

Nevertheless, the uncertainty in the markets has unnerved investors. Analysts say the current selling pressure stems not from a confirmed abuse, but rather from questions surrounding the reliability of the network’s total supply.

On the other hand, Shielded Labs announced that it is working on a new network upgrade that will allow everyone to verify the integrity of the Zcash supply. The planned upgrade aims to create a new protected pool and track all coins from the Orchard pool using special accounting rules. This will make the ZEC supply on the network verifiable and prove that no counterfeit coins exist.

The company also announced it will accelerate its security efforts, expand AI-powered audit processes, and launch a new project to mathematically verify the Orchard circuit. Shielded Labs has also begun recruiting for security manager and cryptography specialist positions to expand its security team.

*This is not investment advice.

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