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The first 3 words carry the same information as: hackers hacked hackable proprietary code. So just "proprietary code hacked" is enough.

Agreed. Further reduced:

> Proprietary code hack.

(6w/45c -> 3w/22c: >50%)

This is too context dependent to be considered lossless.

As it's overwhelmingly code that is hacked, this is nearly lossless:

Proprietary hack

2w/15c

Phack

1w/5c

Goddamn! I thought I was anal about efficiency...

You can get rid of 'flawed' since it's implicit in 'exploit'

The word exploit alone is ambiguous since it can also mean roughly “to use.”