Question: When Cypher is in the restaurant with Smith, is this before he was set free from the Matrix? I'm not too sure if it was the same for him, but I know they try and get them when they are young rather than older, so if it was during him being free, would he have been caught?
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Answer: Cypher was out of the matrix when he met Smith at the restaurant. Like those on the ship, he had to plug into the system anytime he wanted to go into the Matrix. Cypher was being used as a mole by Smith to get to Morpheus. There would be no reason to take him out as he was working with them.
Lummie ★