Unfortunately it sounds like it's possible (though I don't know on such limited information) that your forum has been hacked. Version 1.2 has several security exploits, and the only way to patch those is to upgrade to the latest version (which, as you mentioned, costs money).
An alternative is for you to install a free forum, such as phpBB or SimpleMachines Forum (SMF). Both of which are available through cpanel/fantastico as a one-click install. I know for sure that SMF has available a converter that will convert your existing IPB board to an SMF board (however it sounds like that may not be an option now, as your database is likely corrupt beyond repair, save for a backup).
Either way, I would highly recommend moving away from IPB 1.2, due to the numerous security exploits available.