We have DS1 (nearly 8) and DS2 (nearly 5). We operate a points/rewards system where you get points for good behaviour, chores, good work at school etc, and if you're naughty you lose points and also sit on naughty step. The points get written up on the fridge. At the end of the week we count up the points and pay out pocket money based on the points, that can be saved or spent on treats. Seemed to be working really well.
But since Christmas, DS1 has been losing points every day because of horrible behaviour to his brother - kicking, hitting and trying to scare him whenever he thinks our back is turned. Consequently, even though he has earned some points for good things, he is losing so many he is on zero points. DS2 has lots of points. Tried to talk to DS1 about how if he is just good and nice to his brother he can start getting points again, but not much changing. DS1 then starts saying things like "well it doesn't matter because I have lots more money than DS2 in my piggy bank anyway" and last night I saw DS2 shaking his piggy bank at bedtime and looking confused. This morning it has come out that DS1 has STOLEN all of DS2's pocket money! I am very 
I am worried about lots of things: Why has system stopped working with DS1 and what to do instead? How to stop general bullying and escalating bullying behaviour to his brother? How to adequately punish/make DS1 realise what he has done is really bad? How to come up with a system/punishment that doesn't set up more resentment (eg - if DS2 gets to play games/screentime and DS1 doesn't as part of punishment, then that will make Ds1 even nastier to DS2 I fear)? Have said to DS1 we will sit down with him to talk about this tonight as I think that will help but on the other hand I don't know what the way forward should be?
Any ideas would be really, really welcome.