Stage File Proxy is a general solution for getting production files on a development server on demand. It is not intended for usage on production sites.
The module doesn't sufficiently check file URL for malicious content when attempting to do fallback retrieval leading to a cross-site scripting vulnerability.
This vulnerability is mitigated by the fact this development module must be enabled on an attacker's target site, and the attacker must be able to upload a malicious file to the "origin" server configured for the module.