Coldcard Users Lose $89m After Bitcoin Wallet Is Hacked

An ongoing attack against a popular Bitcoin wallet has already led to the theft of an estimated $89m, according to researchers.

Coinkite’s Coldwallet is a Bitcoin-only hardware wallet which came under attack on July 30.

Galaxy Research tracked the initial wave of attacks, which drained 1,082.65 Bitcoin ($70m) from 1196 addresses over a 41-minute window. It traced the funds to four attacker-controlled addresses, claiming the activity was likely automated.

The research team identified a subsequent second and third wave on August 1, pushing the total stolen up to 1367 Bitcoin ($88.6m) and the victim address count to 4385.

“The Coldcard exploit is ongoing. Move Coldcard single-sig funds to safe locations immediately,” Galaxy Research said in a post on X (formerly Twitter) on August 2.

“We have reported ~600 addresses we believe to be hackers holding funds stolen from Coldcard-generated weak entropy addresses to federal investigators, industry compliance firms, and cross-industry cyber investigators.”

Read more on wallet-based threats: Cyber-Criminals Exploit Hardware Wallet to Steal Almost $30,000

A report from Block’s Bitcoin Engineering and Security team on July 30 claimed the incident stemmed from exploitation of a firmware vulnerability dating back to 2021.

Due to the bug, the wallet sometimes didn’t use a hardware-based random-number generator (RNG) to create users’ wallet seeds (master keys). Instead, it used a fallback generator which was deterministic in nature, meaning the numbers generated were not random enough to be cryptographically secure.

This meant attackers could reproduce the keys offline.

Coinkite Takes Action

Coinkite has now released updated firmware for every affected model and release track, and urged customers not to generate new seeds on affected models until they have installed the fix.

“Funds controlled by a seed generated on Mk2 or Mk3 version 4.0.1 (March 2021) through 4.1.9 inclusive are at risk if the seed was created without at least 50 fair, independent, private dice rolls and the funded wallet is not protected by a strong, unique BIP-39 passphrase,” it explained.

“Seeds generated on Mk4, Q and Mk5 before the fixed firmware releases are also affected, with about 72 bits of entropy rather than the expected 128 bits.”

There may currently be a fourth wave of attacks underway, according to a post on X by Galaxy Research head of firmwide research, Alex Thorn.