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Hackers made away with more than $100 million worth of Bitcoin from thousands of supposedly secured “cold” wallets hosted by Canada-based company Coinkite.
As Bloomberg reports, the hackers managed to infiltrate the wallets despite clients having a physical hardware key associated with their accounts, which was supposed to provide nearly impenetrable security.
“The moment it loaded I knew I was screwed because I saw red lines for withdrawals,” one of the victims, Johnathan Goodman, told Bloomberg. “Between 9:36 and 9:43 pm on July 29th, all three of my wallets were completely drained.”
Crypto insights company Galaxy Research estimated that around $110 million worth of Bitcoin had been drained from around 5,000 wallets last week, a figure that grew to at least 7,300 by Monday.
The incident highlights persistent lapses in security plaguing the largely unregulated cryptocurrency industry.
In the case of Coinkite, it was a particularly egregious lapse in security. The firm warned its customers on July 30 that hackers were exploiting a software bug that allowed them to reconstruct wallet “seed phrases,” which are sequences of random words that act as a master key to “cold” — or offline — wallets.
Coinkite promised in an email to Bloomberg in a followup story that it was racing to get a full picture of the embarrassing situation, saying it was working on “helping affected customers.” However, the company refused to estimate the scale of the losses, vowing to conduct a “post-mortem” at an unspecified future date.
“We’re not in a position to independently confirm total losses or validate the specific figures being reported by third parties,” the company told Bloomberg. “We won’t speculate on a number we can’t verify directly.”
The company also kicked off an “ongoing ecosystem-wide security audit” which has revealed “numerous critical bugs in key software systems across the ecosystem using frontier AI models.”
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