$38M Bitcoin Stolen in Rapid Attack as Wallet Vulnerability Comes Under Scrutiny

A vulnerability in a hardware wallet’s random number generation system turned supposedly secure seed phrases into predictable ones, resulting in a Bitcoin theft worth around $38 million.

Approximately 594 BTC, valued at nearly $38 million, was taken from about 500 wallets during a 25-minute attack window between 01:31 and 01:56 UTC on Friday. The breach was connected to a flaw in the key-generation process used by Coldcard hardware wallets.

The attacker transferred 1,324 Bitcoin outputs across 500 transactions within only three blocks. Following the drain, roughly 562 BTC was combined into a single wallet address, where the funds have remained stationary.

Every affected wallet was a single-signature wallet holding more than 0.15 BTC. Many had been inactive for years, and the stolen coins were linked to transactions from 2021 through 2026, aligning with the period when the vulnerability existed.

Coldcard is an offline Bitcoin hardware wallet developed by Canadian company Coinkite. The device stores private keys away from online systems, with different versions released over time, including Mk2, Mk3, Mk4, Q, and Mk5 models.

The security risk depended on the firmware version installed when the wallet was first generated, rather than the date the physical device was purchased.

Seed phrases are designed to be created using highly secure randomness, producing an enormous number of possible combinations that make unauthorized guessing virtually impossible.

However, Coldcard’s firmware contained a flaw that weakened this protection. According to research from Block’s Bitcoin engineering and security teams, a build setting prevented the device from using its dedicated hardware random number generator. A supporting library checked only whether the option was present instead of verifying that it was actually enabled.

Because of this issue, wallet creation fell back to a weaker software-based method that relied on the device’s serial number and clock register values to generate keys.

These inputs did not provide sufficient security. The serial number is fixed device information, while clock values are timing data that could potentially be estimated or recreated by attackers using similar hardware. Block traced the problem to a code change introduced on March 1, 2021, which appeared in firmware version 4.0.0 released that month.

Coinkite advised users who created seeds on affected Mk3 devices to take action and said early analysis suggested Mk4, Q, and Mk5 models were not vulnerable.

Block said it shared the findings with Coinkite, which acknowledged the issue. Both teams described their investigations as ongoing, while Block explained that it published details before completing full exploit testing because the vulnerability was already being exploited.

The flaw extended beyond standard seed generation. It also affected Coldcard paper wallet private keys, where the generated value directly becomes the key, as well as seed-splitting masks, device cloning keys, and Key Teleport transfers.

Despite the size of the Bitcoin loss, market reaction remained limited. BTC continued trading above $64,000 during early Asian hours, suggesting the incident had little immediate influence on broader investor sentiment.