COLDCARD CATASTROPHE! $70M Bitcoin Stolen, Urgent Fixes Issued After Wallet Flaw

A significant security breach impacting Coldcard Bitcoin hardware wallets, manufactured by Coinkite, has led to the theft of over $70 million in Bitcoin. The hack, which began to be widely discussed on social media around July 30th, revealed a critical vulnerability in how these devices generated secure private keys. Industry experts even suggest the breach might have been accelerated by AI capabilities.

The root cause of the vulnerability was identified as a specific line of code within the firmware of Coldcard Mk3 devices, affecting versions 4.0.1 (March 2021) through 4.1.9. This bug caused the seed generation process to fall back to a weak software Pseudorandom Number Generator (PRNG) instead of utilizing the intended hardware true random number generator (TRNG). Consequently, seeds were generated with only approximately 40 bits of entropy instead of the required 128 bits, rendering the private keys for many single-signature wallets – particularly those created without user-generated dice rolls or a strong BIP-39 extra passphrase – predictable and susceptible to brute-force attacks.

Initially, the Mk3 models were confirmed to be affected, but Coinkite later advised that users of other devices, including Mk2, Mk4, Mk5, and Q, should also take precautions if their seeds were generated without sufficient entropy (at least 50 dice rolls) after late 2020. Over 1,082.65 Bitcoins have reportedly been drained from wallets, with the total stolen amount surpassing $70 million. Blockchain analysts continue to report ongoing drains, indicating active exploitation of the vulnerability.

For users who generated 12- or 24-word seeds on a Coldcard device without including user-generated dice rolls or a BIP 39 extra passphrase, immediate action is critical. Affected users are strongly advised to consider their funds at risk and move them as soon as possible to new, secure wallets.

Coinkite has released fixed firmware versions: Mk4 and Mk5 users must update to version 5.6.0 or later, Q users to 1.5.0Q or later, and Mk3 users to 4.2.0 or later. This advisory was updated on July 31, 2026, at 9:33 a.m. EDT. However, it is crucial to understand that merely updating the firmware does not secure an existing, vulnerable seed. The private and public keys generated by the compromised firmware remain insecure. After updating the firmware, users must create a brand-new wallet and securely send their funds on-chain to the new addresses. Coinkite’s advisory explicitly states: “Updating the firmware does not change or repair an existing seed. If your seed was generated before the fixed firmware version for your model, follow the migration guidance below unless the independent dice-entropy exception applies to you.”

Several migration strategies are recommended. The quickest and simplest method is to transfer funds to another hardware wallet not manufactured by Coldcard. If another hardware wallet is unavailable, users can generate a temporary passphrase using at least six seed words from the BIP 39 word list (using a guide to select words, not picking them independently), then send funds to this passphrase-protected wallet. This provides temporary security against immediate brute-forcing, allowing time to generate a new, secure seed. Software wallets like Nunchuck (which supports multisig for significant sums), Blockstream Green, and Bluewallet are also viable options for securing funds.

Even multisignature (multisig) wallets involving Coldcards may face specific edge cases of risk. Peter Todd, a core contributor and cybersecurity engineer, highlighted a scenario where a 2-of-3 multisig setup with two compromised Coldcards could be vulnerable. If the multisig script is revealed for the first time during a transaction (previously hidden behind an address hash), an attacker could use the two compromised keys to steal funds. A solution involves using private mempool mining services like MARA’s Slipstream, which promises to keep transactions secret until they are already included in a block, dramatically reducing an attacker’s window of opportunity. However, this solution is not relevant if addresses have already been reused.

Beyond the immediate crisis, the incident has prompted a broader re-evaluation of cybersecurity in the crypto space. NVK, a co-founder of Coldcard, committed to assisting affected users with police reports, insurance claims, and investigations. He also pointed to a "new AI paradigm," warning that AI-assisted code review can now uncover latent bugs at a speed that surpasses even seasoned human experts. Developers with open-source firmware are urged to assume their code is already being scrutinized by both attackers and defenders using advanced AI models. This hack, and the estimated $70 million bounty it represents, is likely driving hackers to audit every available wallet codebase for vulnerabilities, accelerating processes that were previously slower.

Industry experts, participating in lengthy public discussions, emphasized that other wallet providers, especially those with open-source projects generating private key material, are likely targets for similar probing in the coming weeks. The consensus suggests companies must now audit their code with the latest frontier AI models, such as those from Anthropic, OpenAI, and Moonshot’s Kimi K3, as a matter of survival. This period of introspection and review, though painful, is expected to lead to an open-source self-custody industry and infrastructure that is orders of magnitude more secure, built on hard-learned lessons.

The future of high-sovereignty wallets, whether retail or corporate, is expected to shift towards multi-vendor designs to distribute vulnerability risks across different codebases, teams, and hardware. User-generated entropy, particularly dice rolls (ideally over a hundred), was consistently highlighted as a robust solution for introducing non-software randomness. Additionally, "Covenants," a proposed Bitcoin soft fork, are being discussed as a further step to strengthen self-custody by enabling smart contract capabilities like whitelisted transaction addresses, which are currently not possible with Bitcoin script.

Regarding the attacker’s methods, an engineer from payments company Block, Clay Garrett, reported that the thief used a paid account at a well-known blockchain-services provider to query source addresses and perform related activities during the sweeps. This pattern was identified during investigations, and authorities have been notified, indicating a sophisticated and organized approach to the exploitation of this critical vulnerability.