Coldcard Firmware Bug Linked to $88.6M Bitcoin Theft

Coldcard users told to move funds now after researchers tie seed-flaw to large Bitcoin drain Coldcard hardware-wallet users face an urgent migration warning after on-chain research linked a firmware bug to a large series of thefts. Dogecoin contributor Mishaboar on Aug. 1 urged anyone who has ever used a Coldcard device to “migrate your funds to a new wallet immediately,” and to never reuse their Coldcard seed phrase. What happened - Galaxy Research’s on-chain analysis identified three suspected attack waves that together swept 1,367.05 BTC — about $88.6 million at the time of reporting — from 4,585 addresses. The firm calls the $88.6 million an “estimated observed size”; it has not been independently confirmed by Coinkite, law enforcement, or every affected user. - The first wave moved 1,082.65 BTC from 1,196 addresses in roughly 41 minutes on July 30. A later third wave took about 208 BTC from 1,912 addresses, with the average balance in that cluster falling to roughly 0.1 BTC per address. The shifting pattern suggests attackers moved from targeting larger balances toward many smaller wallets. - Galaxy said each wave looked internally consistent with a single operator, but it could not confirm whether the same actor executed all three waves. The third wave differed in operational details — using separate destination addresses, batching multiple victims per transaction, and only checking the default derivation path — indicating tactics evolved between sweeps. - Galaxy also warned that its pattern-matching may not catch every theft; other attackers could produce valid transactions that don’t match the same fee, destination or collection patterns. Which Coldcard products are affected Coinkite’s official advisory narrows the scope to specific models and firmware: - Seeds generated on Mk2 and Mk3 devices running firmware 4.0.1 through 4.1.9 are affected. - Seeds created on Mk4 and Mk5 devices before standard v5.6.0 or Edge v6.6.0X are also covered. - Coldcard Q users are covered if their seed was created before standard v1.5.0Q or Edge v6.6.0QX. - Mk1 devices are outside the reported firmware regression. - TAPSIGNER, OPENDIME and SATSCARD devices are unaffected because they use different codebases. What caused the weakness Block’s Bitcoin engineering and security team traced the root cause to a firmware integration error: when generating wallet secrets, an affected code path fell back to a deterministic MicroPython routine instead of using the STM32 hardware random-number generator. On Mk2 and Mk3 v4 firmware this fallback added no cryptographic entropy; later models received some limited secure-element reseed. Block emphasized its findings reflect the current technical view and are not based on exhaustive device testing. Coinkite’s investigation remains open and the company has promised a formal technical report. What Coinkite has done — and what it can’t fix Coinkite has released fixed firmware for every affected model and release track. The patches correct seed generation for newly created wallets, but they cannot add entropy retroactively to seed phrases already produced. That means a vulnerable seed moved into another wallet — hardware or software — will carry the same weakness. Action users must take now Coinkite and security experts recommend immediate, careful migration steps: 1. Install the fixed firmware for your device before generating a replacement seed. 2. Generate a new seed on the updated device — do not reuse the old Coldcard seed phrase. 3. Record and verify the new backup and check the receiving address on the device screen. 4. Send a small test transaction and confirm the funds arrived before moving the remaining balance. 5. Keep the old backup until the migration is fully verified, but do not enter the old seed into any computer or online device. Additional guidance and caveats - Never type a seed phrase into an internet-connected computer. Mishaboar reiterated this and recommended keeping multiple offline copies in separate secure locations to reduce exposure to phishing, malware, or cloud sync during a rushed migration. - Coinkite identified a narrow exception: users who added at least 50 fair, independent and private dice rolls before final seed words were produced — providing at least 128 bits of independent entropy — may be protected. Anyone who entered fewer than 50 rolls, can’t remember their count, or exposed the roll sequence should migrate. - A strong, unique BIP-39 passphrase adds protection but does not repair an affected seed. Short, reused or predictable passphrases may still be guessable; users are advised to replace the underlying seed as soon as practical. Broader implications Bitcoin investor Anthony Pompliano said the incident highlights how technically demanding self-custody can be: the Bitcoin protocol itself wasn’t compromised — attackers reproduced weak wallet keys offline — but users still lost funds when a third-party firmware bug weakened key generation. The case has also intensified the institutional-custody debate: some ETF advocates argue it strengthens the case for spot Bitcoin ETFs for investors who prefer price exposure without managing private keys, while ETF custody brings its own counterparty risks. What’s next Coinkite’s promised technical review and further Galaxy Research address analysis are the next expected updates. Until those are complete, the $88.6 million figure should be treated as an on-chain estimate rather than a final confirmed loss. For now the immediate priorities are installing fixed firmware, generating a new seed on updated devices, and migrating funds using safe, offline procedures.