Coldcard Seed-Generation Flaw Linked to $100M Bitcoin Theft, Thousands of Wallets Hit

A security flaw tied to Coldcard hardware wallets has been blamed for a wave of bitcoin thefts totaling more than $100 million, despite victims following standard self-custody best practices. Toronto entrepreneur Jonathan Goodman said his bitcoin was stolen on July 29 after all of his wallets were drained. Goodman reported losing 18.25 bitcoin, valued at just over $1.17 million at the time. In an Aug. 1 post on X, he wrote that he had done "everything right": his Coldcard device had never been connected to the internet, it was kept in a safe deposit box, and the seed phrase was stored separately and never shared. Galaxy Research said it has high confidence that 1,596 bitcoin, worth over $100 million, were stolen from about 7,300 addresses across a series of attacks. Galaxy Research head Alex Thorn estimated on Aug. 4 that at least 15 separate attackers were exploiting the issue. The attackers did not need physical access to victims' devices. The weakness was not a direct hardware compromise, but a failure in how certain Coldcard devices generated the seed phrase used to derive wallet keys. Hardware wallets are designed around the premise that secrets never leave the chip and that an air-gapped device cannot be remotely hacked. This incident showed that those protections depend on one critical step working correctly: generating keys with sufficient randomness. Coldcard maker Coinkite began its pivot toward hardware and decentralized tools in 2016 after winding down a hosted hot-wallet product, citing operational and regulatory pressures. The company released Opendime in April 2016 and later introduced Coldcard, announcing it in December 2017 as an "open, cheap & ultrasecure" hardware wallet. Early units shipped in 2018, with a more feature-rich model released in April 2019. The product gained a following among advanced users due to features such as duress PINs, encrypted MicroSD backups, multisignature support and user-supplied dice rolls. The seed-generation issue was introduced during a major firmware overhaul in 2021. Coinkite described firmware version 4.0.0 as "All New Code, Same Great Features," replacing core code, adding reproducible builds and crediting an account named "switck" for a "new source code library." Bitcoin developer James O'Beirne said he linked the "switck" account to Coinkite cofounder Peter Gray by matching cryptographic signatures across 58 code changes published under both names. Coinkite has not responded to that identity claim. The library in question, libngu, was incorporated into Coldcard firmware and handled functions including randomness used in wallet creation. O'Beirne said he raised concerns about that randomness source while auditing Coldcard's code in May 2025, and that Coinkite suggested a real problem likely would have been discovered earlier. Randomness, measured as entropy, is essential to making wallet seeds unguessable. Coldcard devices were intended to draw randomness from a dedicated hardware generator. Instead, a configuration error routed some devices to a weaker software-based generator that relied on partially predictable inputs such as device and timing data. That reduced the number of possible seeds an attacker needed to test. Block's Bitcoin engineering and security team said the root cause involved how two software components read a setting that was supposed to disable one random-number source after another was added. Libngu checked only whether the setting existed, not whether it was enabled, allowing firmware to compile and run while using the wrong generator. Block said affected Mk2 and Mk3 devices received no secure randomness through this path. Mk4, Q and Mk5 devices received some secure randomness, but only a small portion was retained. Coinkite estimates those newer devices produced seeds with 72 bits of randomness instead of the intended 128, leaving roughly 72 quadrillion times fewer possible seeds. Block traced the vulnerable code to firmware version 4.0.0 released on March 17, 2021. Coinkite said version 4.0.1 was the first affected release for Mk2 and Mk3 users. While the relevant source code was public and the proper hardware generator existed in compiled firmware, reviewers did not fully validate the end-to-end seed-generation path to confirm which generator was actually used. Coinkite also said AI-assisted reviews conducted before the theft missed the error, and tests run after the incident with several leading AI models failed to flag it. Coinkite has released fixed firmware across affected Coldcard models and release tracks. The patch prevents vulnerable seed generation going forward but cannot strengthen seeds that were already created under the flawed software. Coinkite advised affected users to install the updated firmware, generate a new seed and move funds to new addresses derived from the new seed. The company said it is supporting affected customers directly and has pledged to publish a fuller account of the failure. It did not respond to CoinDesk's request for comment. The incident underscores a core risk in self-custody. Eliminating exchanges and banks reduces counterparty exposure, but it introduces a different dependency: users must trust wallet manufacturers to generate keys safely. In Goodman's case, the private key to a million-dollar bitcoin holding sat offline in a safe deposit box, yet the compromised seed-generation process rendered those physical safeguards ineffective.