Rafomac News, Tech & Trends That MatterMore than $100 million in Bitcoin was stolen from thousands of cold card wallets, the very devices touted as the gold standard for crypto security. What makes this hack chilling is it required zero physical access—attackers exploited a dormant software flaw dating back five years.
How Over $100 Million Vanished Without a Breach
On the night of July 30, 2026, roughly between 131 and 156 UTC, 594 Bitcoin—about $38 million—were drained from some 500 single-signature cold card wallets in under 25 minutes. But the attack didn’t end there. Within 41 minutes, a wider sweep hit nearly 1,200 addresses, stealing 1,082 Bitcoin, roughly $70 million.
Bigger figures emerged soon after. By August 2, Galaxy Research tallied losses to 4,585 addresses and around $89 million. The next day, the total rose to 1,816 Bitcoin spread across 5,200 to 7,300 wallets.
What’s remarkable? These wallets had been dormant for over three years. Owners bought the recommended hardware, properly wrote down their seed phrases, and stored devices offline—some in safes or vaults. Yet attackers managed to drain wallets without physical interaction. In one instance, Canadian entrepreneur Jonathan Goodman lost 18.25 Bitcoin worth about $1.6 million from wallets stored in a safety deposit box—within seven minutes, while the hardware stayed untouched.
The Firmware Flaw That Undermined Security
This wasn’t a phishing scam or careless device connection. The exploit targeted the software that generated seed phrases.
Back on March 1, 2021, Coldcard’s firmware switched to a new cryptography library called Libangu. A single line of flawed code asked the wrong question when handling hardware randomness. Instead of verifying if the hardware randomness was actually enabled, it only checked for the presence of the setting—an important, yet subtle difference.
This caused the device to disable the chip’s dedicated hardware random number generator prematurely, defaulting to a software fallback using the device’s serial number and startup timing to create randomness. That’s like setting a lock’s combination based on easily guessable details. After initial startup, the device never fetched fresh randomness again, leaving every seed phrase predictable.
The kicker: the hardware RNG was still alive and working in parts of the system, masking this flaw from internal audits. So for five years, millions of devices shipped with effectively weakened seed security, indistinguishable from normal behaviour.
From 128-Bit to 40-Bit Security: What This Means
Your seed phrase is a massive random number, usually 128 or 256 bits, making it practically impossible to guess. But this bug cut down effective randomness from 128 bits to about 40 bits on Coldcard MK2 and MK3 models, a drop so severe it reduced the keyspace from unimaginable billions of trillions to roughly a trillion possible combinations.
The newer MK4, MK5, and Q models were better, thanks to secure chips adding extra entropy, but still only offered around 72 bits of security—far from ideal.
Forty-bit security is vulnerable. An ordinary laptop can brute-force all those possibilities offline within hours. What the user sees remains a perfectly normal 24-word seed phrase and a working OLED display. But behind the scenes, the odds are drastically stacked against security.
Why the Attacks Were Automated and Fast
Attackers simply ran through every candidate seed phrase in the reduced keyspace on their own machines, checked which ones held Bitcoin, then swept funds swiftly. No vulnerabilities in Bitcoin were exploited, no devices breached.
As Nick Peroko, Kraken’s chief security officer, observed, the newer secure chips were certified components, but no one verified the exact code path used during seed generation.
The problem extended beyond seed phrases—it also affected paper wallets, device cloning keys, USB encryption keys, and even web 2FA secrets and secure note passwords. The fallout was much broader than the main wallets.
Who Survived and Why
Three groups remained untouched: those who injected real-world randomness by rolling dice during setup, users who employed a strong BIP39 passphrase (an extra secret word layered onto the seed), and anyone using multi-signature wallets requiring multiple device keys.
Crucially, all these safeguards are optional, often skipped during setup. Survivors were simply more cautious or ‘paranoid’ users—adding extra layers beyond defaults.
Coldcard’s Response and What You Need to Do
Coldcard’s CEO, Ralpho Novak, reacted swiftly, publicly apologising and urging all users who generated seeds on firmware between versions 4.0.0 and 5.0.3 to move their funds immediately. Shipments were halted, vulnerable inventory destroyed, and emergency patches released.
However, updating firmware alone won’t fix a compromised seed. The vulnerability is tied to the seed phrase itself, not the physical device, so even importing the seed into a new wallet won’t help.
Coin Kite’s strict data purge policy means they couldn’t notify past customers, creating a communication challenge despite good privacy practices.
The Wider Crypto Industry Has a Randomness Problem
This incident is just the latest in a series of cryptographic randomness failures. Past bugs include the 2023 Milk Sad bug, which used only 32 bits of randomness, making private keys crackable, and the $160 million Wintermute hack caused by poor randomness. Recent bugs also affected Trust Wallet’s browser extension and mobile wallets in “Ill Bloom” attacks that stole millions.
Random number generation is often overlooked yet is a perennial weakest link in crypto security. It’s invisible until exploited, lurking silently inside your device.
Recommended Steps to Protect Your Bitcoins Now
- Verify if your seed phrase was created on vulnerable firmware (versions 4.0.0 through 5.0.3).
- If you didn’t use dice rolls, a strong passphrase, or multi-signature setup, assume your seed is compromised.
- Update your device firmware immediately, but understand this stops new bad seeds; it doesn’t fix old ones.
- Create a new wallet with patched firmware to generate a secure seed.
- Transfer your funds to this new wallet as soon as possible.
- Treat your old seed as public—never use it or fund it again.
- Always verify receiving addresses on your device’s screen before sending significant amounts.
Beware of phishing sites pretending to be recovery phrase checkers—they are active now, preying on panic.
What This Means for Self-Custody
This event shakes up the idea of ‘safe’ self-custody. Exchange deposits spiked dramatically right after, as shaken users rushed for perceived safety. But relinquishing your keys to centralized exchanges reintroduces risks of a very different kind.
The key insight? Real security now comes from verifiable self-custody with multiple layers: added randomness, passphrases, and multi-signature wallets. These ‘optional extras’ have become essential baselines.
The crypto ecosystem proved its strength by rapidly identifying, patching, and publicly sharing this flaw—unlike traditional finance, where transparency is rare.
Ultimately, those upgrading their wallets now will hold Bitcoin more securely than before this hurricane of vulnerabilities struck.
It’s a wake-up call, yes, but also an opportunity to rethink what true self-sovereignty in crypto looks like today.
For anyone eager to understand deeper security mistakes that can cost real money, there are detailed guides available to dive into.
