Galaxy estimates Coldcard vulnerability theft reaches 2000 Bitcoin

A vulnerability affecting seed phrases generated by several Coldcard hardware wallet models may be linked to thefts of as much as 2,055 BTC, valued at roughly $130 million at the prices cited by Galaxy Research. The firm has confirmed 1,596 BTC stolen from more than 7,300 addresses in three waves of attacks and is tracking a fourth, unconfirmed cluster that would substantially increase the total.

Galaxy said in a Monday post on X that the attacks targeted wallets whose recovery seeds were generated on Coinkite’s Coldcard Mk3, Mk4, Mk5 and Coldcard Q devices running affected firmware. Coinkite has issued emergency firmware releases for the affected models and said it destroyed vulnerable inventory that remained under its control.

The episode challenges a core assumption behind hardware-wallet use: keeping private keys offline protects against remote malware, but it cannot compensate for a weakness in the process used to create the wallet’s secret recovery phrase. A compromised or predictable seed can give an attacker access to funds without physical possession of the device.

More than 7,300 addresses tied to confirmed thefts

Galaxy identified 1,596 BTC taken across three confirmed waves, along with 14 smaller incidents. The firm described the activity as an automated, programmatic sweep that began drawing attention after multiple exploit reports emerged on July 30.

The pattern suggests attackers were able to identify vulnerable wallets and drain them at scale rather than relying on isolated phishing attempts or individual device theft. Galaxy said the operation may have involved large language model assistance, though it did not provide further details on the role such tools may have played.

Galaxy Research said the attacks remain active. Its attribution work is focused on finding further attacker-controlled addresses and separating the main operation from newer opportunistic actors that may be exploiting the same flaw after it became public.

A fourth suspected wave could bring total losses to 2,055 BTC. Alex Thorn, head of firmwide research at Galaxy, said on Tuesday that the transaction pattern in that cluster resembled the earlier attack waves. Galaxy assigned medium-high confidence that Wave 4 is largely associated with one attacker, but has not counted it as confirmed because it lacks direct victim confirmation linking affected users to the cluster.

That distinction leaves the documented losses at 1,596 BTC while showing the potential scale of the exposure. The confirmed and suspected figures are based on blockchain tracing and address clustering, methods that can reveal common transaction behavior but cannot always establish the identity of a wallet owner.

Weak randomness placed wallet seeds at risk

The issue stemmed from weak randomness in the code used to generate seed phrases, according to the supplied account of the incident. A seed phrase, typically a set of words, serves as the master backup for a Bitcoin wallet. Anyone who obtains or reconstructs it can restore the wallet on another device and spend its funds.

Secure wallet generation requires a source of entropy — unpredictable data used to create secrets that cannot realistically be guessed. If the possible seed values are limited or follow a predictable mathematical pattern, attackers can search for them more efficiently than they could against a properly random seed.

Affected Coldcard users were advised by Galaxy to move funds to a safe address and create a new seed using a secure device. Moving coins to a new address derived from the same potentially compromised seed would not remove the underlying risk; the replacement wallet must use newly generated, reliable entropy.

One practical safeguard is to generate entropy independently, such as by rolling physical dice many times and entering the results during the wallet-creation process where supported. A sufficiently long series of dice rolls can provide a source of randomness outside the device’s software. Users should follow their wallet provider’s instructions carefully, since an incorrectly recorded manual-entropy process can create its own recovery problems.

Adding a BIP-39 passphrase — sometimes called an extra word or “25th word” — can also protect funds held under a known seed if the passphrase is strong, unique and never disclosed. It creates a separate wallet derivation and can reduce exposure to seed-generation flaws, although losing the passphrase permanently can also lock the owner out of the funds.

Most identified stolen coins remain untouched

Galaxy said that 90% of the stolen BTC it has identified has not moved. It added that none of the coins associated with Waves 1, 2 and 3 had moved at the time of its update.

Unmoved coins can make blockchain monitoring more useful for investigators because the assets remain visible at known addresses. They are not frozen, though. Bitcoin transactions are irreversible once confirmed, and the ability to recover stolen funds generally depends on identifying the people controlling the receiving addresses or intercepting assets when they reach a regulated service.

Galaxy said it has provided confirmed attacker and victim addresses to U.S. federal law-enforcement agencies and cyber-investigation groups. The firm did not identify the agencies involved.

Users who believe a compromised wallet is being drained may have limited options if an attacker’s transaction has not yet confirmed. In some cases, a victim can attempt to replace an unconfirmed transaction with one carrying a higher fee, a mechanism known as replace-by-fee. The tactic only works under specific conditions, including that the original transaction permits replacement and that the victim can spend the same unconfirmed inputs first. It cannot reverse a confirmed theft.

Firmware response puts focus on wallet migration

Coinkite’s emergency firmware releases and destruction of vulnerable remaining inventory address the immediate product issue, but users who generated seeds on affected firmware face a separate migration task. Updating the device alone does not make an already-created seed unpredictable.

The safest response for an affected holder is to create a new wallet with a newly generated seed, verify the backup process offline, and transfer funds to addresses controlled by that new wallet. Users should also be alert to fraudulent recovery offers, especially as public reporting on the vulnerability gives scammers an opportunity to target people who fear their Coldcard wallets are exposed.

For hardware-wallet makers, the incident places unusually direct scrutiny on entropy generation, an area users rarely see but one that determines whether a wallet’s offline security starts from a sound foundation.