A Hardware Wallet Was Supposed to Be Unhackable. Coldcard Owners Lost Over $100 Million Anyway.
A firmware bug left Coldcard seeds guessable, and attackers swept an estimated $116 million to $130 million in bitcoin. A proposed Ontario class action claims Coinkite was warned a year earlier.
C-Tribe Editorial
The pitch for a hardware wallet is simple. Keep your bitcoin keys on a small offline device, away from the internet, and nobody can take them. On July 30, that promise broke for thousands of Coldcard owners at once, and now the Canadian company behind the device is facing a proposed class action in Ontario.
The suit was filed September 11 in the Ontario Superior Court of Justice by Amir Reza Naderi, a Los Angeles resident, against Coinkite Inc. and co-founders Rodolfo Novak and Peter D. Gray, Bitcoin.com News reported. It alleges losses of more than US$140 million and says the flaw "undermined the entire purpose and function of the device." The proposed class covers buyers of Coldcard Mk2, Mk3, Mk4, Mk5 and Q devices, according to TokenPost. None of the allegations have been tested in court, and the case has not been certified. Coinkite declined to comment on the litigation.
What Went Wrong With the Coldcard Wallet?
The randomness was fake. A wallet's security rests on its seed, a secret number that should be close to impossible to guess. Coinkite's own technical write-up explains that a code library meant to call the device's hardware random number generator was instead using a simple default generator from MicroPython. Seeds designed to carry 128 bits of strength had roughly 40 bits on older Mk2 and Mk3 units and about 72 bits on newer ones.
In practice, that turned private keys into a search problem. Seeds "followed a discoverable pattern," as the Toronto law firm WeirFoulds put it. Blockchain analytics firm TRM Labs traced the problem to a build configuration error dating back to firmware 4.0.1 in March 2021. Someone found the pattern and swept wallets in waves, with the first sweep taking about 25 minutes.
The totals differ depending on who is counting. TRM Labs estimates roughly 1,816 BTC, about US$116 million, taken from more than 5,200 addresses over four days. Galaxy Research confirmed 1,596 BTC across three waves and said the total could reach about US$130 million if a fourth wave is included, The Block reported. The US$140 million figure comes from the lawsuit. TRM has not attributed the theft to any specific actor.
Did Coinkite Know About the Flaw?
That is the heart of the case. Coinkite's July 30 advisory said, "We were unaware of the bug until today." The lawsuit claims otherwise, alleging the founders were warned by May 2025. Bitcoin developer James O'Beirne says he flagged concerns about the obscure library to the company that month and was told, in effect, that "we'd already know by now," according to CriptoNoticias. Whether that warning was specific enough to put Coinkite on notice is something a court would have to decide.
Coinkite also made a striking admission. Weeks before the attack, the company said it had run its code past "one of the best available AI models" and "it did not find this bug." After the theft, it tested again with several leading models, including Anthropic's Claude, and wrote that "none of them caught it," in an August 4 post. For anyone assuming AI code review has made security audits cheap, that is worth remembering.
"The last three days have been some of the hardest in this company's history, and for a lot of the people reading this, they've been something much worse," the company wrote, as quoted by Fortune. Its advisory did not mention compensation.
Can Victims Actually Win a Coldcard Class Action?
It will be hard. The suit relies on Ontario's Consumer Protection Act and argues that consumer law overrides Coinkite's terms limiting liability, Cryptopolitan reported. Naderi seeks compensatory and punitive damages for his own loss of about 1.23 BTC and for the class.
First it has to be certified. Since Ontario amended its Class Proceedings Act in 2020, plaintiffs must show a class action is "a superior means" of resolving the claims and that common questions "predominate over the individual issues," law firm Bennett Jones explains. Common questions are the strong part of this case, since a single firmware bug affected every buyer the same way. Individual losses, wallet setups and whether each owner used extra protection like dice rolls or a passphrase will vary.
Then there is the law on code. "Courts have not consistently treated software bugs as product defects," attorney Katherine Kirkpatrick Bos told Unchained, calling it "an uphill battle." Jessi Brooks of Ribbit Capital raised the practical problem of "finding the entity that can pay." A private hardware maker facing a nine-figure claim may not have nine figures to give.
What Does This Mean for Self-Custody?
It punctures a comfortable assumption. Personal wallet compromises made up 20% of all value stolen in crypto in 2025, about US$713 million across more than 158,000 incidents, according to Chainalysis. Most of those were phishing, malware and stolen seed phrases, failures blamed on users. The Coldcard case is different. Owners who did everything right still lost their coins, because the device itself generated weak keys.
That matters in Canada, where about 10% of adults owned bitcoin in 2023, according to the Bank of Canada. The comparable hardware wallet scare, a 2023 supply chain attack on Ledger's software library, cost users roughly US$600,000 and never touched the devices themselves, BleepingComputer reported. The Coldcard flaw was in the core of the product.
If you own an older Coldcard, check Coinkite's advisory for affected firmware and move funds to a freshly generated seed if yours is listed. Then look at the wider point. Self-custody means you trust the code instead of a bank, and this summer showed how few people can check that code, even with AI helping them. An Ontario court will now decide who pays when that trust fails.
