A security flaw in a hardware wallet’s randomization process allowed supposedly impossible-to-predict seed phrases to become vulnerable, resulting in the theft of about $38 million worth of Bitcoin.
Approximately 594 BTC, worth nearly $38 million, was withdrawn from around 500 wallets during a 25-minute window between 01:31 and 01:56 UTC on Friday. Investigators linked the attack to a weakness in the way Coldcard devices generated wallet keys.
The attacker transferred 1,324 Bitcoin outputs through 500 transactions across only three blocks. Following the sweep, roughly 562 BTC was consolidated into one wallet address, where the funds have not moved since.
The affected wallets were all single-signature accounts holding at least 0.15 BTC. Many had been inactive for several years, with the stolen coins originating from activity between 2021 and 2026, matching the timeframe in which the wallet vulnerability existed.
Coldcard, created by Canadian Bitcoin security company Coinkite, is a hardware wallet designed to keep private keys offline and isolated from internet-connected devices. Its product lineup includes several generations, such as Mk2, Mk3, Mk4, Q, and Mk5.
The exposure was linked to the firmware version used when the wallet was first created, rather than the date the hardware device was purchased.
A wallet’s seed phrase is supposed to be generated using a highly secure source of randomness, creating an enormous number of possible combinations that makes guessing the phrase practically impossible.
However, a flaw in Coldcard’s firmware weakened that process. According to research from Block’s Bitcoin engineering and security teams, a build configuration caused the device to bypass its hardware-based random number generator. A related software component checked only whether the option was available instead of confirming that it was enabled.
As a result, the wallet generation process fell back on a simpler software method that used the device’s serial number and clock registers as randomness sources.
Neither input provided true secrecy. The serial number is permanent factory information, while clock values are timing data that attackers could estimate or reproduce with similar devices. Block identified the issue as originating from a code change made on March 1, 2021, which was included in firmware version 4.0.0 released that month.
Coinkite advised users who created wallets on Mk3 devices running affected firmware versions to take precautions. The company said its initial review indicated that Mk4, Q, and Mk5 models were not impacted by the issue.
Block said it reported the vulnerability to Coinkite, which acknowledged the findings. Both companies described their investigations as preliminary, while Block noted that it published its analysis before completing full exploit testing because attacks were already taking place.
The vulnerability extended beyond standard wallet seeds. The same flawed random generation method also affected Coldcard paper wallet private keys, where the generated output directly becomes the key, along with seed-splitting masks, device cloning keys, and Key Teleport transfers.
Despite the size of the theft, Bitcoin’s market showed little immediate reaction. BTC continued trading above $64,000 during early Asian hours, indicating that the wallet breach had limited impact on broader market sentiment.
