By Why Is The Attacker Targeting Smaller Wallets?
Bitcoin stolen from wallets created with vulnerable Coldcard devices has reached 1,367 BTC, worth nearly $89 million, after the attacker shifted toward lower-balance addresses that remained exposed following two earlier theft waves.
Galaxy Research identified a third wave early Sunday, tracking approximately 208 BTC drained from 1,912 addresses between Friday afternoon and Saturday morning UTC. The latest activity lifted the total number of affected addresses to 4,585.
The average loss fell to just over 0.1 BTC per wallet, compared with nearly one bitcoin during the opening attack on July 30. That first wave removed 1,083 BTC from 1,196 addresses in only 41 minutes.
The decline suggests the largest vulnerable wallets may already have been emptied. The attacker is now continuing through addresses holding amounts worth only a few thousand dollars, indicating that the remaining searchable wallet pool is less profitable but still large enough to justify continued sweeps.
The thefts also show why the damage from weak seed generation can continue after the original flaw becomes public. Wallets remain exposed until their owners create a new seed using secure randomness and move all funds to addresses derived from that seed.
How Has The On-Chain Strategy Changed?
The third wave used a different transaction structure from the first two campaigns. Earlier thefts moved funds into a small number of shared collection addresses, making it easier for blockchain analysts to map the stolen bitcoin.
The latest transactions instead sent each victim’s funds to a separate destination. The attacker also moved from standard single-signature outputs to pay-to-witness-script-hash outputs, which can support multisignature arrangements or timelocked spending conditions.
Each sweep transaction combined an average of six victims, while the attacker limited the search to Bitcoin’s default derivation path rather than testing several branches of a wallet’s hierarchical deterministic key structure.
Those changes make the activity harder to track, but they do not prove that a new attacker has entered the campaign. Galaxy said it was confident that each individual wave was conducted by a single operator, although blockchain evidence could not establish whether the same person controlled all three.
The third wave could therefore be the original attacker adapting after the first transactions became public, or another operator exploiting the same reduced pool of possible seed phrases.
Investor Takeaway
Installing new firmware is not enough for wallets created with weak seeds. Funds remain at risk until users generate an entirely new seed phrase and transfer their bitcoin to fresh addresses.
What Caused The Coldcard Seed Vulnerability?
Coinkite disclosed the underlying flaw on July 31. An integration bug introduced in Coldcard Mk3 firmware version 4.0.1 in March 2021 caused seed generation to bypass the device’s hardware true random number generator under certain conditions.
The wallet instead relied on a predictable software-based source of entropy. That sharply reduced the number of seed phrases an attacker needed to test and made it possible to reproduce the limited set of potential wallets offline.
The weakness affects seed creation rather than Bitcoin transaction signing or private key storage. Attackers do not need physical access to the hardware wallet or direct contact with its owner. They can generate candidate seed phrases, derive the related addresses and watch the blockchain for deposits before sweeping the funds automatically.
Coinkite later expanded the affected-device guidance. Every Coldcard Mk3 running version 4.0.1 or later may be vulnerable when its seed was generated using the affected firmware.
The company also issued emergency updates for the Mk4, Mk5 and Q models after finding that seeds generated before the latest patches contained less entropy than intended. The exposure on those devices is considered less severe than the Mk3 weakness, but users may still need to replace previously generated seeds.
What Should Coldcard Users Do Now?
Users who created wallets on affected firmware have been advised to migrate immediately unless they added enough independent dice-generated entropy during seed creation. Updating the device protects future seed generation but does not repair an existing wallet whose seed was created from predictable randomness.
The required response is to generate a completely new seed phrase under patched firmware or another trusted setup, verify the new wallet and transfer all assets from the old addresses. Reusing the original seed after updating the device leaves the same private keys exposed.
Coinkite has also recommended a strong BIP-39 passphrase, which adds a separate secret to the seed phrase. A sufficiently strong passphrase can make brute-force recovery far more difficult, although it also creates another credential the owner must store securely.
The continued thefts nearly three days after the opening attack show that many vulnerable wallets remain funded. While the average balance is declining, the attacker’s willingness to pursue smaller targets means users cannot assume a low wallet balance makes them safe.
The incident is one of the largest known hardware wallet losses caused by flawed random number generation. Bitcoin itself was not compromised; the failure occurred in the process used to create the secrets controlling affected wallets.