Clay Garrett links Coldcard thief to data vendor logs
- Frostsnap cryptographers revealed CoinKite reduced Coldcard randomness to roughly 20 bits.
- Attackers used AI models to map vulnerable code and sweep 2,000 Bitcoin across 1,200 wallets.
- Block matched the attacker's wallet queries to private commercial database logs for federal investigators.
CoinKite cut Coldcard security from 256 bits down to 20. The shortcut enabled an automated script to drain 2,000 Bitcoin from roughly 1,200 self-custody wallets.
On What Bitcoin Did, Frostsnap developers Lloyd Fournier and Nick Farrow detailed how CoinKite bypassed standard cryptographic protocols on Coldcard Mark III devices. Instead of pulling true entropy directly from the hardware chip, the device routed key generation through Yasmerang, a MicroPython algorithm. That reduced the total search space to a few hundred million possible seed phrases. Attackers used LLM models such as Kimi K3 to scan the code and sweep vulnerable addresses across the network.
"Instead of the standard 256 bits of entropy, device key security collapsed to roughly 20 bits."
- Lloyd Fournier, What Bitcoin Did
The paper trail caught up with the thief two days later. On Bitcoin And, host David Bennett detailed how Block engineering lead Clay Garrett connected the stolen funds to commercial tracking records. The attacker queried target addresses through a paid data vendor subscription before launching the sweeps. Vendor logs matched the timing and sequence of the wallet drains with exact precision. Block passed those subscriber records directly to federal investigators.
Galaxy Digital research showed the first wave drained over 1,000 Bitcoin. The stolen funds remain visible in tracked address clusters, but asset recovery requires law enforcement to secure private keys through legal compulsion.
Earlier in the week on BTC Sessions, hardware developers debated how to patch structural risks across self-custody platforms. Foundation Devices founder Zach Herbert warned that automated AI bug reports are flooding vendor repositories. Wallet teams are responding by building AI review tools directly into firmware pipelines. SeedSigner engineers urged mandatory manual dice rolls to guarantee true randomness during wallet setups.
"Open-source visibility alone is no longer enough without continuous active auditing."
- Zach Herbert, BTC Sessions
Trezor and Blockstream developers cautioned on BTC Sessions that steep learning curves push average investors straight into custodial ETFs. Multi-vendor setups offer a middle ground by splitting signing authority across different device architectures. Users running distributed quorums survived the Coldcard flaw without losing funds.
Frostsnap founders Fournier and Farrow advocate for collaborative coin-flipping protocols that mix entropy between mobile applications and hardware chips. Under this framework, neither the phone nor the physical device can predict or forge the final public key alone. Single-device self-custody is no longer sufficient against automated exploit tools.
The age of passive hardware trust is over.