Crypto Wallet Maker Issues Warning as 594 BTC Leaves 500 Addresses
Coinkite has warned Coldcard Mk3 owners that a weakness in how some devices generated seed phrases may have left their Bitcoin exposed.
Key Takeaways
- Seeds generated on a Coldcard Mk3 running firmware 4.0.1 (March 2021) or later may be at risk, through the final Mk3 release, 5.0.3.
- Roughly 594.48 BTC left 500 single-signature addresses inside a three-block window; Coinkite has not linked the sweep to the flaw.
- Coinkite says Mk4, Mk5 and Q are unaffected and can be used to generate a replacement seed.
- Exposure depends on the firmware running when the seed was created, not on when the device was bought.
The company’s July 30 advisory tells users to treat a seed as potentially at risk if it was generated on an Mk3 running firmware 4.0.1, released in March 2021, or any version after it. The issue persists through 5.0.3, the last firmware to support the model.
Coinkite describes the notice as early analysis with a formal technical review to follow, and has published no explanation of the entropy failure, no count of affected devices and no figure for funds lost.
What Happened on Friday Morning
Between roughly 01:31 and 01:56 UTC, 594.48 BTC moved out of about 500 single-signature addresses. AnchorWatch chief executive Rob Hamilton, whose preliminary on-chain analysis followed reporting by Atlas 21, counted 1,324 unspent transaction outputs swept across 500 transactions inside a three-block window, blocks 960188 to 960191. Around 562 BTC was later consolidated into a single address.
At a Bitcoin price near $64,300, that came to approximately $38.3 million.
Hamilton’s early read was that wallet generation appeared to have suffered an entropy flaw somewhere along the way. Kevin Loaec of Wizardsardine, among the first to raise the alarm publicly, suggested a low-entropy random-number generator, possibly inside a software library.
Two details point toward seed generation rather than any single exchange or service. Every drained address was single-signature, and many had been dormant for years, with coins spanning 2021 to 2026, a range that tracks the age of the affected firmware closely.
Coinkite has not confirmed a link between the sweep and its advisory, and no definitive public evidence establishes one.
Whether You Are Affected Turns on One Word
The advisory targets seeds that were generated on an affected Mk3, rather than every wallet the device has touched.
Three conditions have to hold:
- The seed words were created on the Coldcard Mk3 itself
- The device was running 4.0.1 (March 2021) or later at that moment
- That seed still controls Bitcoin or wallets derived from it
The second condition is where owners get stuck, because a Coldcard reports the firmware it is running now rather than what it ran years ago. What matters is the version in place when the wallet was first created, and that is unrelated to when the hardware was purchased. Anyone who generated a seed before March 2021 and never regenerated afterwards falls outside the stated range. Anyone who set up after that date, or who cannot reconstruct the sequence, should assume they are in scope until Coinkite’s review narrows it.
A seed generated elsewhere and imported into the Mk3 never used the device’s random-number generator, so the flaw does not reach it. Coinkite is direct about newer hardware: Mk4, Q and Mk5 are unaffected on current analysis, and the advisory recommends using one of them to create the replacement seed.
Moving the Seed to a Newer Device Does Nothing
New firmware fixes how future seeds are created and has no effect on words that already exist.
The seed is the source from which every private key and address in the wallet is derived. If the randomness behind it was weaker than intended, an attacker can search a far smaller range of possible seeds until one turns up controlling funded addresses. The words look random to their owner either way, because the weakness lives in how the device chose them rather than in how the finished phrase appears.
One reported case illustrates the point sharply. A Reddit user described funds drained from a wallet whose seed was generated on an Mk3 bought in May 2021, then restored onto an Mk4 in January 2026. The newer, unaffected device inherited the original words and with them the original weakness. That account is self-reported and establishes nothing about the wider sweep, though the mechanism it describes is exactly what Coinkite is warning about.
The remedy is a seed that was never generated by an affected device.
Before Anything Else, Check the Balance
Given what happened on Friday, an affected user should verify their funds are still present before planning a migration. An emptied wallet calls for incident response rather than a careful transfer.
Migrating With a Second Device
Coinkite stresses proceeding calmly, noting that a rushed migration can create more immediate risk than the flaw itself.
- Generate a new seed on an unaffected Coldcard.
- Record and verify the backup before depositing anything.
- Verify a receive address on that device’s own screen.
- Send a small test transaction and confirm the new wallet works.
- Move the remaining funds only after those checks pass.
- Keep the old backup until the migration is complete and confirmed.
If the Mk3 Is Your Only Device
Coinkite offers two routes, both treated as interim rather than complete fixes.
The first applies a BIP-39 passphrase, meaning a separate secret added to the recovery words, not the Coldcard PIN. The PIN protects the device and leaves the underlying keys untouched, so it offers nothing here.
Read the official passphrase instructions first, then select `Passphrase` on the Mk3 and enter something long, random and unique. Never a quotation, a name, a familiar phrase or a reused password, and never typed into a computer, phone or website. Back it up exactly, stored separately from the seed words, because losing it means losing the funds.
Select `APPLY`, record the new wallet’s eight-digit fingerprint, then power the device off and back on, re-enter the passphrase and confirm the same fingerprint appears. Export the passphrase wallet to your coordinator, verify its receive address on the Mk3 screen, then power-cycle and sign in without the passphrase to reach the original wallet. Send a small test transaction, re-enter the passphrase, confirm the test arrived, and only then move the remainder.
Every passphrase produces a valid wallet, including one containing a typo. Verifying the fingerprint before each send is what catches that.
The Dice-Only Alternative
The second route sidesteps the device’s random-number generator entirely.
On an empty Mk3 running 4.1.9, selecting `Import Existing > Dice Rolls` and entering at least 99 independent rolls of a fair six-sided die creates a seed by hashing the roll sequence directly. Coinkite is specific that the ordinary `New Wallet` flow does not do this, so it must be the dice path.
This is an advanced procedure and Coinkite labels it as such. Running both seeds on one device means alternating between them safely: verify each written backup and fingerprint before erasing anything, verify a receive address for the dice wallet, restore and verify the original, and send a test transaction before moving the balance.
The roll sequence is key material. It should never be photographed, saved digitally or entered into a networked computer. The dice-roll documentation covers the method in full.
A Passphrase Buys Time Rather Than Safety
Coinkite’s early analysis puts funds behind a strong BIP-39 passphrase at minimal risk from this issue, because the passphrase derives a separate wallet from both the original seed and the added secret. Automated searching for wallets built directly from a weakened base seed will not reach it.
That aligns with what Friday’s sweep showed: every drained address was single-signature, each holding more than 0.15 BTC.
The underlying entropy flaw remains regardless. Those recovery words are still weaker than intended, and everything now depends on the strength and secrecy of one added phrase. The permanent fix is a new seed from an unaffected device.
What This Says About Hardware Wallets
Coinkite’s investigation continues, and the scope may shift when the formal review lands. Owners should follow the company’s own updates rather than screenshots, forwarded messages or any third-party service offering to test whether a phrase is vulnerable.
That last point deserves emphasis. A warning at this scale attracts phishing aimed at exactly the people most likely to act quickly. No legitimate tool asks for seed words, and no support form, website or recovery service should ever receive them.
The lesson here is narrower than “hardware wallets failed.” An offline device keeps a private key away from malware, which it did. What it cannot do is protect a seed that was already predictable at the moment it was created, and key generation is where the entire security model starts.
- Disclaimer: This article is for informational and security-awareness purposes only. Follow Coinkite’s official instructions and never disclose seed words, private keys, wallet backups or BIP-39 passphrases to anyone.
- Methodology: Firmware versions, affected models, migration steps, the passphrase procedure and the dice-only alternative come from Coinkite’s July 30, 2026 security advisory and its linked documentation. Sweep figures come from AnchorWatch chief executive Rob Hamilton’s preliminary on-chain analysis, following reporting by Atlas 21. Coinkite has not confirmed a link between the sweep and the seed-generation issue.
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 5,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
