Coldcard Mk3 warning follows $38M Bitcoin drain

Coinkite warned Coldcard Mk3 users on July 30 to move Bitcoin from wallets whose seed phrases were generated on affected firmware.

The Canadian hardware maker said seeds created on firmware 4.0.1 or any later Mk3 release through version 5.0.3 may put funds at risk.

The notice arrived as security researchers examined a coordinated sweep of 594.48 BTC, worth about $38.2 million at a Bitcoin price near $64,324. However, Coinkite and independent researchers have not established that the Mk3 issue caused those transfers.

Coldcard Mk3 warning covers firmware since 4.0.1

Coinkite’s official advisory said its investigation remains active. The company said the Coldcard Mk4, Q and Mk5 are not affected based on its early analysis. It also said wallets using an affected seed with a BIP-39 passphrase face “minimal risk,” while stressing that a passphrase is different from the device PIN.

The advisory now gives users more detailed migration options. Coinkite recommends generating a new seed on an unaffected device, verifying the backup and receiving address, sending a small test transaction and moving the remaining balance only after the test confirms the setup works.

The 594 BTC sweep remains unlinked to Coldcard

AnchorWatch CEO Rob Hamilton reported that 1,324 unspent transaction outputs moved through 500 transactions within a three-block window. The transfers swept 594.48 BTC from single-signature addresses, after which 562 BTC was consolidated into another address.

Hamilton wrote, “At a glance, this looks like there was flawed entropy” during wallet generation. That statement was a preliminary assessment, not a confirmed cause. A Reddit account also described a drained wallet tied to a Mk3-generated seed, but the self-reported account does not prove a wider connection.

Wizardsardine CEO Kevin Loaec described low randomness in a wallet generator as his “current hypothesis.” He said the source could be a software library, secure element, device batch or firmware version. He also proposed that an attacker may have searched a narrow set of BIP-84 paths, which could explain the concentration in native SegWit addresses and partial sweeps.
https://x.com/KLoaec/status/2082926304995762209?s=20 

Loaec’s theory remains unverified. No public technical report has identified the faulty component, measured the available entropy or shown how an attacker derived the keys. Coinkite’s advisory still promises a formal technical review, but the company had not published that review at the time of writing.

The case resembles a broader class of weak-randomness failures. In related coverage, crypto.news reported on the Ill Bloom vulnerability, which Coinspect linked to weak recovery-phrase generation across several blockchains.

As previously reported, the older Randstorm vulnerability affected BitcoinJS wallets that did not generate sufficiently random private keys. That case involved wallets created between 2011 and 2016 and is separate from the current Mk3 investigation.

Affected users have two fallback migration paths

Users with an unaffected Coldcard can create a new seed there and migrate carefully. Coinkite advises preserving the old backup until the entire transfer is confirmed. Users should verify every address on the hardware screen and avoid entering seed words or passphrases on websites or untrusted devices.

For users whose Mk3 is their only option, Coinkite suggests a strong, unique BIP-39 passphrase as a temporary measure. Advanced users may instead create a dice-only seed on an empty Mk3 running firmware 4.1.9 by entering at least 99 independent rolls of a fair six-sided die. The company cautioned that this procedure requires careful backup and verification.

What happens next depends on Coinkite’s technical review and continued on-chain analysis. Until investigators publish a confirmed root cause, the 594 BTC sweep and the Mk3 seed-generation warning should be treated as related in timing but not proven to share the same cause.