Coinkite, maker of the Coldcard hardware wallet, faces the threat of a class-action lawsuit after a bug in its seed phrase generation code let attackers drain more than 1,300 BTC from user wallets. Victims are organizing internationally as legal experts split on whether Coinkite can be held liable for the losses.
Thomas Braziel, founder and managing partner of 117 Partners, is studying how to bring product liability claims against Coinkite, including the possibility of a class action lawsuit over the Coldcard vulnerability. He is coordinating with victims internationally and gathering information before pursuing any action.
Victims Coordinate Across Borders
Braziel is not alone in pursuing Coinkite. Felipe Ojeda, a bitcoin advocate in Brazil who lost almost all of his capital to the bug, has already filed a police report and plans to file a complaint against the company in Brazil.
Still, he doubts the company can make victims whole. He told Livecoins that Coinkite raised two funding rounds in 2013 and has no sales volume, calling it a tiny company outside bitcoin circles despite being one of the largest names in self-custody.
Legal Experts Split On Liability
Cris Carrascosa, CEO of legal firm ATH21, is pessimistic about the odds of a successful suit. According to Carrascosa: "zero regulatory responsibility over the funds of the users of its products," she said, adding that proving Coinkite could have foreseen the hack will be difficult.
Ana Ojeda, Head of Institutional BD at Blend, takes the opposite view. She argues Coinkite could still face liability in some capacity, pointing to a credible legal basis to investigate defect and negligence claims, even though victims have no automatic right to recover every satoshi.
At the time of writing, more than $88 million in bitcoin had been stolen from Coldcard wallets hit by the vulnerability, and experts expect the figure to keep growing. Any resulting case could set a precedent for how courts treat liability at crypto hardware wallet makers.
Source: Bitcoin News
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