Coldcard class action over $140 million: what it means for owners

A proposed class action against Coinkite, the Canadian maker of the Coldcard hardware wallet, has been before the Ontario Superior Court of Justice since 11 September 2026. The claim centres on a flaw in a firmware release from March 2021 that allegedly made the recovery phrases of affected devices predictable, and puts the Bitcoin drained as a result at more than $140 million. None of this has been proven, and the case has not been certified as a class action either.

If you own one of these devices, a separate question matters more than the lawsuit: was your recovery phrase created before August 2026? If so, your balance does not depend on the court. It depends on when you move it.

What the claim alleges: $140 million and five device lines

The claim was filed by a retail investor from Los Angeles. He states that unauthorised transfers on 6 August 2026 cost him 1.22940052 Bitcoin, worth roughly $79,764 at the time according to the filing. The defendants are Coinkite Inc., based in Toronto, and its two co-founders.

The proposed class covers everyone who bought an Mk2, Mk3, Mk4, Mk5 or Q device for personal use. The claim seeks damages plus punitive damages, and alleges breach of contract, negligence and violations of Ontario's consumer protection legislation. The figure of more than $140 million refers, according to the account at news.bitcoin.com, to all known thefts rather than to the claimant's individual loss.

One note on the scale: reported loss figures differ. Alongside the $140 million, other accounts cite $116 million and a quantity of more than 1,300 Bitcoin. That range stands here because none of the figures comes from a court-verified schedule.

The firmware flaw: how a hardware random number generator became a software one

A hardware wallet generates the recovery phrase from which all private keys derive using random numbers. The less predictable those numbers are, the more hopeless any attempt to guess the phrase becomes. That is precisely where the allegation lands.

According to the claim, a firmware update from March 2021 introduced an error in how the program components were assembled and linked. Instead of the intended random number generator on the chip, the device is said to have used the Yasmarang software generator from MicroPython. A generator of that kind is a calculation: from the same starting value it returns the same sequence of numbers. Anyone who knows the method and the seed value can reproduce the output.

Why a predictable seed defeats every PIN

A hardware wallet's defences all operate at the device: the PIN, the wiping of memory after too many failed attempts, the sealed case. Each assumes an attacker has to get hold of the device. If the recovery phrase is predictable, nobody needs the device. The keys are recreated on someone else's machine, and to the blockchain the transfer looks exactly like one the owner authorised. That is why neither a PIN, nor a passphrase, nor a safe helped in these cases.

The timeline: 594 Bitcoin in 25 minutes

Exploitation began on 30 July 2026 according to the filing. Around 594 Bitcoin were drained in the first 25 minutes or so, worth roughly $38 million at the price of the day. At the 25 October 2026 price of around $80,700, the same coins would be worth some $48 million.

Coinkite disclosed the vulnerability publicly on 30 July and shipped corrected firmware the following day. Further waves of attacks followed in the weeks after. One point easily missed is decisive for anyone affected: the update on its own rescued nothing. It stops new recovery phrases from being created incorrectly. Phrases already generated stay predictable for as long as they remain in use. Protecting what sat on the device meant generating a new phrase and moving the coins to new addresses. We described how that works in our article on the 5.6.1 firmware update of 22 August 2026.

May 2025: the allegation that carries the case

A technical flaw alone would be misfortune. It becomes litigation through a second allegation. The claim names Bitcoin developer James O'Beirne, who it says alerted the company to the vulnerability as early as May 2025. If that holds up, more than fourteen months passed between the warning and the first theft. The account remains an assertion by the claimant's side and has not been tested in court.

The claim raises a second point alongside it: Coinkite is said not to have notified affected customers directly, despite holding contact details. Public disclosure via a blog reaches only part of a customer base, and for a device whose whole purpose is to sit untouched in a drawer for years, that part is small.

The company's position includes both sides. Chief executive Rodolfo Novak has publicly accepted full responsibility for the firmware flaw and apologised to those affected, according to the Globe and Mail report of 24 October 2026. Coinkite is not commenting on the live proceedings; a full investigation report has been announced.

Affected models: Mk2 to Q, and who falls outside the class

The claim names the Mk2, Mk3, Mk4, Mk5 and Q lines, limited to purchases for personal use. Commercial buyers therefore sit outside the proposed class and would have to pursue claims individually.

The model designation alone says nothing about whether your balance was ever at risk. What counts is when the recovery phrase was created on the device. Phrases generated before the faulty March 2021 update came from the intended process. Phrases from the period after it fall under suspicion. Anyone who regenerated a phrase on a device with corrected firmware is clear. Telling those three cases apart is the first task, before any legal question becomes interesting.

One more point that often goes missing: the flaw affected the generation of the recovery phrase, not the signing of transfers. If you created your phrase elsewhere, with dice or on another device, and only entered it into the Coldcard, the software generator never touched it.

Ontario Superior Court: what a proposed class action is, and what it is not

Under Canadian law a class action starts with a motion. A court must first certify it, meaning it has to find that the claims are suitable to be heard together. That certification is still pending here. Until it comes there is no class in the legal sense, no registration deadline and no claim anyone could quantify.

Certified class actions in Ontario also work on the principle that those affected belong to the class automatically and must opt out actively if they want to go their own way. In practice: there is nothing to do now and nothing to miss. What is sensible happens regardless of the court, and this piece returns to that shortly.

Liability waivers against consumer protection: the real battleground

Hardware wallet makers usually cap their liability very tightly in their terms of sale, often at the purchase price of the device. The claim attacks that cap directly, arguing that consumer protection law should override such contractual limits on claims and compensation.

More than this case hangs on the answer. If the claimant's side prevails, it would set a precedent for what a wallet maker has to answer for at all. If it fails on the liability cap, the risk of a software defect in self-custody stays with the holder. Expert views on the prospects diverge widely so far, and a forecast here would be guesswork rather than evidence.

Can people affected in Europe do anything?

Holders in several countries were robbed, and the international law firm Fieldfisher notes in its public assessment that claims can therefore be pursued across different jurisdictions. Separately, asset manager Thomas Braziel of 117 Partners has been gathering information from victims internationally since August 2026, by his own account, in order to examine product liability claims.

For you, one thing matters above all: documentation. Anyone who lost coins needs evidence, and needs it now rather than when some proceeding sets a registration deadline. That means the purchase receipt for the device including the model designation, provable evidence of when the recovery phrase was generated, the affected addresses, the transaction IDs of the unauthorised outflows with timestamps, and your own acquisition records for the coins. Without those papers, neither a civil claim nor any tax treatment is enforceable later. A police report costs nothing and produces a case number that later steps can refer to.

Stolen Bitcoin and the tax office: why the loss usually does not count

This is the most unwelcome news for anyone affected in Germany. Private gains and losses on crypto assets fall under private disposal transactions in section 23 of the Income Tax Act. A loss only counts there if it arises from a disposal. Someone who is robbed sells nothing.

The German Federal Ministry of Finance circular on crypto assets does not address theft explicitly. The prevailing view in the specialist literature is that a disposal is therefore missing, and that no deductible disposal loss generally arises. Treatment as an extraordinary expense comes into consideration only in exceptional cases. Where any offsetting is possible at all, it works solely against other private disposal gains of the same kind, and the acquisition cost has to be documented. What tax offices actually accept in such cases, and which records they ask for, we collected in a separate piece on stolen coins and proving the loss to the tax office. Which tools prepare the history robustly enough for that is covered in our overview of tax software and portfolio trackers.

None of this is tax advice, and an individual case belongs in expert hands. The direction is clear enough to know before anyone counts on a refund.

Hardware wallets after this case: what shifts in the trade-off

The episode does not mean hardware wallets are worthless. The real point lies elsewhere: trust shifts from the build of the device to the quality of the software running on it, and to how the maker handles reported flaws. Neither is easy to see from the outside.

Three points consequently weigh more heavily in a purchase than they used to. First, the source of the randomness: devices that let you contribute to the recovery phrase with your own dice make you independent of the maker's generator. Second, splitting: anyone who spreads larger holdings across two devices from different makers, or sets up a multisig arrangement, does not lose everything to a single maker's error. Third, the handling of reports: a maker that publishes vulnerabilities openly and writes to customers directly is preferable to one that relies on a blog post. Which devices bring which of those qualities at which price point is set out in our hardware wallet comparison.

Putting the risk in proportion also means comparing it with the alternative. Leaving coins on an exchange means carrying that exchange's risk, and that has materialised more often in the past than a flaw in a hardware wallet's random number generator. The Coinkite case shifts the trade-off; it does not reverse it.

Coldcard owners: the key points for your decision

Three steps, in this order:

1. Establish when your recovery phrase was created. Generated before March 2021: not affected. Generated between March 2021 and July 2026 and unchanged since: move the balance to a new phrase, today rather than at some point. Regenerated after the firmware update: done. Which device makes sense for the new phrase is shown in the hardware wallet comparison.
2. Prepare the move before you generate the new phrase. You need destination addresses that do not derive from the old phrase, and network fees at the right level. If you need a trading venue in the meantime, the terms are in the exchange overview; keep holdings there only as long as the move takes.
3. Build a file, even without a loss. Purchase receipt, model line, date the seed was generated, old and new addresses. Where coins were actually lost, add transaction IDs, timestamps and acquisition records, plus a police report. For a clean history and acquisition evidence, tax software and portfolio trackers help.

The Ontario proceedings will run for years, and nobody can tell you today whether money will flow at the end. The two actions that work regardless are the new recovery phrase and complete documentation. Both cost an evening.

(As of October 25, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)