Malicious actors are increasingly likely to use artificial intelligence to identify even the smallest software vulnerabilities, the maker of Coldcard Bitcoin hardware wallets has warned following a theft of over $100 million in cryptocurrency.

MILESTONE | ColdCard Bitcoin Losses Surpass $100 Million

The incident has raised fresh concerns about the security of hardware wallets which are physical devices designed to store the private keys needed to access cryptocurrency. Such wallets have long been regarded as safer than keeping digital assets on exchanges because they can remain disconnected from the internet.

However, users of some Coldcard wallets had their funds recently drained in a series of attacks. The attackers appear to have exploited a weakness in the way certain versions of the wallet generated cryptographic keys.

The devices themselves were not physically compromised or connected to the internet. Instead, the flaw meant that the wallets’ algorithms did not produce sufficiently random numbers allowing attackers to work out some of the keys.

Rodolfo Novak, CEO of Canadian ColdCard maker, CoinKite, described the incident as evidence of a changing cybersecurity environment.

“We believe this is a sober reality of the new AI paradigm,” Novak wrote in an apology over the flaw.

“AI-assisted code review can now find latent bugs at a speed that is outpacing even the industry’s most seasoned experts.”

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Novak warned that developers should assume publicly available firmware can be scrutinized by both attackers and defenders.

CoinKite initially warned customers to update affected firmware, which was originally released in March 2021, and transfer their Bitcoin to new wallets generated with fresh recovery seeds.

The company urged users to treat the situation as urgent and migrate their funds while the attacks were still ongoing.

Within a few days, blockchain intelligence firm, Galaxy, said it had identified three separate waves of attacks targeting ColdCard users. The attacks had resulted in the theft of over 2,000 BTC, worth over $100 million as of this writing.

Galaxy subsequently warned of a possible 4th wave estimating that total losses could potentially reach roughly $130 million.

The incident highlights a fundamental risk of hardware wallets:

Keeping private keys offline does not eliminate vulnerabilities in the software used to generate or protect those keys.

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It also challenges the assumption that self-custody is automatically safer than centralized cryptocurrency storage.

The Coldcard incident therefore points to a broader shift in cybersecurity. As AI systems become increasingly capable of reviewing software and identifying subtle vulnerabilities, flaws that remain undiscovered for years may become much easier for attackers to find.

For crypto users and wallet developers, the episode underscores that security depends not only on keeping devices offline, but also on the integrity of the firmware, cryptographic libraries, and key-generation processes that underpin them.

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