Crypto Investor Loses $7 Million After Buying Compromised Cold Wallet

A crypto investor recently suffered a significant loss of nearly $7 million after purchasing a compromised cold wallet from Douyin, China’s version of TikTok. Cold wallets are physical hardware devices used to store cryptocurrencies offline, providing a secure method for long-term holders to protect their digital assets from online threats such as hacks, malware, and phishing attacks. Unlike hot wallets, which are connected to the internet and offer faster access to funds, cold wallets isolate private keys from online threats, making them a preferred choice for security-conscious investors.

The victim in this case bought what appeared to be a factory-sealed cold wallet at a discounted price from a Douyin Shop listing. Shortly after using the wallet, it was compromised, and the entire balance was drained within hours. Blockchain security firm SlowMist revealed that the private key was compromised at the time of creation, making the wallet a hot trap designed to steal funds. The stolen cryptocurrency was laundered through Huiwang, also known as the Huione Group, a Cambodia-based conglomerate with alleged ties to illicit financial services. The Huione Group operates platforms such as Huione Pay PLC, Huione Crypto, and Haowang Guarantee, which are reportedly linked to criminal networks. The swift laundering of the stolen funds made recovery difficult, and although SlowMist was able to trace the stolen funds, the chances of recovery were deemed unlikely.

This incident highlights the risks associated with purchasing discounted hardware wallets from unverified sources. SlowMist’s chief information security officer warned users not to gamble their entire fortune on a wallet that is a few hundred bucks cheaper, as these devices are often tampered with during the shipping or packaging process. Individuals involved in handling these products are often unaware of the tampering, making it difficult to detect and prevent such scams.

Beyond the risks of hardware tampering, other attack vectors can still put users at risk. For instance, a recent phishing campaign targeted Ledger wallet users, distributing fake versions of the Ledger Live app for macOS. This scheme tricked users into entering their 24-word recovery phrases, which were then sent to attacker-controlled servers, allowing them to empty the users’ wallets almost instantly. Additionally, Trezor faced scrutiny in March 2025 after Ledger researchers flagged a critical flaw in its Safe 3 and Safe 5 models. The vulnerability involved a voltage glitching exploit that could bypass microcontroller safeguards, provided the attacker had physical control of the device. Trezor acknowledged the issue and has since issued firmware patches to address the vulnerability.

This incident serves as a stark reminder of the importance of sourcing hardware wallets from trusted and verified channels. While prominent manufacturers may alleviate concerns about tampered devices, users must remain vigilant against other attack vectors that can compromise their digital assets.