Crypto Investor Loses $7 Million in Sophisticated Cold Wallet Scam on Douyin

A crypto investor has lost nearly $7 million after purchasing what appeared to be a legitimate cold wallet through Douyin, the Chinese version of TikTok, only to discover the device was a sophisticated trap designed to steal digital assets. The victim, described as a close friend of a former Bitmain team member, fell prey to what security experts call a “carefully designed hot trap” that compromised the wallet’s private key at the moment of creation.

Within hours of the theft being discovered, the stolen cryptocurrency had been laundered through Huiwang, a Cambodian-based network operated by the Huione Group that facilitates illicit financial activities, including crypto exchange services and darknet marketplace operations. This speed and efficiency suggest coordination between hardware scammers and money laundering networks.

Criminals are now adopting a growing, dangerous trend where traditional phishing techniques are targeted at hardware wallets, which users trust implicitly for enhanced security features. A SlowMist investigation revealed that the compromised wallet was marketed through Douyin’s e-commerce platform, which allows third-party sellers to offer various products, including cryptocurrency hardware. The scammers exploited this legitimate marketplace to distribute devices that appeared factory-sealed and authentic, often advertising them at discounted prices to attract cost-conscious buyers.

Unlike software-based scams that rely on users making mistakes during transactions, this hardware compromise occurred at the fundamental level of private key generation. When the victim initialized their new wallet, the pre-compromised device generated keys already known to the attackers. This created an illusion of security while providing criminals complete access to funds transferred to the wallet.

Within hours of the theft, the criminals had successfully moved the stolen cryptocurrency through multiple layers of obfuscation, making recovery virtually impossible. This incident highlights the increasing sophistication of crypto crimes, where attackers are moving beyond traditional phishing emails and fake websites to compromise the very tools and devices that users trust for security.

Recent months have witnessed a surge in similar attacks, including the distribution of malware-infected Ledger Live applications targeting macOS users and the revelation that a printer manufacturer had been distributing Bitcoin-stealing malware alongside official drivers, resulting in the theft of 9.3 BTC worth over $953,000. The Atomic macOS Stealer, discovered embedded across at least 2,800 compromised websites, was a convincing fake version of legitimate applications like Ledger Live, with authentic interfaces that trick users into revealing their seed phrases.

The increasing sophistication of these attacks has prompted major technology companies to take decisive action. Microsoft recently collaborated with international law enforcement to disrupt the Lumma Stealer malware operation, seizing nearly 2,300 websites linked to the criminal infrastructure.

This latest crypto loss occurs against a backdrop of escalating crypto security threats, with a May 2025 Security Report revealing over $302 million lost across Web3 through various attack vectors. The report showed a dramatic increase in losses from code vulnerabilities, totaling $229.6 million in May alone, while phishing attacks continued to plague the ecosystem with $47.6 million in losses. The cold wallet scam represents a particularly insidious evolution in crypto crime. It exploits users’ trust in hardware security devices that are traditionally considered the gold standard for cryptocurrency storage.