Cryptocurrency User Loses $6.9 Million in Cold Wallet Scam

A cryptocurrency user recently fell victim to a sophisticated scam, resulting in the loss of $6.9 million in digital assets. The incident involved a cold wallet, a type of hardware wallet used to store cryptocurrencies offline for enhanced security. The user, enticed by a discounted price, purchased the wallet from a seller on China’s TikTok, unaware that it was part of a scammer's scheme.

The scammer managed to exploit the user's trust by offering a seemingly legitimate product at a reduced cost. Once the user transferred their cryptocurrency to the cold wallet, the scammer gained access to the funds, leading to the substantial loss. This incident highlights the risks associated with purchasing hardware wallets from unverified sources, especially on social media platforms.

Blockchain security firm SlowMist reported that the private key of the cold wallet was compromised at the time of its creation, allowing the scammer to drain the user’s funds within hours. The firm warned that cold wallets advertised as “factory sealed” or “discounted” are often tampered with, and the reduced price is a tactic used to lure victims into the scam.

An individual known as Hella, a former team member working under Jihan Wu, the co-founder of a Bitcoin mining equipment manufacturer, shared details about the incident. Hella described the wallet as “a carefully designed hot trap” and noted that the stolen crypto was “washed away through Huiwang within a few hours.” Huiwang, also known as the Huione Group, operates a network of illicit businesses, including a payment service platform, a crypto exchange, and a darknet marketplace.

Hella emphasized the importance of choosing reliable channels when purchasing cold wallets, stating that most of the ones available online are fake. SlowMist’s chief information security officer, under the X handle 23pds, echoed this sentiment, warning users not to “gamble your entire fortune on a wallet that’s a few hundred bucks cheaper.” The officer highlighted that these types of scams can be more difficult to prevent because the devices are shipped by third parties, and the people involved in the shipping or packing process are often unaware of the scam.

This incident serves as a stark reminder of the importance of vigilance and due diligence when dealing with cryptocurrency transactions and hardware wallets. Users are advised to purchase wallets from reputable manufacturers and authorized dealers to minimize the risk of falling victim to similar scams. Additionally, users should be wary of offers that seem too good to be true, as they often are. By taking these precautions, users can better protect their digital assets and avoid the financial losses experienced by the victim in this case.