Cryptocurrency User Loses $6.9 Million in Cold Wallet Scam on TikTok

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.

An individual known as Hella, a former team member working under Jihan Wu, the co-founder of a Bitcoin mining equipment manufacturer, shared insights on 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 wallets available online are fake. SlowMist managed to track the stolen funds but noted that there was little hope of recovering them from the thieves. The chief information security officer of SlowMist warned users not to “gamble your entire fortune on a wallet that’s a few hundred bucks cheaper,” as it ultimately leads to significant financial loss.

The officer added that these types of scams can be more difficult to prevent because the devices are shipped by third parties, and the people shipping or packing the devices are often not aware that it’s part of a scammer’s plot. This incident serves as a cautionary tale for cryptocurrency users, reminding them of the importance of verifying the authenticity and security of their 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.