Coinkite, the Canadian manufacturer behind the Coldcard hardware wallet, has issued an urgent advisory urging Coldcard Mk3 users to relocate funds from any wallets whose seed phrases were created on affected firmware versions. Coldcard devices are widely used in Bitcoin self-custody, in part because they are marketed as air-gapped wallets that keep private keys offline.

On Thursday, the company stated that seeds generated on a Coldcard Mk3 running firmware version 4.0.1 — released in March 2021 — or any subsequent Mk3 firmware may be vulnerable. The potential issue extends through version 5.0.3, the last firmware release supporting the Mk3. According to Coinkite's preliminary analysis, the Mk4, Q, and Mk5 devices are unaffected.

The warning coincides with an ongoing examination by Bitcoin security specialists of a large, coordinated sweep of 594.48 BTC from single-signature addresses. No definitive public evidence has yet linked the Mk3 firmware issue to those transfers.

Acting "out of an abundance of caution," Coinkite advised affected users to create a new seed on an unaffected device, verify both the backup and the receiving address, send a small test transaction first, and only then transfer the remaining balance. The company described its investigation as ongoing and committed to publishing a formal technical review.

Coinkite also noted that affected seeds paired with a BIP-39 passphrase carry minimal risk. The company emphasized that this refers specifically to a BIP-39 passphrase, not the Coldcard device PIN.

Security Experts Examine the 594 BTC Sweep

The coordinated sweep drew public attention after a Reddit user reported that funds had been drained from a wallet whose seed was originally generated on a Coldcard Mk3 purchased in May 2021. The user stated that the same seed was later restored onto a Coldcard Mk4 in January 2026, meaning it had been entered into a second device after initial creation. This account is self-reported and does not conclusively link Coldcard to the broader sweep.

In a preliminary analysis posted on Friday, AnchorWatch CEO and co-founder Rob Hamilton reported that 1,324 unspent transaction outputs were swept across 500 transactions within a three-block window, totaling 594.48 BTC. At the time of writing, that amount was valued at approximately $38.3 million, based on a Bitcoin price of $64,364.07 per CoinGecko.

Hamilton noted that all affected addresses were single-signature, and that 562 BTC was subsequently consolidated into another address. "At a glance, this looks like there was flawed entropy in wallet generation somewhere along the way," he wrote.

Entropy failures in seed generation are a known class of vulnerability in cryptocurrency. In 2013, a flaw in Java's SecureRandom implementation on Android devices led to compromised Bitcoin private keys, demonstrating how insufficient randomness in seed creation can result in predictable, exploitable wallets.

Separately, Wizardsardine CEO Kevin Loaec shared his working hypothesis: a low-entropy random-number generator — potentially residing in a software library, a secure element, or a specific device batch or firmware version — may have produced wallet seeds with insufficient randomness.

Loaec suggested that an attacker aware of such a flaw could have deployed an AI-generated script to brute-force compromised wallets, but limited the search to a narrow range of BIP-84 derivation paths. This could explain why the sweep appears concentrated in native SegWit addresses and why some wallets were only partially drained. Loaec cautioned, however, that this theory remains unconfirmed.

If the hypothesis is correct, Loaec warned that wallets partially drained in the initial sweep could still be targeted for further theft. He added that funds held under other address types might also be at risk if the attacker broadens the scan to include additional derivation paths.

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