Ethereum worth $72m “lost”: crypto service provider Fireblocks in court

June 24, 2021

The company Fireblocks offers crypto custody services. Now the company is facing legal action: a customer claims Fireblocks lost the keys to his ETH wallet worth $72 million.


"Accidentally" deleted the keys

The crypto custody company Fireblocks is being sued by one of its customers. He claims that he can no longer access his Ethereum wallet - which contains 38,178 ETH worth 72 million dollars. Fireblocks is an Israel-based company that provides crypto custody services to businesses.

The allegation:

"Defendant irrevocably lost access to Plaintiff's digital assets deposited in an electronic wallet provided by Defendant, resulting in the loss of 38,178 ETH Coins belonging to Plaintiff."

The allegedly injured client is crypto-staking platform StakeHound. According to her, the negligence of a Fireblocks employee resulted in millions of Ethereum being lost. Because of this, the platform has now filed a lawsuit and demanded damages. But how do you lose 72 million due to "negligence"?

Allegedly, a Fireblocks employee failed to keep the wallet's private keys safe. Inadvertently and "for no apparent reason", the keys were deleted - and therefore StakeHound can no longer access the Ethereum assets.

Millions in damage due to human error


Staking platform StakeHound commented in a statement:

"This was a human error committed by an employee of Defendant who worked in an inappropriate work environment, failed to protect or secure Defendant's private keys needed to open the corresponding digital wallet, and for no apparent reason, the keys were deleted, preventing access to Plaintiff's digital assets."

Fireblocks, however, denies any negligence. According to the company, the private keys were generated by the customer and stored outside the platform. And: the customer had "not stored the backup with a third-party provider in accordance with our policies".

All funds of Fireblocks customers are safe, the company emphasises, "the customer keys are secured and recoverable". They are actively investigating the situation. On a specially set up page on its homepage, the company explains its view of the situation in detail and promises regular updates on the situation.

Background Fireblocks:

Fireblocks is a crypto custody service provider that offers companies an infrastructure for moving, storing and issuing digital assets. Fireblocks enables, for example, exchanges, banks, fintechs, hedge funds or liquidity providers to securely manage digital assets through various products and services. Fireblocks says it serves over 250 financial institutions and has secured over $637 billion in digital assets.

In the crypto industry, there is a principle that goes: Not Your Keys, Not Your Coins. What this means is that due to the nature of cryptocurrencies, you only really own your coins if you manage the private keys for them yourself. If the keys are in the possession of a custodian service provider, for example, then this service provider is also the owner of your assets. In the case of Fireblocks, it should be interesting to see to what extent the custodian can be held liable for the loss of the keys.

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About the author

Hi there, my name is Zalman Weinberg. I'm enthusiast with over 7 years of experience in cryptocurrencies and blockchain. Professional Trader providing Blockchain solutions to Startups and Enterprises. Expert in all cryptocurrency exchange APIs (BitMEX, Bittrex, Binance, Bitfinex, Kraken, Poloniex, Gdax etc.). I have also worked with multiple Forex broker APIs.

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