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$75,000,000 in Ether Reportedly Lost by Israel-based Crypto Service: Details

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Wed, 06/23/2021 - 13:26
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Vladislav Sopov
According to local tech media, cryptocurrency services vendor Fireblocks is being sued by Stakehound for losing $75 million
$75,000,000 in Ether Reportedly Lost by Israel-based Crypto Service: Details
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Seasoned cybersecurity expert Alon Gal, founder of top-notch cyber crime monitoring platform Under The Breach and Hudson Rock CTO, shared the information about an unusual lawsuit.

Why backup solutions matter

According to an article by the CTech media outlet, the lawsuit was filed today at the Tel Aviv District Court by the StakeHound cryptocurrency company.

StakeHound attorneys claim that the officers of another crypto-oriented firm Fireblock were negligent, which led to a loss of $75 million in Ether. As stated in the lawsuit, Fireblock representatives did not protect or back up private keys from the account with StakeHound's funds.

When another StakeHound's partner, Coincover, attempted to verify the private keys from StakeHound's account, it became known that the defendants couldn't provide backup tools to Coincover.

The plaintiffs described the outcome of this situation as "a disaster" since StakeHound's 38,178 ETH has been irrevocably lost.

Fireblocks denies any wrongdoing

Fireblocks CEO Michael Shaulov dismisses the accusations. He told journalists that StakeHound team decided to join staking in Ethereum 2.0. In December, 2020 StakeHound asked Fireblocks to create a set of BLS credentials related to an ETH 2.0 staking project.

Meanwhile, the aforementioned keys were managed outside the Fireblocks platform:

No Fireblocks production keys were ever affected, and all Fireblocks customers’ funds are safe, and customer keys are backed up and recoverable

Thus, the keys in question were generated by StakeHound and weren't managed by Fireblocks.

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About the author

Blockchain Analyst & Writer with scientific background. 6+ years in IT-analytics, 3+ years in blockchain.

Worked in independent analysis as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)